The problem with business decision-making

One key problem with making decisions is that the big ones don’t come along all that often. You get one shot at making the ‘right’ choice, and you will never know what would have happened if you had chosen a different path. 

Small decisions are different. Choosing what to wear each day is still a decision, but you‘ve made that decision enough times to know what to select and when. You know the seasons change, and you will always check your diary to see if you need to look smart for a meeting. You learnt this by repeatedly making a decision each day about what to wear, and refining those decisions using feedback – by getting too cold, hot, or wet some days.

With a big decision, you don’t have an opportunity to try out lots of alternatives. And if you end up making that ‘bad’ decision, you’ll rarely admit it to yourself or anyone else. In fact, we may never actually know if we made a bad decision, because of something called the ‘narrative fallacy’.

Humans aren’t generally wired to make good decisions, but we are wired to tell a good story. And when things don’t turn out as we’d hoped, we have a booker prize-winning ability to justify it to ourselves with a new ‘narrative’, which explains why the bad outcome had nothing to do with our decision-making ability. We do this to reduce the uncomfortable feeling of cognitive dissonance – the internal friction between a poor outcome and our responsibility for it – and seek out reasons (excuses) to explain how the problem is not our fault.

We don’t know of many businesses that routinely look back at earlier decisions to assess whether they could have been improved. Learning from small routine decisions provides a feedback loop, but for more important decisions, the feedback loop is harder to find, and perhaps as a consequence, is ignored. However, if you are regularly making structured decisions, there is a benefit to keeping a record of your forecasts, the assumptions on which they were based, and any probability you assigned to the successful outcome. Reviewing the outcomes against the decision criteria will allow you to improve your future decisions by calibrating your decision-making process, and potentially identify a repeating bias (such as overconfidence in timescales).

If you have carried out these kinds of comparisons in your decision-making, we’d love to hear about it. 

We’ll be continuing this theme in the next article, which will go live shortly. You can receive notifications of our future articles by subscribing to the series.