Avoiding Decision Traps From The Inside-Out

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“If someone really is certain about something, they have almost certainly frozen their ability to change their minds when they need to.” ?- Carol Tavris, Ph.D.

Over the years, I have known many leaders who take pride in their ability to take emotion out of decisions. We know this isn’t possible, and I have seen too many leaders make emotional decisions, then rationalize them to believe that people can simply will themselves to be rational actors. Behavioral economics confirms that decisions are influenced by psychological, emotional, cultural, and social factors, as well as information. This research is becoming increasingly well known in business circles, but it is surprisingly difficult to put into practice. One reason is that many still deny the role of emotion in our decisions.

Challenge Yourself

Some people can be extremely adamant about their “emotion free” decisions. Aaron, an executive responsible for risk in a financial firm, insisted that emotion had no impact whatsoever on his decisions. He was so incensed at the idea of emotion and social context affecting his decisions, he stood up and yelled, “I am not emotional!”?

This might have been funny, if I hadn’t known that Aaron was already having problems at work because of his bad temper. He was intelligent, but had blocked his ability to learn about decision-making in two ways. First, he believed he already knew everything. Second, he was so defensive that he was unable to participate in discussions of ideas other than his own. Defensiveness makes it? impossible to learn because the learning process isn’t only about adding to what we know. Sometimes we must let go of what we thought was true when new information tells us it isn’t.?

While most of us aren’t like Aaron, It can still be difficult to let go of beliefs, even if we’re not so easily provoked. This is especially true when colleagues argue against abandoning or even challenging accepted knowledge. Even Richard Thaler, Ph.D., one of the early researchers in behavioral economics and the winner of the Nobel Prize, has been criticized by some economists for his work, which challenges long-held theories. Challenging our beliefs and assumptions isn’t easy, but it’s important to good decision-making, especially when those decisions involve significant risk.?

Outside-In and Inside Out

When faced with a high-stakes decision, it can be helpful to have a framework in place, like “outside-in and inside-out.” Outside-in asks what outsiders think of your business. I worked with a banking executive, Valerie, who said that, “Our customers don’t love us, but we seem to think we know what we’re doing. My team says all the right things, and I believe their intentions are good.” However, she had her doubts, admitting that she was annoyed by some on her team who repeated phrases like “customer experience” without understanding what it truly means. She called this “The ontology of the parrot,” which would be funny if she weren’t right.?

Valerie realized she needed to understand the perspective of people outside her organization, so she commissioned a study that included people within the bank (but outside of her team), customers, and suppliers. The results of the study gave her an outside-in view based on data.?

Inside-out asks how you think others see you and your team. While feedback was gathered from outsiders, a similar process was launched for those inside her organization. The results were surprising, showing that people didn’t think they were doing an excellent job. There were several reasons for this, including scarce resources, inadequate technology, and inconsistent management. Valarie also learned that people felt constrained by the bureaucratic culture that they felt prevented them from offering ideas about how to improve.?

On top of that, the feedback from the outside-in study revealed that, despite the assurance from her leadership team, outsiders viewed the organization as careless and unresponsive.?

Take Action?

Now that Valerie had this information, it was up to her to use it. This is where some leaders fall off. Valerie recognized her responsibility for the situation and knew that asking for feedback but failing to take action is worse than not asking, so instead of spinning the data, she faced it. By sharing the results, she showed others in her organization that facing news is better than ignoring it, even when it is embarrassing.?

Valerie’s approach proved effective, allowing her to make specific improvements and starting a practice that became widespread. Her team dubbed the procedure “Shutting down the parrot.” The method was effective longer-term, and the message had just enough humor in it to help everyone remember that decision traps happen to humans, even intelligent humans.?

Even the most successful executive can step into decision traps by relying on information that is no longer useful, leading to poor decisions and serious mistakes. To escape these decision traps, leaders must not only recognize their own fallibility; they also utilize tools like the “outside-in/inside-out” method to gather information - even if they think they already know the answer.?

My newest book, Meta-Leadership: How to See What Others Don’t and Make Great Decisions, draws on a vast body of research from psychology and business to show how great leaders can improve their judgment and decision-making for stronger, more profitable results.?

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