A Perspective on Decision Making

There are three important things to remember about decisions:

First - a decision by itself changes nothing.

Second - at the moment a decision is made, it cannot possibly be known whether it is good or bad.  Decision quality, when measured by results, can only be known as the consequences of the decision become known.  A decision must be implemented for its consequences to become clear.

Third (and most important) more time living with the consequences of our decisions than in making them.  It is likely that the effects of the decision will be with us longer than it took to make the decision, regardless of how much time and effort was invested.

Decision-Making and Routine Decision Making

Mostly, When we make decisions, we use unconscious routines, called heuristics (personal models), to cope with the complexity of decision-making. These routines serve us well in most situations. 

Much decision-making is based on sensory perception, (“I can see/smell/hear/taste something and based on previous experience this is what I conclude) As magicians know, sensory perceptions can be used to fool people. (Hint: Do not just trust your eyes!)

Other decisions are based on biases or on irrational anomalies in our thinking. These anomalies are potentially dangerous and often they are invisible to us. They have become hardwired into our thinking, so we fail to even recognise we are using them.

Here are some of the most common decision-making traps and what you can do to overcome them.

Anchoring

When considering a decision, the mind gives disproportionate weight to the first information it receives. Initial impressions, estimates, or other data anchor subsequent thoughts and judgments. (Being the firstest with the mostest - as Civil Way General Nathan Bedford Forrest said)

In business, one of the most frequent "anchors" is a past event or trend. In attempting to project sales of a product for the coming year, a marketer often begins by looking at the sales volumes for past years. This approach tends to put too much weight on past history and not enough weight on other factors.

Reduce the impact of the effects of anchoring in these ways:

1. Be open minded. Seek information, other variables and opinions from a variety of people to widen your frame of reference, without dwelling disproportionately on what you heard first.

2. Offer objective information. In seeking advice from someone else, offer just the facts, without your opinion, so you don't inadvertently anchor the person with your thoughts. Then you can benefit from hearing diverse views on the situation without those views being coloured or anchored by yours.

3. Whoever most vividly characterizes the situation usually anchors the other's perception of it. Others literally see and discuss the situation while anchored from that most memorably stated perspective. The vivid communicator has literally created the playing field on which the game will be played.

The Status Quo

We instinctively stay with what seems familiar. Thus we look for decisions that involve the least change. To protect our egos from damage, we avoid changing the status quo, even in the face of early predictions that change will be safer. We look for reasons to do nothing.

Sins of Commission and Omission

In business, sins of commission (doing something) tend to be punished much more severely than sins of omission (doing nothing). In all parts of life, people want to avoid rocking the boat.

What can you do? 

Think first of your goals when preparing to make a decision.

1. Review how these goals are served by the status quo as compared to a change.

2. Look at each possible change, one at a time, so as not to overwhelm yourself and instinctively want to stay "safe" and unchanged.

3. Never think of the status quo as your only alternative. Ask yourself whether you would choose the status quo if, in fact, it weren't the status quo.

4. Avoid the natural tendency to exaggerate the effort or cost or emotional reaction of yourself or others if you change from the status quo.

5. Remember that the desirability of the status quo might change over time. When considering a change, look at possible future situations.

6. If several alternatives are superior to the status quo, avoid the natural tendency to fall back on the status quo because you are having a hard time choosing among the other alternatives.

The Past-Actions Trap

The more actions you have already taken on behalf of a choice or direction, the more difficult you will find it to change direction or make a different choice. Whenever you invest time, money, or other resources, your personal reputation is at stake, you will find it more difficult to change your decision or course of action.

What to do?

1. For all decisions with a history, make a conscious effort to set aside your "past actions" -- investments of emotion, money or other resources -- as you consider whether to change direction.

2. Seek out and listen to people who were uninvolved with the earlier decisions.

3. Examine why admitting an earlier mistake distresses you. If the problem lies in your wounded ego, deal with it straight-away.

4. Don't cultivate a fear of failure culture in the people around you. In such an atmosphere, others will perpetuate mistakes rather than admitting them to you and changing course. When you set an example of admitting mistakes in your choices and self-correcting, others will believe they can do likewise without penalties from you.

