Decision Making

By Michael Barna, Kepner-Tregoe

Not all decisions require a high level of rigor. Fundamentally, the amount of time and effort invested in making a decision should be contingent on the risk of making the wrong choice and whether the consensus of other stakeholders is needed to move forward. In situations where the threat of making a poor choice is relatively low and others involved are aligned on the best alternative, the gut feel approach may be appropriate.  Gut feel is probably enough when choosing which brand of peanut butter or how to spend a Sunday afternoon.

However, a more systematic approach to decision-making is needed for any high-impact decision where the risk of making the wrong choice is serious, or when its necessary to consider other people with differing views on the best choice.  Acting on gut feel when deciding a new strategic direction or choosing someone to hire, for example, may fail to properly evaluate alternatives and fairly consider all individual and organizational objectives.

 

Too often, people dive headfirst into talking about the alternatives

 

Too often, people dive headfirst into talking about the alternatives they have in mind before they’re even clear on what they want out of the decision, let alone why they’re making it.  Typically, this is evidenced by what seem to be binary or “either/or” decisions.  For instance, suppose someone is in the market for a new car and they’re wondering whether they should go with an Acura TLX or Infiniti Q50.  While both are solid choices, a question I would ask is, why just consider those two?  Now, perhaps this person has already done their due diligence on this, and these truly are their top two car alternatives – fair enough.  Nonetheless, what are the chances there’s still another car competitor they haven’t considered that’d turn out to be just as good for this person, if not ultimately better, than the current two alternatives?  What is it about both those vehicles that scream, “they’re the ones”?  Moreover, has this person arrived at the TLX and Q50 out of a careful consideration of what’s important to them in choosing the right vehicle, or are they emotionally smitten by a laundry list of flashy features causing them to act impulsively?

When making a complex or costly decision, best practice is to initially avoid thinking about alternatives and focus instead on clarifying the fundamental purpose of the choice to be made and the objectives that will influence the outcome.  This serves to minimize decision-making bias and maximize the odds of making an overall, fair, well-balanced choice, that doesn’t end in “buyer’s remorse.” In the car example above, what does this person ultimately wish to have?  For example, the “fundamental purpose” isn’t to have an Acura or Infiniti, but to “choose a 4-door luxury sedan to finance” of which an Acura and Infiniti comprise two, very decent alternatives.  The benefit of framing the decision in this way is to focus on the primary outcome without prematurely filtering options to consider and encourage “out of the box” thinking that includes a range of viable alternatives.

With the fundamental purpose clear, stakeholders should then brainstorm a list of objectives – what they need and want from the “ideal” choice – aligning around what I think of as the Four Rs of rational decision-making:  Results – Resources – Restrictions – and Risks.

Results

Decisions are all about results.  At the heart of it, we make decisions because current conditions no longer satisfy expectations.  The implication of being in the market for a car is that my vehicle situation no longer meets my needs, whether because I no longer have viable transportation, my car got totaled, my lease expired or I’m just not happy with my car anymore.  What will it take to satisfy expectations and ensure happiness with the outcome, both now and later?  What are the short-term benefits, and what will keep us satisfied that we made the right choice in the long-term?

 

My amazing vehicle ended up falling short of my long-term expectations because I neglected to consider why I was investing in the car and acted out of gut feel

 

In our experience, many people focus too heavily on what they want now.  They make an impetuous decision without considering something they’ll still want down the road.  To give a personal example, years ago (before learning KT Decision Analysis, of course) I bought a sports car.  Admittedly, I acted on total emotion; at the time, my buddy was leasing a similar sports car, and I wanted to rival what he had without copying.  At first, this car was great – it was flashy, nimble, fast and made me feel good driving it.  Then, as the months went by, I grew unhappy with a few things.  My monthly lease payments were expensive.  My car insurance went up.  A tank of gas didn’t last for very long and it was premium only.  My lease didn’t include enough miles for how far I’d be driving and, moreover, the seats just weren’t comfortable.  I had buyer’s remorse.  My amazing vehicle ended up falling short of my long-term expectations because I neglected to consider why I was investing in the car and acted out of gut feel.  Had I considered objectives like “maximizes driving comfort”, “maximizes fuel economy,” “minimizes my monthly payment,” as well as “feels good to drive,” perhaps I would have considered better choices.

