How to avoid failure in judgment and decision making
Tags: business management
All of our decisions are based on a well researched and proven “value chain” that helps determine both the nature and the quality of the decisions we make. In short, all of our decisions, especially those we make in business, are based on a Premise.
The Premise (right or wrong), in turn, shapes the Assumptions we then make, which lead to the Conclusions we draw and the Actions we take – or do not take. Technically, it is a little more complicated than that but for our purposes let’s simply say that Premise and Assumption are the raw materials of all decisions.
Taking care in your decision making
It has long been bewildering why leaders do not seem to take either enough care or pay enough attention to the decision making process within their organizations. The same leaders who will spend millions of dollars to improve the efficiency of an outdated IT system, or an inefficient manufacturing system or a faulty sales process have, generally speaking, never really considered spending any money on improving the corporation’s Decision Making Process.
As leaders, it is our obligation to do justice to the one element of organizational effectiveness many of us have been afraid to address for far too long. Let’s begin by setting out some facts and arguments.
First, we must redefine what it means to fail.
We have all heard the phrase that we “learn more from our failures than our successes”. If that is true then you have to wonder why we have not done a better job of formalising the “learning from mistakes process” in order to improve the learning itself. The fact of the matter is, like so many other urban myths, the words are nice and the thought somehow comfortable and reassuring, but the reality is quite different.
Author and well-known “blogger” Seth Godin, in the September 2010 edition of The Harvard Business Review, premised that, in order to get better, we need to redefine what it means to fail. We need to broaden the definition of failure so as to better capture the full magnitude of the disappointment we create by the poor decisions we make.
In short, we will need to apply more rigour and scrutiny to our failures if we want to create new opportunities to reinvent our organizations, the products we offer, the value we create and the people we chose to be our leaders.
We need to examine failure not just through the lens of failed outcomes, but also in terms of:
• Failure of Opportunity
• Failure of Trust
• Failure of Will
• Failure of Priorities
• Failure of Respect
Think about it for just a minute.
The “value” created by any leader, team or organization is really the sum total of all of the decisions made by the leader, the team or the organization over time. The improvements we make, the breakthroughs we have, the innovations we spawn and the outcomes we achieve are all, ultimately, based on the quantity and quality of the decisions made, both large and small. While much has been written on the importance of execution (which we do not deny or dismiss) the fact of the matter is there can be no more important attribute for defining individual or collective success than the ability to make great decisions.
In others words, while executing the decision is important, the things that govern the decision and the decision making process itself are equally important.
If that is so, then we have to ask ourselves:
• What are the processes that lead to the best decisions?
• Who, in our particular organization, best exemplifies good decision making?
• How good is the thinking and decision making process we use?
• What can we learn and how can we improve it in order to improve results?
It turns out that, among the many factors that go into decision making, there are two mysterious but incredibly powerful functions within the brain that are specifically designed to help us deal with the issue of complexity, which in turn helps us cope with ambiguity and uncertainty. These two mental processes help us make decisions when we don’t know what to decide and they can either work for good or evil, as long as we know the difference.
They are:
Pattern Recognition: Our ability to “fill in the blanks” because we have seen a certain pattern in the past and we recognize it. This ability is enhanced through experience and the broader the experience repertoire a person has the better the skill is developed and coded in the brain. The more shallow the repertoire, the more likely we will be negatively influenced by misleading judgments.
Emotional Tagging: Our ability to arrive at a decision or make a choice, despite all the empirical or analytical data we might assemble, still requires a human emotion in order to activate it. Our emotional tag repertoire can either help or hinder our decision making depending upon what are called our Inappropriate Attachments and Inappropriate Self-interests.
The Importance of Context: In our own study of decision making, we have come across what we believe is the next great leadership insight. It centres on the value and importance of a new leadership attribute called “Contextual Intelligence” or CQ for short.
What is CQ? While “experience repertoire” is critical to improving the quality of the decisions a person makes, it is essentially based on having a rich, robust and diverse past rather than a shallow one. However, since the past may not be a good predictor of the future, there needs to be a companion competency that is forward oriented and can help us deal with the complexity of the unknown, and that is Contextual Intelligence. Together, they create the powerful mix that creates decision making excellence.
Contextual Intelligence is the ability to:
• Accurately assess the changing environment
• Read and interpret the important shifts
• Make sense out of things
• Distil and simplify
But there is nothing more crippling to the decision making process than bias. Even with the richest, most varied experience repertoire, and the best-honed Contextual Intelligence, there is still a huge risk of being sideswiped or derailed by bias.
In our work with organizations we see bias all the time. It is always fascinating to see how those who live within an organization, and are products of a certain culture and way of thinking, simply do not see what can be so clear to the objective outsider. As it turns out, there has been a wealth of study into the identification of the many types of bias that infect organizational decision making and lead to errors in judgment.
The long list of biases fall into four broad categories:
Misleading Experiences: Conclusions we draw from the past that are incorrect
Misleading Prejudgments: Mental Mindsets that are flawed or irrelevant
Inappropriate Self Interests: Conclusions we draw that are too narrowly defined
Inappropriate Attachments: Beliefs which anchor our thinking in faulty ways
This list can also be broken down into four broad categories:
• Denial
• Overcompensation
• Ignorance
• Blame
A rich and wonderful body of learning has come forward in the past 10 years or so,lead by the design profession and matched by our own rising respect for how things look and feel. Our aesthetic tastes have been developed to a point where we all now increasingly appreciate and value the importance of design, whether it is in the cars we drive, the appliances we use, the experiences we crave or the products that we allow to seduce us.
In this regard, we are huge fans of Tim Brown and his work at IDEO, the industrial design firm from Palo Alto, Calif., that has captured so much acclaim for its work and its philosophy on how you make better decisions in order to innovate. Their premise is elegant in its simplicity. They believe, as leaders and designers of new organizational structures and new solutions for new markets and customer needs, we need new choices. They also believe we have been limiting ourselves to too small a tapestry, and that we have primarily done so as a coping mechanism in response to rising uncertainty.
New solutions to new problems
They suggest the menu of choices lies across a spectrum as follows:
If we want better choices and we want to create new and different possibilities, then we have to address the fact the more traditional linear thinking approach is just not very well suited to the complex, ad hoc world in which we now live. In fact, it is inappropriate and will only lead to flawed or sub-optimal decisions. The answer is simple, but certainly not convenient or comfortable: we need to change the way we think and then change the way we decide. If the outcome is new answers to new questions, in order to create new solutions to new problems, then we need to understand what actually leads to the generation of new ideas. That is something called Design Thinking which, at its core is the belief that new ideas need to be fuelled by Inspiration. Simply put, we need to place a torch under that part of the human spirit which sparks Imagination.
Doug Williamson is president and CEO of The Beacon Group. He leads the company’s associates in their activities to support clients and provide customized organizational transformation and effectiveness programs as well as talent identification and leadership development throughout North America and around the world. To contact Doug, send inquiries to navigate@thebeacongroup.ca.