Levels of Decision Making

Decision Levels

 We all recognise that some decisions are more important than others, whether in their immediate impact or long term significance. As a means of understanding the significance of a decision so that we can know how much time and resources to spend on it, three levels of decision have been identified:

1. Strategic. Strategic decisions are the highest level. Here a decision concerns general direction, long term goals, philosophies and values. These decisions are the least structured and most imaginative; they are the most risky and of the most uncertain outcome, partly because they reach so far into the future and partly because they are of such importance.

For example: Decisions about what to do with your life, what to learn, or what methods to use to gain knowledge (travel, work, school) would be strategic. Whether to produce a low priced product and gain market share or produce a high priced product for a niche market would be a strategic decision.

2. Tactical. Tactical decisions support strategic decisions. They tend to be medium range, medium significance, with moderate consequences.

For example: If your strategic decision were to become a forest ranger, a tactical decision would include where to go to school and what books to read. Or if your company decided to produce a low priced product, a tactical decision might be to build a new factory to produce them at a low manufacturing cost.

3. Operational. These are every day decisions, used to support tactical decisions. They are often made with little thought and are structured. Their impact is immediate, short term, short range, and usually low cost. The consequences of a bad operational decision will be minimal, although a series of bad or sloppy operational decisions can cause harm. Operational decisions can be preprogrammed, pre-made, or set out clearly in policy manuals.

For example: If your tactical decision is to read some books on forestry, your operational decision would involve where to shop for the books. You might have a personal policy of shopping for books at a certain store or two. Thus, the operational decision is highly structured: "Whenever books are needed, look at Joe's Books."

An important comment should be made here. Issues should be examined and decisions should be made at all of these levels. If you discover that nearly all of your thinking and decision making is taking place at the operational level, then you are probably not doing enough strategic thinking and planning. As a result you will lead a reactive life, responding only to the forces around you and never getting control of your life, your direction or your goals.

Decision Making Techniques

The techniques in this topic range from the very simple to the rather sophisticated. Which technique you choose for a given decision will be influenced by the importance and complexity of the decision. As a preview to a discussion of techniques, then, let's consider a few preliminary ideas that will help identify some decision making levels.

  

Planning for Decision Making

While decision making without planning is fairly common, it is often not pretty. The terms used to describe it--crisis management, putting out fires, seat-of-the-pants governing--all reveal the inelegance and awkwardness of this way of life. Planning allows decisions to be made in a much more comfortable and intelligent way. Planning even makes decisions easier by providing guidelines and goals for the decision. We might even say that planning is a type of decision simplification technique (see the discussion of these techniques below).

Decision makers will find four major benefits to planning:

1. Planning allows the establishment of independent goals.

The vision which will shape the decisions is set apart from surrounding events. Decisions are not made only as reactions to external stimuli. "Management by firefighting" is replaced by a conscious and directed series of choices. Managers now steer the organisation, individuals now steer their lives, rather than being steered by external forces. Sometimes the difference between planning and not planning is described as "proactive" (taking control of the situation) versus "reactive" (responding to stimuli).

2. Planning provides a standard of measurement.

A plan provides something to measure against, so that you can discover whether or not you are achieving or heading toward your goals. As the proverb says, If you don't know where you're going, it doesn't matter which way you go.

3. Planning converts values to action.

When you are faced with a decision, you can consult your plan and determine which decision will help advance your plan best. Decisions made under the guidance of planning can work together in a coherent way to advance company or individual goals.

Planning is useful in emergency situations, too. When a crisis arises, a little thought about the overall plan will help determine which decision to make that will not only help resolve the crisis but will also help advance the overall plan. Without a plan, crises are dealt with haphazardly and decisions are made which may ultimately be in conflict with each other.

4. Planning allows limited resources to be committed in an orderly way.

Budgets, time, effort, manpower--all are limited. Their best use can be made when a plan governs their use.

A simple example would be planning to buy a house or a car. Rather than having to decide between buying the item right now with all cash or never having it, you can plan to buy it over several years by making payments. Or, you might combine this plan with the plan to buy a smaller house and add rooms later as they could be afforded. By planning you can thus accomplish things that might otherwise look impossible.