Effective Decision-Making

Decisions are often influenced by recommendations made by professionals with subject knowledge. But increasingly decision-makers are demanding supporting evidence other than just opinions when considering alternatives, particularly when the decisions are complex, unique and/or highly impactful on organization performance. Evidence-based management has emerged as a discipline in response to the dynamic environment and the complex nature of decisions that must be made.

NOTE: A series of articles that summarize the results of high quality research related to important workforce management topics will be launched on May 20, 2021 by World at Work (worldatwork.org). These articles are based on rigorous analysis of all published studies by the Center for Evidence-Based Management (CEBMa.org). This initiative is intended to provide practitioners with valid information that can be used to inform decisions.

Although professional expertise and human judgment are still valued relying solely on opinions is increasingly viewed as inadequate. Even though an expert in a field has decades of experience the volatile environment often presents situations that have not been dealt with in the past. This brings into question whether practices that worked well in the past will work in different contexts. For example, the unexpected current pandemic has forced governmental agencies to decide whether existing eligibility requirements for unemployment insurance are still appropriate. And another important question that must be answered is “if an individual works as a contractor performing “gig” assignments does the disappearance of work constitute unemployment, or is it a characteristic of the way a freelancer’s income varies?” State government agents who would normally make that determination may lack experience with the impact of a “Black Swan” event that has been sudden and devastating for so many. And each employer must also decide whether financial support beyond what state unemployment programs will provide for those losing much or all of their income will be an investment it will make. Weighing the consequences on parties-at-interests makes high stakes decisions daunting.

The Impact Of Organizational Culture On Decision-Making

The beliefs and values that underlie an organization’s culture have a major impact on how it makes decisions. The belief that it takes everyone giving their best in order for the organization to succeed is prevalent in collectivist cultures, such as those commonly found in many Asian and Latin countries. The belief that exceptional individuals are responsible for organizational success is more common in individualistic cultures that prevail in the U.S. and other Anglo countries. These beliefs result in different approaches to decision-making.  

Collectivist cultures will tend to prefer processes that involve the participation of a wide range of people, while individualistic cultures often look to decisive individuals to use their judgment to make the tough calls. But important decisions in today’s complex context are increasingly being made using processes that are a mixture of these two approaches. Because so many decisions require deep understanding in a wide range of disciplines a process that accumulates the perspectives of a variety of specialists and uses that intelligence to decide is most likely to succeed. No one person is apt to have the wide and deep expertise required, and even though a single person may be viewed as the decision-maker that person is likely to understand the need to tap all available resources.

Whatever process is used it is incumbent on decision-makers to be viewed as having utilized the best evidence. Making a unilateral decision based on individual judgment or instinct is a high-risk approach, especially when it appears to others there was information available that would have called for a different decision. And when Black Swan events such as the 2020 pandemic happen, it forces decisions to be made without precedent and without the benefits of rigorous planning. One of the benefits of having extensive experience is that most things have some resemblance to what has happened in the past. This provides the “well, in this kind of situation that approach has worked” kind of knowledge that can guide decisions. But if no precedent exists there is little to guide decisions. And although Black Swan events are supposed to be rare there have been at least five of them in the last decade. So, if the new normal is making decisions that do not have precedents it brings into question what type of processes will work in these situations.

Types Of Evidence That Can Inform Decisions

There are four types of evidence that can inform decision-makers. Individual expertise, of both the decision-maker and advisors, gained through education and experience, is a major contributor in most decisions. Organizational data will also generally be considered, since it is relevant to what fits the specific context. The beliefs and preferences of stakeholders should also enter into the decision, since the outcomes will impact them. Finally, there may be research evidence that is relevant to the decision.  

It is prudent to consider all forms of relevant evidence. In some cases, research findings may be dominant. Studies may suggest that trying to motivate employees with one type of incentive does not generally produce the desired results, and this might be sufficient to alter the decision. Stakeholder views may also dominate. If the Board of Directors has established short-term profitability as the primary objective that may result in not making investments in R&D that could only pay off well into the future. Reconciling conflicting evidence to arrive at a final decision may be difficult, making it prudent to use a structured process. By weighting the relative importance of the different types of evidence and evaluating what action each type of evidence prescribes it may be possible to come up with a type of point system to guide the decision.

