Tuesday, April 30, 2019

Decision-making problems

Decision-making problems
When I consult with executives, I sometimes start with this very simple exercise. I ask group members to come to our first meeting with a brief description of their best and worst decisions of the previous year.

I have yet to come across someone who doesn’t identify their best and worst results rather than their best and worst decisions. This drawing of an overly tight relationship between results and decision quality affects our decisions every day, potentially with far-reaching, catastrophic consequences. Poker players even have a word for this: “resulting.”

While good decisions can have a bad outcome, bad decisions have a far higher probability of a bad outcome than good decisions. You can compare decision-making when you don’t have all the facts to making a bet.

According to professional poker player Annie Duke, “Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out: the quality of our decisions and luck. Learning to recognize the difference between the two is what thinking in bets is all about.”

Poker is a game of incomplete information. It is a game of decision-making under conditions of uncertainty over time. In poker, valuable information remains hidden. There is also an element of luck in any outcome. You could make the best possible decision at every point based on the information you have and still lose the hand, because you don’t know what new cards will be dealt and revealed. Once the game is finished, you can try to learn from the results. But separating the quality of your decisions from the influence of luck is difficult.

In chess, outcomes correlate more tightly with decision quality. In poker, it is much easier to get lucky and win, or get unlucky and lose. If life were like chess, nearly every time you ran a red light you would get in an accident (or at least receive a ticket).

So now that we have established that we need luck and quality decision-making to get our project to succeed, let's focus on the latter.

Is it a decision or is it a problem?

One of the first decision-making problems you face—often without realizing it—is to decide whether you have a problem to solve or a decision to make.

Time can be wasted and people frustrated if you resort to setting up a problem-solving team when really a decision simply needed to be made.

Alternatively, living with a decision that was made when it wasn’t clear why something had gone wrong (that is, you had a problem to solve first before you could make a decision) can be just as costly.

Decision-making problems often arise because you aren’t clear whether you have a problem to solve or a decision to make.

Avoiding this problem can be easy. A simple approach is to determine whether there is something wrong, or something you are dissatisfied with that you know needs to change. If there is, and you know why something is wrong and there are clear approaches to take or alternatives to choose, then you have a decision to make. You can look forward and act. You make a bet.

It is only when you have a situation where it is not clear what should be done, that you then have a problem to solve. In this case, you must first work on understanding the problem and define potential alternatives or approaches to solve the problem. Then, you must make a decision based on these alternatives.

So now that we know when to make a decision and when to solve a problem, let’s have a look at some other reasons why decision-making is done badly so often.

Common decision-making mistakes

Below are a number of observations I have made in the last few years regarding decision-making at steering committees and executive management meetings.

> Key decisions (e.g., strategic, structural or architectural) are made by people who lack the subject-matter expertise to be making the decision.

> Expert advice is either ignored or simply never solicited.

> Lack of “situational awareness” results in ineffective decisions being made.

> Failure to bring closure to a critical decision results in wheel-spinning and inaction over extended periods of time.

> Team avoids the difficult decisions because some stakeholders may be unhappy with the outcome.

> Group decisions are made at the lowest common denominator rather than facilitating group decision-making towards the best possible answer.

> Key decisions are made without identifying or considering alternatives. The first option wins.

> Decision fragments are left unanswered, resulting in confusion. In other words, parts of the who, why, when, where and how components of a decision are made, but others are never finalized. See “Many decisions are no decisions (and this makes projects difficult)”.

> Failure to establish clear ownership of decisions or the process by which key decisions will be made results in indecision and confusion.

Conclusion

Identifying that a decision needs to be made, rather than a problem solved, is the first important step in avoiding decision-making problems. But once it’s been determined that a decision needs to be made, things can still go wrong. All of the above observations can be attributed to three root causes of bad decision-making:

1) We don’t involve the key people who should be involved.

2) We don’t generate enough alternatives upon which to base our choice of decision.

3) We don’t follow recognized and proven decision-making processes.

So do the opposite. Involve the right people, evaluate alternatives, and follow a proven decision-making process.

What makes a decision great is not that it has a great outcome. A great decision is the result of a good process, and that process must include an attempt to accurately represent our own state of knowledge. That state of knowledge, in turn, is some variation of “I’m not sure.”

So just like in poker, base your bet on the information you have, and you just may end up with a winning hand.
Posted on Tuesday, April 30, 2019 by Henrico Dolfing

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