Decision Quality vs. Decision Outcome
Magdy Reda
FP&A | Innovation & Negotiation | Driving Growth, Cost Efficiency, and Collaborative Success | Interdisciplinary Expertise | CMA, CSCA, PMP, SSBB
Evaluating the quality of a decision based on its outcome can be misleading. A well-informed, carefully considered decision can still lead to an unfavorable outcome due to factors beyond our control. Conversely, a poorly made decision might result in a positive outcome purely by chance.
Let me illustrate this with a historical example: Roman Emperor Constantine's victory at the Battle of the Milvian Bridge in 312 AD was significantly influenced by the fortuitous collapse of a bridge, leading to a decisive and unexpected victory. What does this event really tell us about Constantine's decision-making? Or should the loser, Emperor Maxentius, be blamed for not considering the possibility of the bridge's collapse?
In war, love, business, and all other aspects of human life, the lack of full information, coupled with rapid changes, makes decision-making complex and daunting. We might argue that we're better off today since we live in an age abundant with information, which should theoretically lead to better decisions. Yet, the vast volume of available data can be overwhelming, requiring leaders to skillfully discern which information is most relevant.
Reflecting on Decision-Making
As business leaders, it's essential to reflect on the underlying questions of our decisions:
These reflections can help improve our decision-making processes, even if the outcomes are not always favorable.
Imagine you need to decide on a significant project, considering more than just the financial implications of a cost/benefit analysis based on the present value of the project's cash flows. The practical steps outlined below mirror the strategic decision-making of ancient battles, maybe discussed for days in public squares of Rome, and can guide your next project:
Even after taking all these steps, be prepared to accept that a project may still have a negative outcome. In such instances, it is common to find yourself alone, as success has many fathers, but failure is an orphan.
During these moments, the best course of action is to avoid getting trapped in hindsight bias—judging past decisions with the benefit of new information that was not available at the time. You might recall discussions where someone says, "How come we didn't consider this or that? It's so obvious."
To reduce the emotional response when reflecting on similar past experiences, consider the humorous example of a typical Italian Monday morning. Work productivity often plummets as discussions about Sunday’s football games dominate. Everyone becomes an expert coach, claiming how the team’s coach should have done this or that, as if the games were entirely predictable. Does this happen in your country too?
Rather than falling into this bias, the best course of action is recognizing that we are far less in control than we would like to be and integrating the lessons learned into future decisions. For instance, airlines purchase aircraft years in advance and for millions of dollars based on numerous factors, most of which are out of their control (global economic growth, geopolitics, travel preferences, etc.). Hardly anyone would blame the expansive trend of 2019’s decisions given the COVID-19 recession. The proper approach is integrating recent events into decision-making and having a response plan if another pandemic requires airlines to revise their fleet plans.
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This approach focuses on fat tails: rare, high-impact events ("Black Swans") can have a huge influence, and we tend to underestimate their likelihood. In aviation, the possibility of a rare but catastrophic event is always considered, and preparations are made accordingly. After COVID-19, pandemics are more prominently represented in forecasting models. Businesses should adopt a similar approach, planning for unlikely but potentially disruptive events.
Engage in the Discussion
Reflect on your own decision-making processes:
Given the complicated times we are living in and the necessity to maintain mental health and capability, it is important to acknowledge that our brains, evolved for survival, are not naturally equipped for complex statistical analysis. Recognizing these limitations can help us make better decisions in the face of uncertainty.
In conclusion, if you haven't already, surround yourself with capable analytical minds and be open to their honest feedback, which may challenge your natural biases. Trust them, your decision-making processes, and remain adaptable when outcomes differ from expectations.
Take care and keep safe,
Magdy
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DIRECTOR QUALITY—Leads Overall Operational Excellence with KPI focus on Profit, Customer Satisfaction, Revenue Generation, and Regulatory Compliance.
7 个月Madgy, what I found particularly insightful in the Decision Quality vs Outcome article was two concepts: 1--Assess probability of outcomes BOTH subjective and objectively. 2--Don't beat yourself up over decisions in the past, particularly if new information comes to light after the decision was made. Your article triggered other thoughts: 1--A decision does not have to be singular; It may make more sense to take multiple actions to hedge bets. Stock pickers cannot chose one gorilla stock to make consistent returns. Thus the reason for a hedge strategy. 2--You mentioned going forward companies going will incorporate the pandemic risk. I wonder if airlines have concrete plans on what they would do different if we had a replay of the COVID episode. To illustrate out of box thinking, would airlines challenge the "science" and government? Similarly, what will be the "frame" for making a decision on Boom, the upcoming supersonic airliner? I suggest there are considerations (thus risks) not front-of-mind in the normal process to decide on an airliner.
DIRECTOR QUALITY—Leads Overall Operational Excellence with KPI focus on Profit, Customer Satisfaction, Revenue Generation, and Regulatory Compliance.
9 个月#magdyreda Magdy As always, an excellent article. ?? If I were to add anything, I would ask at the front end of the challenge what problem(s) are we trying to solve? Organizations thorough in their methodology will: 1-- Distinguish symptoms from true problem statements 2--Identify validate true root cause(s) 3--Identify effective solutions and validate 4--Modify their business processes to prevent similar issues, such as the launch of a new product or service. In any industry whether manufacturing, services, etc there is a cycle of approaches that come and go, and are often spread like peanut butter across the organization. However, in a world where there are always more positive things that can be done, there is normally lack of resources to do it, whether in a war setting or in any other. Thus it is critical to assess the problem(s) correctly to provide by addressing root causes at the heart of the problem statement. I do like clarity on what is the problem we are trying to solve. Often one can ask 10 people and get (10+X) answers or something so general in nature it is not properly actionable. Best regards, Udo