Successful leaders make good decisions… consistently.
Good decision-making is dependent on a number of factors: understanding, experience, intelligence, foresight, and just plain luck. There is no guide that will tell you how to make the perfect decision. But, there are some keys to better decision-making that, when followed, will help to improve the quality and consistency of your decisions.
- Be Smart: To make good decisions, we need to Be As Smart As We Can Be. Most importantly, we need to be alert and focused on the decision and take the time to think about the decision, both consciously and sub-consciously. Flipping a coin or winging it just does not work.
- Recognize and Avoid Biases: Using our Critical Thinking Skills is vital to good decision-making. Specifically, we need to overcome our biases and realize the limitations of our memory and personal viewpoint.
- Overcome the Confirmation Bias: The confirmation bias is the mind’s tendency to notice and accept information that confirms and supports beliefs that we already hold, while rationalizing or ignoring information that goes against what we believe. This is the biggie of all decision-making biases and thus gets its own bullet point. To overcome this confirmation bias, we need to think through counter arguments or have a devil’s advocate that argues against the decision (Embrace the Antithesis).
- Be Humble: We need to be humble and know that we do not have all the answers. Through humility, we keep our eyes and ears open to new data and insights. Arrogance and over-confidence, by contrast, lead us to reject arguments and data points (via the confirmation bias) that run counter to the decision that we want to make.
“I am wise precisely because I recognize the limits of my own knowledge.” Socrates
- Get the Facts: A fundamental of Toyota’s lean approach is Genchi Gembutsu. This means go and see for yourself. This comes in many different forms but boils down to getting the facts on the ground and the viewpoints of the relevant stakeholders. Importantly, when mediating a conflict, it is vital to get the facts from both sides of the conflict. Only with this level of research can we make a fact based decision.
- Use the Base Rate: In making decisions, we need to use the base rate. What is the history and success ratio for the decision we are about to make.
- If we are going to do an acquisition, we need to base our decision around the base rate that (according to the Harvard Business Review) more than 70% of all mergers and acquisitions fail. How can we really be better than the 70%?
- If we are deciding to become an actor or musician, how are we going to become one of the 5% of actors and musicians that make a living in that career?
- Think It Through: In making decisions, we need to think through the long-term consequences of our decisions. We need to use Scenario Analysis to play our decision forward. On the positive side, could making this decision open us up to further options in the future? On the negative side, could making this decision led to blowback or other unintended negative consequences?
- Get Buy-In: Decisions are only effective if they can be implemented. As CEO consultant Ram Charan writes, “the biggest reason CEO’s fail is not bad strategy, but bad implementation of their strategy.” Thus, we need to get our team’s involvement and buy-in of the decision to ensure the implementation of the decision matches the quality of the decision. In the end, a decision is only effective if something gets done and a positive change is made.
- Don’t Boil the Ocean: In making decisions, we need to be sure that what we decide upon can be accomplished. In too many cases, leaders make decisions that require either perfect execution or the business equivalent of solving world hunger to occur in order for the decision to pay off. Small, simple decisions well implemented can and do lead to the positive change that we require.
- Review and Evaluate Our Decision-Making History: Good decision-making is a skill and requires constant assessment to see whether we are making good decisions and reflect on how we could have improved the quality of our decision-making. A key feature of excellent decision-makers and excellent forecasters is that they do not try to explain away their decision-making errors (as most TV pundits do) rather they use their errors as a ‘source of calibration’ to improve their decision-making process in the future.
- Be Decisive: Using all these keys is important, but it should not take away from the need to be Decisive. We need to make a decision and get going. In the book, Skills for Success: The Experts Show the Way, the authors summarize an effective rule of thumb on how to be decisive:
“Decisiveness in decisions is vital. Make 80% of your decisions on the spot; 15% need to mature; 5% need not be made at all.”