Nov. 1, 2012 – Despite the wealth of information available to us these
days, many of today’s best and brightest business leaders still make
poor decisions. Michael Menard discusses overcoming five obstacles that get in the way of making decisions.
Nov. 1, 2012 – Despite the wealth of information available to us these
days, many of today’s best and brightest business leaders still make
poor decisions. This is unfortunate, because sound decision making is at
the heart of every company’s success.
Even if you have the best education and years of experience, it’s still
possible – and common – to make poor decisions. Why? Today’s decision
makers are up against a long list of pitfalls and obstacles that prevent
them from making sound decisions. Fortunately, once you know what
you’re up against, you can take the proper steps to correct it. Here are
the top five decision-making pitfalls that get in the way of
organizational success.
1. "We need to change, only not today." (Avoiding the decision)
Saint Augustine (b. 354 – d. 430) prayed, "Lord, make me chaste, but not
yet." It’s one thing to know about change and imagine future benefits,
but we often avoid deciding to take action right now because change
means some level of immediate discomfort. Realize, though, that no
business or individual grows without change and risk. However, risk
aversion is basic human nature. The paradox is that we want something
different without having to change. This is like the teenager who wants
her parents out of her life but first wants to be dropped off at the
mall.
With the recent economic downturn, many companies are employing a bunker
mentality. They’re staying put and not taking action. Instead of
playing to win, they are playing not to lose. Without a realistic vision
of what’s both possible and probable, organizations will continue to
play it safe and delay making decisions. But this so-called safety is an
illusion. Organizations must keep moving, employ their assets, and
create value. That value comes from the decisions they make and the
projects they implement.
Remember, any decision is a choice. Choosing not to choose is a choice.
2. "It’s such a simple decision." (Oversimplification of the challenge)
Telephone numbers are seven digits long because most of us can only keep
this much information in our short-term memory. We naturally chunk
information into intelligible bites. Likewise, difficult and complex
situations can overwhelm us, so we unconsciously and erroneously make
them simpler. However, this natural tendency to simplify information can
hinder decision making.
Of course, let’s not confuse oversimplification with the highly valuable
ability to reduce a problem to its essentials. After all, decision
making needs to be both effective and efficient. But we must distinguish
between these two words. We can be efficient without being effective by
doing the wrong task well.
No matter how well-intentioned we are, under pressure our desire for
simple answers to complex questions increases dramatically. The red
flags go up. When we imagine we don’t have time or resources to address a
problem adequately, we start to look for a single explainable cause
that fits into our existing framework. Paying too much attention to what
we directly see in front of us is called the present bias.
Oversimplification discounts contributing factors and exaggerates what
already stands out for us. Oversimplify and we set ourselves up for poor
decision making.
3. "Everything is GREAT!" (Happy talk)
Project advocates would never get the ear of senior management without
predicting optimistic outcomes. Politicians would never be elected if
they didn’t promise a sunny future. Optimism is ingrained in American
culture. Attempts to confront it with reality are consistently dismissed
with the discussion-ending judgment of negativity.
But who wouldn’t rather think they are going to enjoy a positive future
rather than pain, suffering, and gnashing of teeth? However, due to
unrealistic optimism, who hasn’t miscalculated how long it will take to
get to a destination? Who hasn’t underestimated the real cost of time
and effort to reach a particular goal? The optimism bias shows up every
time a company has to restate its earnings. Project-cost overruns,
delays, and benefit shortfalls result from this combination of wishful
thinking and the inability to recognize complexity.
Of course optimism is not a bad thing. It can stem from genuine
responsible confidence, and confidence may lead to bold, necessary, and
effective action. But optimism without a foundation sunk into the ground
of reality is unstable and self-delusional. The optimism bias
underestimates necessary contingent factors—as any insurance salesman
would be happy to point out to you.
4. "I can’t wait that long." (The time factor)
Given the choice, would you prefer to have $100 today or $300 tomorrow?
Most of us can defer immediate gratification and wait an extra day for a
significant monetary increase. However, studies show if we have to wait
one year for $300 or we can take $100 today, most of us demonstrate
what’s called present bias and go for the $100 right now.
The perceived length of time to realize a benefit has a significant
impact on our selection, so let’s change the time factor. Imagine you
are given the choice between gaining $100 one year from today or $300 in
one year and one day. Most people given such a choice can wait the
extra day. Studies show that under similar conditions, as the time to
realize the benefit is increased, the majority of us would reverse our
decisions. Without short-term reinforcement of long-term goals, our
objectives remain mirages and greatly affect our decision making
ability.
5. "According to my Magic 8-Ball . . . "(Magical thinking)
"Mirror, mirror on the wall, who’s the fairest of them all?" The evil
queen in Snow White wanted to know about the future, and so do we. She
had a magic mirror. We have educated guesses. While any prediction about
the future or how a decision will turn out is a guess, educated guesses
are more likely than magical thinking to deliver results we want.
However, we should be aware of our tendencies to oversimplify, as we
discussed, by focusing only on what we think is relevant.
Cognitive scientists call this bias anchoring. Once this anchor has
securely fixed itself in a crevice in the seabed of your mind, it’s not
easy to shift. Then you interpret information based on this
what-you-think-is-relevant anchor. It gets worse. You ignore other
possible relevant factors. Not only are you focusing on wrong
information, but you’re ignoring information that could be vital to
long-term success. Falling prey to magical thinking and not testing your
assumptions—not anchoring—can capsize the whole enterprise.
It’s never too late
If you’ve ever realized that a decision you made was less than stellar,
don’t feel bad. It happens to us all. But by understanding the top five
things that get in the way of most decision-makers, you can analyze your
decision with a new perspective and make the best choice for you, your
organization, and your future.
Michael Menard is the author of “A Fish in Your Ear: The New
Discipline of Project Portfolio Management,” and co-founder and
president of The GenSight Group, which provides enterprise portfolio
management solutions for strategic planning, project portfolio
management and business performance optimization. A holder of 14 US
patents, Menard has utilized his expertise to advise senior executives
at organizations such as Coca-Cola, Cisco and the US Department of
Energy. To learn more about Mike Menard please visit www.afishinyourear.com.
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