We make numerous decisions every day like what to wear, what to eat, and what form of advertising should our business pursue?
We even make a decision to defer a decision, or we decide to procrastinate.
We spend too little time on the how and the why of our decision-making, decisions that deeply affect the outcome of our business.
How do you make a decision? Rely on gut instinct, your experience? Or do you perform a thorough analysis of the decision?
How important is this decision, and do we have all the information to make a wise choice?
One of the major changes in decision-making occurred in the sports field. In the movie, “Billy Ball,” we learned about the formula for creating the perfect baseball line-up based on cost-analysis, and statistics. However, in many instances, coaches and managers still rely on gut and experience to make the final call.
Let’s consider the following as you approach the decisions you have to make for your business:
Understand your business needs and the decision-making process
Decision-making uses mathematical models, rules, experience, and instinctive actions. Mathematical models number-crunch data to determine the best solutions under a variety of circumstances.
- Experience models most frequently use experience and historical trends to predict the future.
- Instinctive models rely on expertise to evaluate alternatives.
Each of these has their pros and cons. For example, bias, assumptions, and knowledge can greatly affect the value of these methods, so predicting hot weather in August is fairly easy, but can you predict the short term impact of climate change? Not when there’s so little to go on.
Beware and Minimize Bias
The greatest detractor from effective decision-making, whether intentional, random, hidden or even unknown, is bias.
- The first source of bias is our own set of beliefs, experience and reliance on the “we’ve always done it that way” method. Thus, we simply ignore information or facts that go against our beliefs.
- The second is our information and perspective. For example, right brain and left brain people can see the same thing and yet understand it in a different way.
- The third is incomplete or wrong information, or being too quick to make a judgment. For example, take a frog. When you say, “jump,” the frog jumps. But tie his legs together and say, “jump,” the frog most likely won’t jump. To then decide that the frog has lost its hearing is the wrong answer.
Decision-makers need to include risk and probability
One of the crucial aspects of decisions is risk and the probability of the outcome.
- Buying a lottery ticket has minimal risk because of the low cost, but comes with high potential value. In contrast, ignoring medical problems can have very high risk and very unfortunate consequences
- Decisions and risk are also greatly affected by probability and information. There is a huge difference in predicting results where there is significant and consistent historical data. However, predicting results for new programs or with little or inconsistent data becomes much more difficult.
- Decisions can also be greatly affected by things we don’t consider or the environment. Factors like the economy, gas prices, politics, social values, the internet, and cell phones can greatly affect our plans….
I recommend more consideration of the process of decision-making. Ask yourself: how good is our information? What are the consequences of mistakes? And how much risk can we afford? With the exception of issues like safety, I believe we can afford more risk. We are overly concerned with the consequences of mistakes than the potential of risk. This approach is well stated by Sheryl Sandberg, Facebook CEO, where she asks: “What would you do if you weren’t afraid?”
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