Cognitive bias can also have a major impact on the quality of a decision in several ways. We tend to be more confident in what we know than cold logic would suggest. We also tend to more readily accept information that agrees with our current beliefs or what we would like to be true than information that contradicts it. And System 1 thinking (fast resolution) often drives a decision without activating System 2 (analytical assessment of first impressions). Finally, we tend to prefer things we are familiar with, such as an action that has been taken in the past. Realizing a past decision created unforeseen problems may offset the tendency to go with the familiar. There can be a reluctance to make a decision that makes a prior decision seem like a mistake. It is important to recognize that prior decisions were made under different circumstances and may have been the best choice at that time. So what appears as changing one's mind may in fact be adjusting the decision to fit the current realities. Contexts change, and what worked in the past may not work today. Biases do not necessarily harm the quality of decisions, but it is important to be aware of them and to attempt to consider how they might impact the final choice of direction. 

Contextual Change Impacts The Effectiveness Of Decisions

The rapid evolution in technology that can support decision-making presents new questions. AI, machine learning and robotics offer new tools that can be enlisted in analyzing issues and making decisions. There have been instances where an algorithm has done a better job of predicting outcomes than even highly competent specialists. Human intellect is limited in some ways. Fatigue or processing capacity often causes the brain to be overwhelmed and to make errors. Human emotions may override logic, causing personal biases to outweigh relevant data.

Yet people tend to hold on to the power to make decisions. Not doing so can make the person seem less capable. An example where this tendency can produce less than optimal results is when someone is differentiating between candidates for employment. The most common tool for selecting talent for organizations is the one-on-one unstructured employment interview. The least valid tool for selecting talent is the one-on-one unstructured interview. This use of a tool with little or no validity persists despite the existence of scientifically valid research that demonstrates the flaws in the approach. Choosing convenience over scientific validity seems a poor choice. Yet an inflated estimate of one’s ability to judge can cause people to stick with personal instincts.

The use of unstructured interviews is an example of using one form of evidence (gut feeling) rather than another (research findings) because the user is more comfortable with it. Admittedly a manager should consider whether (s)he feels the candidate can “fit in” when making a final hiring decision. But if organizational data shows that the criteria that best predict who will be a successful employee differ from the criteria used by a manager the freedom to override evidence with feeling should be questioned. Several major universities have dropped the SAT from the factors considered in admission decisions because there is a suspicion that it is biased in favor of white candidates, despite its demonstrated correlation with successful selections. But if an interview replaces the test is there not a danger that personal bias will bias decisions? Implicit bias resides in the sub-conscious level and more people behave in a biased manner than admit to being biased. It is not fashionable or considered appropriate to discriminate based on personal characteristics, so few want to be thought to be biased. 

As the issues related to human – technology interface become more prominent it is necessary to develop principles that can guide decisions. There are potential problems with both human judgment and in replacing it with technology. Using technology as an enhancement of, rather than a replacement for human decisions may be the best option. 

Conclusion

Decisions are most apt to be correct when effective processes are used to make them. A sound process will ensure that all relevant evidence is considered. Decision-makers must become proficient in understanding what constitutes sound and relevant evidence and how to apply it. And the different forms of evidence may suggest different decisions, so it is necessary to decide which should be weighted most heavily in each case at a specific point in time. 

The influence of technology will vary depending on the type of decision and the outcomes. Humans must cope with the consequences that decisions have on people, making it necessary for them to apply moral and ethical principles when making them. Technology will rely on rigid guidelines while decision-makers must consider how human emotions will impact the desirability of what manifests. Integrating both perspectives, albeit challenging, is often the right choice.

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About the Author:

Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene speaks and teaches globally on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds publications and articles about human resource management throughout his career.

• Strategic Talent Management: Creating The Right Workforce
• The Most Important Asset: Valuing Human Capitol
• Rewarding Performance Globally [with Fons Trompenaars] 
• Rewarding Performance: Guiding Principles; Custom Strategies (2d Edition)

Order his latest book entitled "Strategic Talent Management: Creating The Right Workforce" with a promotional offer code from the publisher, Routledge available here.