The art of decision-making: a simple guide

Decision Making has been a discipline of heart for me for the last 5 years.

Every day, you're taking approximately 35,000 conscious decisions. Your near-instantaneous automatic thinking takes a lot more than that.

This includes every small choice you're making, as small as, snoozing the alarm clock or getting up on the first ring.

In the same way, leadership is synonym to constant decision making. From strategic planning to crisis management, the choices made by leaders shape the direction and fate of their organizations.

In the wake of an unexplored yet challenging 2024, most leaders will have to face high-stakes decisions, and you might be one of them. How you will approach these decisions can significantly impact your teams, your stakeholders, and your organization's future.

Daniel Kahneman said: The brains of humans contain a mechanism that is designed to give priority to bad news.

Our brains are wired to have significant bias. Thus it is essential to build a system that allows us to reflect on the type of decisions we need to take and support the process.

Decision making pertains to different situations and contexts, and each is ruled by its own imperatives.

Strategic Decision Making: Strategic decisions, like market expansion or product innovation, require a long-term vision. Leaders must balance immediate needs with future goals, often under conditions of uncertainty. Daniel Kahneman 's work on cognitive biases is pivotal here. He emphasizes that leaders should be aware of biases like overconfidence and loss aversion that can skew strategic decision making. Kahneman advocates for a more data-driven approach, where empirical evidence takes precedence over intuition.

In this new era of data science and AI, these tools can play a fundamental role in ensuring leaders are taking the right decisions for their organization based on facts and data.

Fast and Responsive Decision Making: In situations requiring swift action, such as responding to a sudden market change, leaders need to make decisions quickly. This is where Barry Schwartz's concept of 'The Paradox of Choice' comes into play. Schwartz argues that too many options can lead to decision paralysis. Effective leaders need to simplify choices and focus on key information to make timely decisions.

Priorization: Leaders are often swamped with numerous tasks and decisions. During my time at HKS, I had the opportunity to have Jennifer Lerner as a lecturer. Her research on emotion and decision making sheds light on how leaders can prioritize effectively. Lerner suggests that understanding emotional responses to different scenarios can help leaders identify which decisions require immediate attention and which can be deferred.

It is also crucial to understand that any context runs as a system, with its own pertaining dynamics. John Sterman focused on the importance of taking into account the causal loop systems , which might have a delayed negative (or positive) impact on top of the direct intended impact, thus having repercussions on the way we have priorized the tasks.

Crisis Management decision making: This is probably the most sensitive case of decision making. During a crisis, leaders must make high-stakes decisions under pressure. In such a context it is important to be consideringa range of outcomes and their probabilities. If in such a position, it will be crucial for you to anticipate various scenarios and their impacts to have an effective crisis management.

For all of these cases, here is a simple framework you can decline for each major decision you have to undertake:

1. Define the Decision Context: Understand whether the decision is strategic, urgent, a matter of prioritization, or crisis-related. This clarity helps in adopting the right approach.
2. Gather Information: Collect relevant data and insights. For strategic decisions, this might involve market research, for crisis decisions, real-time information is crucial.
3. Identify Biases and Emotions: Reflect on personal biases and emotional responses. Leaders should be aware of how their perceptions and feelings might influence their decision-making process.
4. Develop Options: Brainstorm possible courses of action. Involving a diverse team in this process can provide multiple perspectives and reduce individual biases.
5. Evaluate Outcomes: Assess the potential outcomes of each option. Leaders should consider both short-term and long-term impacts, balancing risks and benefits. Be sure to create full causal loops to evaluate the delayed impacts of your decision, and identify the scenarios that might be detrimental to your organization on a mid or long term.
6. Decide and Act: Make the decision based on the best available information and analysis. Effective leaders are decisive and can communicate their decisions clearly to their teams.
7. Review and Learn: Post-decision, evaluate the outcomes against expectations. This step is crucial for learning and improving future decision-making processes.

In all cases, it is always difficult to evaluate whether we are making the right or wrong decision. In some cases, all the decisions might be difficult to take, and in others, all of them might seem wrong.

Thus it is crucial to allow yourself to develop your own framework to support the process taking away all the personal and social bias that might influence these.

I also recommend this short read on HBR, Growing Pains, as a case study for decision making.

What are some experiences on difficult decision making, either personal or business ? Let us know in the comments. ????