Based on research conducted by McKinsey and Company, about 52% of decisions made by senior CEOs end up being good decisions. I would have guessed that number to be much higher. These are some of the most intelligent people in business, yet this is only slightly better than flipping a coin.
We can all remember some of the spectacularly wrong decisions. Remember, “New Coke” lasted 79 days before being taken off the market. Or how about Ford’s Edsel car, which cost them 350 million dollars, was researched by many focus groups and then was shut down after 24 months.
As a business leader, you have to make many decisions under pressure and often without much time to think about them. So, how do you become a decision-maker that makes good decisions?.
You can read many books and articles that offer reasons why people make bad decisions and other books and articles on advice and models of making good decisions. Here are some examples from Jack Zenger in a Harvard Business Review article.
Laziness; failure to gather input or check facts
Not anticipating unexpected results
Indecisiveness (little information or changing information)
Remaining locked in the past and using old data that may not be true today
Having no strategy alignment, meaning not being connected to the problem or strategy
Over-dependence on other people’s decisions
Isolation by not drawing in other’s opinions
Lack of technical depth
Others offer advice on setting up a model for decision-making. For example:
Define the problem (with clarity)
Identify the decision criteria
Develop the alternatives
Evaluate alternatives
Select the best alternatives
Here are a few thoughts from people we know are excellent decision-makers:
Colin Powel said never make a decision with less than 40% of the information you need, and never delay a decision once you have 70 percent of the information you think you need,
Steve Jobs would talk to his employees about a problem or opportunity and make an intuitive decision.
Daniel Kahneman (author and professor) wrote a book on how we use our brains to think. In his excellent book, “Thinking Fast and Slow,” he talks about our fast brain, which gives us an immediate answer (there is a tiger in the bushes), and our slow brain, which provides us with an in-depth explanation based on all the information our brain has stored over time.
But in the past few years, there is another way to think about decision-making based on our perceptions.
Decision Making Based On Preceptions
We can look at decision-making from two perspectives: processing and perceptions.
Processing is like putting all the ingredients together to make a meal. When we have the information, we have developed excellent methods for processing that information, including the following:
Mathematics
Statistics and probabilities
Computers and data processing
The production of the ingredients– for information processing– is the role of perception.
It is a perception that organizes the world into Xs and Ys and then processes it with mathematics.
It is a perception that gives us the observations for propositions that we then handle with logic.
It is a perception that provides us with the words which we use to think about anything.
We have developed great processing systems, but we have done very little about perception because we have not understood perception.
It’s only recently that we have begun to understand the behavior of self–organizing information systems and self-organizing neural networks of our brains. This gave us the model to understand perception, humor, and creativity.
Creativity takes place in the perceptual phase of thinking, where we form perceptions and concepts. According to author Edward De Bono, Most of the mistakes in thinking are inadequacies of perception rather than mistakes of logic. Our emphasis has been on logic or truth rather than perception. With perception, we do not see the world as it is but as we perceive it and process this information over time.
An example of perception vs. processing
A group of young boys decided to pick on Johnny, one of the younger boys. They offered him two coins, a large coin worth two dollars and a smaller coin worth one dollar. Johnny picked the smaller coin, and the boys all laughed and teased him. They repeated this “trick” on Johnny several times.
One day, an older man saw this and asked Johnny why he chose the smaller coin worth a dollar vs. the larger coin worth two dollars. Johnny’s response was. “how often would I have been offered more coins if I had taken the two-dollar coin initially?”
A computer programmed for value would have taken the two-dollar coin the first time. But it was Johnny’s human perception that allowed him to take a broader view and consider the possibility of repeat business.
This example was a complex example of clear perception; Johnny had to assess how often his friends would want to tease him, how many one-dollar coins they would be willing to lose, and how long before they realized what he was up to? There was also the risk factor involved here.
This example shows the difference between a computer and a human. The computer is given its perceptions and then processes the information. The human mind forms its perceptions by choosing to look at the world in a particular way.
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However, we end up in our perception bubble — our own bias.
The logic bubble is that personal bubble of perceptions within which each person acts logically. The logic is correct, but if the perceptions are limited or faulty, the resulting action may be inappropriate.
Here is one way to broaden your perspective
- Scan the plus points.
- Then, the minus points.
- And finally, the interesting facts.
Here is another story from Edward DeBono to illustrate this process. A class of 30 boys was offered the option of getting 5 dollars a week to attend school, and 29 of the 30 boys opted in. Then, in step two, the boys asked if the 5 dollars would have to be returned if their school work was unsatisfactory. The answer was yes. So, in step three, they all changed their minds.
The comfort of logic vs. perception
We have always felt uncertain with perception and preferred processing logic. However, to make better decisions, we need to expand our view to see additional options. In the end, however, we have to come back to the world of logic to present ideas that are solid, workable, and of testable value.
But, our perception is also biased because we live in our own bubble. Therefore, we have to broaden our bubble to include, as much as possible, the perceptions of other people in our life, industry, market, and competitors to get the broadest possible perception of “what could be” before we make that decision.
Broadening your worldview is critical to making great decisions. Ask yourself, What other perceptions are out there that we could use to our advantage?
To make impactful, lasting decisions that move your company forward, you have to look at a broader picture than simply accepting information and processing it.
