3 Maxims for Effective Decision-making in Complex Situations

Researchers estimate that on average each person makes 35,000 decisions per day. That is a big number. However, not all decisions are equally staked. Some are high-impact while others may lead to temporary or entirely reversible results. For example, joining the slow-moving lane in traffic can be both temporary and easily reversible, unlike the decision to sign a three-year exclusivity contract with a raw-material supplier. For first-time startup founders, in particular, the after-effects of high-stake decisions such as hiring choices, employee equity participation, market strategy etc. can impact the overall growth of the company, even in the short run.

This constant process of choosing between or from amongst competing alternatives - logically or subliminally - can lead to increased levels of emotional stress, mental fatigue, procrastination, impulsivity and…wait for it…indecision.?The maxims below promise to introduce some structure to your decision-making process but may not entirely eliminate any of the nuanced complications or complexities.

#1 Begin with an end in mind

Here's a relatable scenario. Imagine sitting in a restaurant looking through the menu trying to decide on what to order. Everything looks delicious, you are spoilt for choice. You know it is impractical to order the entire menu because a) it will probably cost more than you planned to spend on a single meal ( all-you-can-eat buffet experiences aside) and b) the marginal satisfaction from each additional bite will turn negative at some point. You've scanned through the menu booklet twice and can feel the waiter beside you starting to get impatient. It's a busy evening and there are customers waiting to be attended to. You're starting to get anxious, earnestly trying to make up your mind. Emotional stress! And you haven't even had a taste of the meal.

Now imagine how differently this scenario would play out if it was approached with an end in mind. Your planned objective from the get-go was to try out a new cuisine. Immediately you receive the menu, you eliminate all the weak preference choices - if you've had it before, it doesn't make the cut. Most rice and potato options get eliminated, automatically limiting your options, streamlining your focus and helping you to think more clearly. As the popular saying goes: "it is easy to make good decisions when there are no bad options".

#2 Integrate probabilities

The best part about incorporating probabilities into the decision-making process is that it forces one to examine the underlying assumptions critically. Let's consider a simple scenario. Imagine you are heading out to work on a typical winter day and are considering taking an umbrella in case it rains. As you are about to head for the door you remember this maxim and decide to test it out on your hypothesis which is: "it will rain today". You begin by asking a simple question "What are the chances of this event occurring?".

The chance of rain on a random day is 0.5 - it either rains or it doesn't. However, as it is winter season, the possibility of rain is generally higher, so you bump that probability number to 0.55. Next, you recall that it rained the previous day and the day before that. If you believe that this trend will continue, you'll bump the probability number once again to...let's say 0.6. (We can unpack how to determine whether or not a 60% chance of rain is significant in another article.)

The main takeaway here is that during this process of thinking probabilistically, you would notice certain questions naturally start to emerge which would help you think about your hypothesis more clearly: Why is there a higher chance of rain during winter? Is that verified information or where did that come from? What are the underlying causes of this? Why do I think the rain trend over the past two days is indicative? Is a 60% chance of rain convincing? Why or why not? Do I need more information?

#3 Remember the people

People are the centre of every company and will be impacted by business decisions - regardless of the organisation's age or size. There are various tools leaders adopt to ensure that the far-reaching implications of business decisions are carefully considered.

A personal favourite is the stakeholder matrix - commonly adopted during change-management projects. The stakeholder matrix allows founders to create an exhaustive list of all the different parties that may be impacted by a decision, and then weigh their interest/influence levels. This tool can be used internally - within an organisation, or across a market - to better understand the competitive landscape, as organisations do not operate in a vacuum. This is especially relevant for founders with disruptive solutions.

Furthermore, mapping out stakeholders will also provide a lens to better understand who the beneficiaries of an initiative are likely to be based on: shared interests, allyship, and positive externalities. In a similar vein, it would also help leaders identify parties or groups who may be negatively impacted by the outcome of the decision and how best to address their concerns. If this sounds like a political pitch, maybe it is because it sort of is. The reality is that all businesses have a political dimension, they involve heterogeneous people, are bound by contractual agreements and are in one way or another regulated by the government.

Overall, the three maxims listed above are not the be-all and end-all solution to the complexities involved in decision-making as good decisions can have unfavourable outcomes. However, these guides can relieve some of the emotional stress that clouds the mind when faced with a complex decision, helping leaders approach such situations systematically and logically.