Influencing the decision-making process

Uncertain times lead us once again and more intensely to thinking of how do we make the right decision. "Should I stay or should I go now?" For those who recognise the song and are already humming it in mind, head banging and dancing is the best decision and answer, for that matter. 

Not every decision is that simple. What does it need to make the right decisions? Is safety required in being assured by having considered all options or do you prefer to take risks? 

The characteristics of the decision situations. 

How do we determine the decision situation? Depending on whether the options are predetermined or open, different decision processes can be considered. In case of predetermined options, we select the best possible alternative of the available variants. Open options require another approach, in which case the decision process starts with searching and identifying the options. If options are open but not available, they must be developed in a creative process. Unfortunately, optimal solutions may not be considered because they are not yet known to the decision-maker. In this case it can be helpful to surround yourself with a group of diverse thinking people. How long the options are sought and modified can be considered itself a decision problem. A high amount of options iwill slow down and hinder decision making. This phenomenon is called the Paradox of Choice. We like to have as many options as possible and struggle at the same time that we have to take a decision.

One step and one-time decisions

The one step decision requires mostly an either/or decision. We either decide in favour of a situation or against. In complex situations with several decisions we tend to consider only the decision on hand without recognising that it affected or affects the whole decision process.

The one-time decisions are taken for the defining and long terms of life or business as what business are, we going in. Even if we are considering changing the positioning later on it is not a reoccurrence of the initial decision. Taking a new product on is considered as a recurrent decision even if it differs from the previous or future products of the company.

Sensitivity of time in decision making

Time pressure is reducing the quality of decision. When time is short, we tend to search less for information, examine fewer options and choose a simple strategy for decision making. In this case, we discover probably fewer problems and could increase the errors. Not necessarily as we will discover later on in Gerd Giegerenzer’s research. Other findings state that we tend to shorten the decision-making time but considering the same number of options. Stress therefore influences the speed of decision making, but not performance.

Decision-making strategy can be deliberately chosen considering the options or the attributes in decision-making. Having enough time is the Option-Strategy in favour as it allows to prove all possible Options to their risks and pick the best option. The question on hand in this situation is: “What can we do?”

Quick decision-making requires clarification on the minimum requirements of an option and we identify the attributes for finding the best option under the circumstances. The question we pose in this case is: “What must we do?”

Decisions in groups

Decision-making in groups implies, that more brains decide better than one alone. Team members can talk to each other and find the errors in reasoning of others, which would lead to better decisions. To the other extend, group-decisions could also lead to polarisation. The starting point is going to be extremized. If the group starts with the safe option, the decision will be even more cautious. In case the group starts with the risky option, the discussions could lead to a higher risk decision. Lioba Werth cites Irving Janis in his definition of group-think. This occurs when the striving for consensus strongly dominates in a group, or becomes more important than the matter of managing the task as well and effectively as possible. This can lead to a distorted perception of reality.

Symptoms of group-think are the illusion of non-contestability is created by false unanimity and generates excessive optimism. Here, the contradictory arguments and facts are devalued. The own group moral stops members to see questionable consequences of decisions. Stereotyping is assessing the ideas of opponents or outsider constantly as negative and would not be considered as serious. This leads to a pressure to conformity and self-censorship as the team members would not address their opinion open in fear of not being accepted in the group.

The hazard of group-think is higher when the group is seeking for consensus, the organisation has strong hierarchies, the members identify strongly with their group and when homogeneity of the group is high.

Decision-making under risk vs. uncertainty

Complex problems don not always require a complex solution. In an uncertain world, heuristic would be the best choice for a fast and high accuracy decision-making. The technical definition of heuristic is a simple procedure that helps find adequate answers to difficult questions. Here is where Giegerenzer and Kahnemann have the same definition, but differ in their point of view.

Gerd Giegerenzer sees heuristics as focusing on the one or few pieces of information that are important and ignoring the rest. Experts often search for less information than novices do, using heuristics instead. He sees heuristic as helping steps in decision-making under uncertainty, which can be developed for different situations.

Daniel Kahnemann, proposes a simple account of how we generate intuitive opinions on complex matters. If a satisfactory answer to a hard question is not found quickly, System 1 will find a related and easier question and will answer it.

A difficult question (“How much would you contribute to save an endangered species?”) can be replaced by a simpler heuristic question (“How much emotion do I feel when I think of dying dolphins?”). The answer of the second question would need to be fitted to the original questions. For example, the feelings about the dying dolphins must be expressed in dollars. Both feelings and dollars are intensity scales and there is a contribution that matches the intensity of the feelings. This insight can help making the decision.

Certainty is an illusion

Humans seem to have a deep desire for certainty. The illusion of certainty is the belief that something is certain, even when it isn’t. Giegerenzer emphasizes two aspects of it: the zero-risk-illusion and the turkey-illusion. The zero-risk-illusion mistakes a world of risk with a certainty and occurs whenever known risks are mistaken for absolute certainty.

