Phil was recently promoted to line manager in a Fortune 500 manufacturing plant. Tina is the new Call Center Director in a utility company; John was promoted to Vice President of Clinical Research in a pharmaceutical company. The ability to make sound decisions is critical for each of these managers, both for their respective companies and for their career development. But they don’t necessarily have the skills to make those decisions most effectively.
Every day we are confronted with decisions that affect our lives in varying degrees. When a crisis occurs or tough choices need to be made, the ability to make accurate judgments is essential. At times the choice is between two defined alternatives, at other times there may be many possibilities. Making the wrong decision or judgment can have grave consequences.
Here are some tips to help you make the right choices, no matter what the situation. Deal: Strategies for Making Good Decisions
- Conduct a thorough analysis. Too often, decision makers make decisions based on inconsistent messages or incomplete data. According to a recent nationwide survey by Harris Interactive, 75% of workers made business decisions that were later determined to be wrong due to faulty data. The Harris survey also found that 94% of American workers trusted their data and did not seek additional sources when making a decision. Workers admitted to making bad decisions based on information that was inaccurate, incomplete, or contradictory.
- Utilize decision-making tools routinely. One easy to use tool is the pro/con T-chart, which allows you to identify the outcome pros and cons and to assign a value to each. Another excellent tool is the Fishbone Diagram, which is used to identify the causes and effects of the problem. If a decision is made to correct the wrong cause, the problem will not be solved and new problems may develop. To construct the fishbone diagram, draw a long horizontal line that represents the problem. Then draw diagonal lines from the horizontal line. Label each line with issues that relate to the problem, then draw shorter lines from each of the diagonals that run parallel to the problem line. On these lines identify specific issues that affect the larger problem. This visual analysis diagram is one way of helping the decision maker analyze the problem's cause and effect.
- Identify criteria for a good decision. Ask: What would a successful decision look like? What is required of the solution? When the decision is between a set of alternatives, first identify the criteria required for the ideal solution. Then weigh solution alternatives against the criteria.
- Make a list of possible solutions. Too often decision makers stop at the first solution. Develop a list of all possible solutions—even zany, off-the-wall ideas. This exercise will increase the possibility of finding a creative solution.
No Deal: Decision-Making Warnings
- Emotional decisions. Emotions can override our better judgment. When a situation triggers an emotion, need, or temptation, we are in danger of making a bad decision.
- Time-pressure decisions. Time restraints put added stress on the decision maker and can force a manager to make a judgment based on incomplete analysis. Quick decisions can often lead to wrong choices.
- Overconfidence. While confidence can be a laudable trait in many situations, having too much confidence can work against you when it comes to making good decisions. People often are blinded to alternatives and other points of view because of overconfidence bias. This type of individual is often surprised to learn that their probability judgments are incorrect and that their ability to accurately predict outcomes may be unrealistic.
- “Sunk cost bias”—the reluctance to ignore invested costs. Fear of wasting money and time already invested in a project can prevent managers from looking at a project objectively. If a vice president has have sunk $500,000 into a project that is not delivering on its promises, he’s faced with two choices: scrap the project and start again, or allocate additional money, time, and company resources, hoping that the project will eventually deliver on its promises. In too many cases, because of sunk cost bias, the manager opts for the second choice—throwing good money after bad.
Shall we flip a coin? Sound decision making depends on more than luck or common sense. It requires an ongoing, systematic process of thoughtful analysis so that the players can make informed choices. It’s also important that no matter how serious the situation, a rash, from the gut decision can lead to disastrous consequences. Whenever possible it’s always best to take some time to gather the facts and construct a clear picture of the problem and the impact of various solutions before making a decision.