?? The Art and Science of Decision-making

Hi Friends ??,

Decision-making is a fundamental skill that can make or break an organisation.

Every choice a leader makes has far-reaching consequences, affecting the bottom line, the people, the culture and reputation.

In this article will delve into the art and science of decision-making. Today we’ll explore:

• How We Make Decisions: The Neuroscience Behind Choices
• 4 Leadership Decision-making Styles
• 10 Common Decision-making Mistakes (That We All Make)
• 3 Biases to Avoid
• 4 Decision-making Tools to Make Better Decisions

Let’s dive in!

How We Make Decisions: The Neuroscience Behind Choices

Decision-making is not a purely rational process; it’s deeply rooted in our brain’s intricate mechanisms. Understanding the neuroscience can provide valuable insights into why we make the choices we do.

The brain balances physical, mental and emotional systems. There are two main systems known as Red (energy) and Blue (clarity) that are needed to balance decision-making.

When under pressure we may become out of balance, meaning that too much emotion may cause us to fight, flight or freeze. Or, too much analysis or reflection may cause overthinking and paralysis.

Recognising we operate using both Red and Blue systems is crucial to improving decision-making.

4 Leadership Decision-making Styles

All leaders are responsible for making great decisions. These four styles are commonly used:

1) Autocratic Leadership

Autocratic leadership involves a single leader making quick and unilateral decisions without input from others. It’s suitable for urgent situations or when the leader possesses essential expertise.

2. Participatory Leadership

Participatory leadership entails leaders actively seeking input from team members before deciding. It’s valuable for complex problems or when team collaboration benefits the decision.

3. Democratic Leadership

Democratic leadership involves team members voting or reaching a consensus. It fosters inclusion and is ideal for important, non-urgent decisions.

4. Consensus-Based Leadership

Consensus-based leadership requires unanimous agreement among team members. It’s used for significant, long-lasting decisions when ample time allows for thorough discussions.

Two factors drive the choice of leadership style:

1. Urgency: Urgency determines whether to use autocratic or participatory leadership for swift decisions or democratic/consensus-based when time allows.

2. Impact: High-impact decisions benefit from participatory, democratic, or consensus-based approaches, while low-impact ones can use autocratic leadership for quick resolutions.

10 Common Decision-Making Mistakes (That We All Make)

Research from IESE Business School Professors Miguel Angel Ari?o and Pablo Maella highlight the ten most common decision-making mistakes:

1. Holding out for the perfect decision (analysis paralysis)
2. Failing to face reality (we tend to see things as we wish they were)
3. Falling for self-deceptions (how facts are presented may influence decisions)
4. Following the crowd
5. Rushing and risking too much (rushing is seen as efficiency, but it is often risky)
6. Relying too heavily on intuition (intuition should not outweigh analytical thinking)
7. Being married to our own ideas (it’s hard for us to change a prior decision)
8. Paying little heed to consequences (for example, the titanic ignoring warnings of icebergs)
9. Overvaluing consensus (no one in the Kennedy administration questioned the Bay of Pigs invasion to avoid appearing ‘dissident’)
10. Not following through

3 Decision-making Biases to Avoid

There are over 150 unconscious biases that can cloud our judgment and lead to poor decisions. It’s essential to recognise and mitigate biases such as:

• Confirmation bias is the tendency to seek, interpret, or remember information in a way that confirms one’s preexisting beliefs or opinions. People often give more weight to information that aligns with what they already think or believe while downplaying or ignoring information that contradicts their views.
• Outcome Bias is the tendency to judge the quality of a decision based on its outcome rather than the quality of the decision-making process itself. Even if a decision was made using sound reasoning and information, if the outcome is negative, people may wrongly perceive the decision as poor.
• Hindsight Bias, also known as the “I-knew-it-all-along” phenomenon, is the tendency to believe, after an event, that the outcome was predictable or that one would have predicted it correctly all along. It makes people overestimate their ability to foresee events or outcomes after they have happened.

“Many situations in life are similar to going on a hike: the view changes once you start walking. You don’t need all the answers right now. New paths will reveal themselves if you have the courage to get started” – James Clear

4 Decision-making Tools to Make Better Decisions

Now that we’ve learned how difficult making good decisional, here’s some practical and useful tools for making better decisions:

1) PMI (Plus-Minus-Interesting): PMI is a straightforward yet effective exploration and evaluation tool. When faced with a decision, create three columns.

In the “Plus” column, list all the positive aspects of the decision. In the “Minus” column, identify the negatives. Lastly, in the “Interesting” column, jot down any intriguing or unexpected aspects related to the decision.

You can also, weight or score the aspects you’ve come up with to help arrive at an overall tally to help inform the decision.

This structured approach helps you slow down and assess a decision from multiple angles, promoting a more comprehensive understanding.

2) Six Thinking Hats: Developed by Edward de Bono, the technique encourages individuals to approach a decision from different cognitive angles. Read this post for a detailed explanation.

3) Second-Order Thinking: This tool involves thinking beyond the immediate consequences of a decision.

To apply second-order thinking, consider the primary outcomes and the potential secondary and long-term effects.

Delve into the ripple effects and unintended consequences that the decision might trigger.

First-order thinking is fast and easy.

Second-order thinking is more deliberate.

“… Never seize on the first available option, no matter how good it seems, before you’ve asked questions and explored” – Ray Dalio

4) Post Implementation Review: In a Post Implementation Review, you evaluate the outcomes after a decision has been executed or a project has been completed (helps mitigate outcomes bias).

Categorise the evaluations as – what to keep, what to stop, what to add or what to change.

This assessment helps identify lessons learned, areas for improvement, and best practices for future decisions and projects.

?? The Short of it

Decision making is a complex beast. Don’t leave it to chance.

For optimal decision-making:

• Realise that the brain uses two systems (emotions and analysis) that must work in balance to be effective.
• Choose a leadership style to suit the urgency and impact of a decision.
• Recognise that there are 10 common mistakes and 3 biases that leaders should avoid when making decisions.
• Leverage the 4 decision-making tools to make better decisions.

I hope this article helped you.

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See you again soon.

Cheers and keep thriving ??,

Vaughan

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This article was originally published in September 2023 as a Future-state Thinking newsletter.