The turkey illusion (the calculate risk illusion) mistakes a world of uncertainty with a world of known risks. Giegerenzer quotes Nassim Taleb and his story about a young turkey who grows in confidence as the farmer is approaching and feeding him every day. The turkey lives a happy life and is considering himself as being highly appreciated by the farmer. However, he seems to lack the notion and customs of Thanksgiving. Wrongly assuming that all risks are known is the illusion of certainty.

Figure 1: Sometimes the terms “certainty” and “risk” are used as synonyms. They aren’t. (Gerd Giegerenzer, in Risk Savvy: How to Make good Decisions).

In a world of known risks, everything including the probabilities, is known for certain. Statistical thinking and logic are facilitating and making good decisions. In an uncertain world, where not everything is known and calculation won’t deliver the best option a good heuristic (a good rule of thumb and intuition) is required.

With known risks in decision-making we need logical and statistical thinking to take a great decision. We have to consider the three possible characteristics of probability: frequency, measured by counting and design, which refers to the construction of probability. Frequency and design limit the probability to situations for which large amounts of data are available. The degrees of belief, which can vary from an experience to a personal impression and are highly subjective.

Frequencies and design limit probability to situations and involve a great amount of data or a design that is clearly understood. Degrees in belief, in contrast, are more expansive, suggesting that probability can be applied to any and every problem, which is seducing to think that one tool – calculating probabilities – is sufficient for dealing with all kinds of uncertainty.

A risk can be a threat or a hope. Without risk taking there would be little innovation. In many situations a perceived negative outcome may have a positive one from another point of view. Risk aversion, on the other hand, is tied to the anxiety of making errors. The fear of doing something wrong and being blamed for it creates a climate whit no innovation. No errors, no innovation. A culture in which errors are openly admitted and used as lessons to be learned from them to be able to avoid them in the future, nurture new ideas, fun at work (even though in that moment no one can laugh) great human interactions and trust.

Network intelligence in decision-making

Another completely different approach is described by Frederic Laloux in his book Reinventing Organisations. He calls it the advice process. In self-managed teams with no formal hierarchy, how are decisions made? Neither, anyone can make a decision nor using consensus would be practical in large organisations. Laloux quotes AES and FAVI with their “advice process” which states that any person in the organisation can make any decision. But before doing so, that person must seek advice from all affected parties and people with expertise on the matter. The person is under no obligation to integrate every piece of advice, but advice must be sought and taken into serious consideration.

The bigger the decision, the wider the net must be cast – including the CEO or the board of directors. Usually the decision maker is the person who noticed the issue or the opportunity or is the person most affected by it.

The formal way of making decisions through hierarchical authority (someone calls the shots – where many people might be frustrated, but at least things get done) or through consensus (everyone gets a say, but it’s often a frustrating long and slow process and sometimes things get bogged down because no consensus can be reached). The advice process transcends this opposition: the agony of putting all decisions to consensus is avoided, and yet everybody with a stake has been given a voice.

The benefits of this process are multiple. People involved in the process learn about the issues and become knowledgeable. Asking for advice is an act of humility, which is one of the most important characteristics of a fun workplace and an on the job education. The chances to reach the best decision is greater as the decision maker is closer to the issue and the process stimulates initiative and creativity, which are enhanced by wisdom from knowledgeable people in the organisation.

In times of crisis, extreme situations call for extreme measures. When swift or even harsh decisions might be needed, self-management might need to be suspended temporarily for the CEO to make a few necessary, top-down decisions. By sharing the problem with the employees, trying to figure out a course of action could lead to unexpected and unusual solutions, neither management nor employees would have considered or accepted under different circumstances.

Either we use mathematical and statistical rules in assessing the data needed for a decision or we rely on heuristics or intuition depends on how we use to see the world and how much we can stand uncertainty. Asking the right questions for the right situations and knowing when to make own decisions instead of walking with the group enhances the outcome of making the right decision.

Recognising the different situations and the adequate types of decision making can help everyone to build own habits and expertise on how to navigate life successfully. Sometimes gaining confidence by knowing how to asses the situation in order to make the right decision can be a great step forward.

Literature

Gerd Giegerenzer (2014): Risk Savvy: How to Make good Decisions. Penguin Books, New York,

Daniel Kahnemann (2011): Thinking Fast and Slow. Penguin Books, UK.

Frederic Laloux (2014): Reinventing Organisations. A Guide to Creating Organisations Inspired by the Next Stage of Human Consciousness. Nelson Parker.

Hans-Rüdiger Pfister, Helmut Jungermann and Katrin Fischer, (2017): Die Psychologie der Entscheidung. Eine Einführung. Springer Verlag Berlin Heidelberg.

Lioba Werth, (2004): Psychologie für die Wirtschaft. Grundlagen und Anwendung. Spektrum Akademischer Verlag, Heidelberg, Berlin