Decisions, decisions, decisions
Decision-making isn't always easy. Of course, there are many many things on which we make decisions. We decide which clothes to wear each day; we decide what we are going to eat this evening or we look through a restaurant menu to choose a dish. For some people decisions aren't easy. Do I or don't I; which should I choose?
There is an agony in believing that choices are binary – they are either right or wrong. This isn't the case. Does it matter that much if you choose the wrong meal? The problem we face is decision-making in business as here the implications may be much more serious. And in business, we are faced with different paths to take, sometimes with very little certainty as to the result.
Back in 1961, Daniel Ellsberg discussed this subject in the Quarterly Journal Of Economics. He asked us to imagine that there are two urns, each containing 100 red or black balls. The first urn has 50 red and 50 black balls. The second urn has an unknown mix. Now let's imagine that you are offered a huge prize if the ball you draw out of an urn is red. Which urn would you choose from? It turns out that most people prefer the first urn where the risk is known. The second urn is full of uncertainty as it could be mainly red balls or mainly black balls – who knows.
The experiment confirms how uncertainty affects business decisions. We are unlikely to make a jump into the dark whereas we may be persuaded to make a jump even if the odds aren't particularly favorable (50-50 odds are not good!).
Decision-making with patchy intelligence also leads to another phenomenon – we believe what we want to believe. When things are uncertain we can lean heavily on our world view. We only need one person to express a view that accords with our belief and this single comment can guide our decision. Take for example Brexit. People in the UK were asked to vote on whether they should remain in the European Union or leave. This is a complicated decision and it was given to the British people in a referendum almost four years ago. One young man was interviewed on the television and asked for his view. He expressed it like this – "Look how many German cars there are on our roads. The minute we say we are leaving the EU, Mrs Merkel will be on the plane the next day to beg for a good deal. They will be desperate to keep the market open for German cars".
In arriving at a decision as to which way to vote, the young man focused on one thing that was very obvious to him. It reinforced his view that the UK should leave because it had such a strong negotiating position.
So what to do? How do you reduce procrastination and arrive at decisions when things are so complicated? Here are four strategies that might help improve your decision-making.
Don't be rushed
There are occasions when immediate decisions are required but they are less frequent than you may imagine. Take your time to make your mind up. During this time you will be scanning for intelligence that will help in the decision-making process. Most big decisions are best left to stew a while.
Collect facts as well as opinion
Opinion has a massive influence and plays an important part in decision-making. However, opinions of others usually come with a good degree of bias and it is important that this is balanced. Facts may be boring and they may even disturb us if they point in a direction we didn't expect. Facts also tend to be historical so where possible, see if you can determine trends.
Locate your problem in a framework
It's not surprising that frameworks have cropped up in this blog. That is because frameworks are there to help decision-making. They create a context in which a problem can be located and as a result will offer guidance as to different outcomes of the decision.
Trust your intuition
Intuition sounds as if it is entirely judgemental. However, intuition is almost certainly influenced by what you know, what you have seen and what you have experienced. These determine your expectations. It is a synthesis that is likely to be right more often than wrong.
And remember that if all decisions are equal, you don’t have to be right all the time, just most of the time!