There is a big difference between what we’d like to have out of a decision, as opposed to what’s truly required.  By setting objectives with clear measures of the results we want to achieve, we can make reasoned choices. A discussion around objectives is great for maximizing team collaboration and having meaningful discussions rather than simply arguing why one alternative is better than someone else’s.  Objectives that must be achieved (MUSTs) are enhanced by objectives that are desirable and allow alternatives to be compared (WANTs).  With objectives it becomes easier to eliminate poor choices that fail to deliver the results you need and to focus on which alternatives will deliver the most ROI. 

Resources

Generally, nobody ever works with unlimited time and resources, so the sky is seldom the limit when making a choice.  What resources, such as costs and time spent, can be saved or spent in your decision-making process and how do available resources influence your choice?  Some decisions may be yours alone and involve little to no costs, while others will require input from a variety of perspectives and considerable expense – not just from a financial standpoint.  

A complex decision may require examination of a large amount of information and involve the judgment of many people.  Hiring may involve the expense of headhunters and the involvement of HR and management.  Choosing a new business location may require extensive travel.  Large capital expenditures involve significant budget and financial inputs.  When selecting a corrective action for a problem, it may be important to minimize the number of engineers involved in getting the fix in place, so other priorities aren’t impacted.  Restrictions to available resources can affect possible alternatives, how decisions are made and by whom, so the question is:  What are we prepared to save, spend or give up, in order to make a choice?

Restrictions

Often, there are certain thresholds that decisions must meet.  Sometimes, these are factors beyond our control that are indisputably levied by regulatory bodies and company policy, as in quality guidelines defined by the FDA.  In other cases, they’re more subjective and imposed at the behest of the decision-maker, as in a car buyer declaring they will not consider putting more than $2,000 down on a car, else they’ll walk away.  The value of these objectives is to eliminate flat out poor choices from consideration; those that fail to meet certain basic standards.  Nonetheless, there’s danger in having too many restrictions in that you may quickly run out of available choices to consider. Where the quest for perfection becomes the enemy of good enough. 

Pressure check any restrictions to verify that they answer these three questions:  Are they truly mandatory in that we will walk away from something if it doesn’t 100% meet the objective?  If mandatory, is there a clear limit that must be achieved?  If there’s a clear limit, is the restriction legitimately realistic and can it be achieved?  If “no” to any of those three questions, avoid labeling something a “must have” and don’t use it as criteria for sending something packing.

Risk

The first Three Rs identify what we truly “must” have versus what we simply “want” to have so that we can consider all viable alternatives, eliminate those that won’t succeed and narrow down those that will give us the most benefit.  However, at the point we have identified the best alternatives, at minimum, we need to identify the presence of risks – where/how each alternative could fail during implementation to deliver on results. 

 

Murphy’s Law says, “What can go wrong will go wrong,” and decisions are certainly no exception

 

Especially when making complex decisions, it’s critical to weigh the benefits of an alternative against the risks of where that alternative may fail.  This consideration covers the bases so an overall balanced choice can be selected.  The entire point of a decision is to satisfy our expectations with our selectionwe don’t consider what might go wrong, we risk ending up even more dissatisfied than we were in the first place.

Not every decision requires a methodical process; the over-thinking of analysis paralysis is a real thing. On the other hand, failing to make a decision is also a decision, with all the associated risks. Consider the type of decision you are facing before determining the way to go about resolving it. Sometimes past experiences, going with your gut or simply flipping a coin is enough.  However, looking ahead by knowing your objectives can save time and trouble later and asking What could go wrong? before acting can improve your results.  The more intangible and qualitative the data, the more we need to consider involving others in making the decision, using a systematic method for handling information, and separating judgments to produce a successful conclusion.

More about Decisions from Kepner-Tregoe

How Leaders Use Balanced Decision Making Skills to Move Organizations Forward

The Consequences of Choice: The Final Step in Decision Making

 

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