There is no shortage of spectacular mistakes in the business world. From Kodak, which developed the technology for one of the first digital cameras (and a cellphone prototype), but chose to focus instead on its traditional film-based product until it was completely destroyed by cellphones, to Anglo American, who decided to buy and invest billions in the Brazilian iron ore project Minas-Rio, right at the peak of the commodity boom.
Given the huge cost of potentially getting it wrong, making a big call can be debilitating. Often managers endlessly delay key decisions in order to review all possible information, analyses and opinions to make sure they are doing the right thing.
But protracted decision-making is costly too. In the current environment, the fast eat the slow. There can be enormous opportunity costs in waiting to make sure that all moving parts have been considered. Your competitor may come to market first with a similar, even inferior, product and capture the market.
Dithering also comes at a painful cost to your own reputation. Indecision does not instil confidence in your abilities. Teams want to see their manager taking decisive action: hesitation and overthinking create uncertainty.
How to take more effective decisions:
1. Set a strict deadline. Waiting for all information or for the planets to align perfectly before you make a decision will result in endless delays. Instead, have a realistic deadline (preferably: today) for a decision, make sure you have considered the worst possible outcome of that decision, and live with the consequences.
2. Abandon the pursuit of the perfect decision. As the Italian saying goes, “The perfect is the enemy of the good enough.” Make peace with the fact that your decision can only be based on all known factors, and that you won’t provide for all eventualities. Be open to adapt your plan as new circumstances emerge, but press ahead as soon as you can make an informed decision.
3. Avoid analysis paralysis. Too much information (including all possible statistics, numbers and surveys) can cloud your judgement and add to confusion.
Take for example the experiment detailed in Daniel Kahneman’s bestseller Thinking Fast and Slow, where experienced German judges tended to give a shoplifter a longer sentence if they had just rolled a pair of dice loaded to give a high number. Be very clear about what you want to achieve with your decision and only focus on pertinent information that will help you in that aim.
“For complex decisions with unknowable outcomes, consider following your gut,” says Jonathan Hoch, founder and executive coach at Hoch Partners in Johannesburg. “Our brain’s ‘fast’ intuitive, subconscious processing is superior to ‘cold’ rational thought. Our brain can instantly process and compare infinite patterns from the past in order to make predictions about the future.”
Trust your own experience and have confidence in your ability. As Malcolm Gladwell famously explained: If you’ve had 10 000 hours of experience in a specific field, you can “blink” and make a decision.
But for simple, yet important decisions, you should follow your head, says Hoch. “Use cold, slow, rational thought. Calculate and make sure.”
4. Embrace failure and uncertainty. Mark Zuckerberg often said that if you never break anything, you’re probably not moving fast enough. Fear of failure and humiliation stifles experimentation and will steer you towards the tried and tested, and away from bold ideas and solving challenges with new thinking.
5. Don’t spend time on unimportant decisions. Zuckerberg wears the same type of T-shirt every day so that he doesn’t have to decide what to wear in the morning: one less decision that helps him focus on those that really count. This is supported by new research on decision fatigue, which shows that mental energy and willpower are limited, and that taking many little decisions will sap your ability to make the important decisions.
Take the powerful example of a survey of 1 000 parole decisions made by eight judges in Israel over a 10-month period. The study showed that the judges were far more likely to grant parole at the start of a session than at the end: in fact, a prisoner’s chances of receiving parole more than doubled if his case was heard at the beginning of a session. Also, the more cases a judge had to hear, the less likely it was that a prisoner at the end of the session would receive parole.
Accordingly, by limiting the number of decisions you have to make during the day, you will enhance the quality of the decisions you do make. Determine what decisions are important to you, and automate or outsource the rest. For example, schedule exercise sessions long in advance (to avoid deciding every morning whether you feel up to it), or pre-order lunch.
6. Limit advice. Inviting too many people to provide their inputs on a decision will add to the confusion and won’t necessarily lead to enlightenment. Instead, choose one or two strong experts on the topic and ask them the difficult questions. Also, don’t try to come to a decision by calling a meeting.
7. Make sure you are in the right state of mind. “We make our best decisions when our brains are at the optimal balance of arousal: focused and alert, yet calm,” says Hoch. “Too much or too little stress can impact negatively on decision-making.”
This article originally appeared in the 13 April edition of finweek. Buy and download the magazine here.