Leaders Making Better Decisions, Think Probability!

The world has become much more complex and uncertain recently. The business world is full of examples of disruptions that completely transform entire industries very rapidly, living behind leaders with their beliefs that they hold as true for too long. Kodak is the example that always come to mind, particularly because they have invented the technology that would eventually disrupt their own market. And even despite this, they were not able to switch their business model on time because their leadership team hold the belief that consumers would always stay on argentic.

Leaders face these situations every day. Making decisions based on assumptions that are constantly changing is difficult, because it asks for reviewing our old beliefs, which our mind is not used to do it. Research in psychology shows that our mind is always looking for ways to spend less energy and use shortcuts to come to fast solutions. However, these heuristics can be misleading sometimes, because they are more often now based on changing and invalid assumptions. For example, if you were a leader in the movie renting industry in the 90s, you might have take the decision to double the catalogue or improve services in your movie renting store when you saw that particular survey in which consumers were asking for it. However, this would be completely irrelevant when Netflix completely transformed the rules of this game through the internet.

The main problem with this is the “certainty fallacy”, which happens to leaders who sometimes quickly internalize some beliefs about their business and consistently discount new information that would contradict this belief. Leaders take tones of decisions everyday and they got used to simplify problems, extract their essence, form quickly opinions and take decisions based on this. Moreover, leaders used to be rewarded by their confidence on their decisions, which sometimes may lead them to overestimate their confidence and close their eyes to contradictory information. Popular culture too often assume that that good leaders are never wrong, which may lead to overconfidence and bad decision making process.

There are many ways to reduce this challenge. Many of the remedies are related to the culture of the organization and the team dynamics that are supporting it. One simple way that helps reducing this is thinking and expressing decision making within teams on probability terms.

One simple way that helps reducing this is thinking and expressing decision making within teams on probability terms.

Think about that, the simple fact that a leader says “this action has 85% of chance to improve our market share” is completely different than “this action will improve our market share”. It implies that the leader herself knows that there is always a chance that things go in the other way, helping thinking on alternative actions or other supportive solutions to address the same problem. It also helps the team to express their divergent opinions and coming with other richer alternatives, which would not be possible when the leader already expressed her mind that THIS IS THE BEST option.

This obviously does not mean that the leader should always communicate this decision in probabilistic terms. I believe communicating in a probabilistic way with her team would be a great opportunity to focusing on diversity and creative ideas. However, when the decision has been taken and we are in an implementation mode, I believe the leader should be more assertive and do not use probabilistic language. For instance, during the organization’s annual convention, the leader should definitely insist that this is the best course of action, which would facilitated information processing and engagement from employees. However, in the boardroom, when we are exploring alternatives and thinking the problem through, probabilistic language helps to facilitate divergent thinking and more creative solutions. 

If you have any comments or thoughts on this topic, I would love to hear from you.

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Adilson Borges is the Chief Learning Officer at Carrefour and the Immediate Past President of the Academy of Marketing Science. Adilson is also the IRC Professor of Marketing at Neoma BS. Before that, he held various positions and worked as a consultant for different organizations in Brazil, Europe and USA. He's is passionate about marketing, learning, decision making and behavioral science. Adilson enjoys sharing his personal thoughts here on LinkedIn. All statements and opinions presented in his articles or posts only reflect his personal opinion.

Follow Adilson on Twitter: @aborges_mkt