In order to make wise decisions, we must understand the environment in which the decision must be made, and critically evaluate the best alternatives available within this context. To achieve this situational awareness, we need to marshal the facts and information available, and take account of the potential future consequences of each decision option. Finally, we must think critically about the facts available to us, our observations, and the reasoning we use to reach our conclusions.
Unfortunately, our collective assimilation of this information may not allow us to process it within the time we have available, or come to reasonable conclusions from that information. Even if we have enough time, our understanding of the situation is exposed to all kinds of flaws and biases that are inferred from our mental models of reality. As John Sterman describes these limitations:
To influence the actors in our transactional environment we have to understand why they do what they do. Understanding is different from both information and knowledge. Information deals with the "what?" question, knowledge with the "how?" question, and understanding with the "why?" question... The why question is the matter of purpose, that of choice. And the choice is the product of the interactions among the three dimensions: rational, emotional, and cultural. Rational choice is the domain of self-interest, or the interest of the decision-maker, not the observer. A rational choice is not necessarily a wise choice. It reflects only the perceived interest of the decision-maker at the time. Meanwhile, wisdom has ethical implications and considers the consequences of an action in the context of a collectivite.
A formal decision theory has emerged which has identified a number of common pitfalls that decision makers fall into when they make decisions:
- Decision makers are inclined to make choices which emphasize avoiding losses over realizing gains
- Decision makers focus more on changes which will improve the relative utility of something they appreciate themselves rather than the utility available collectively
- The probabilities which decision makers assign to events and options are severely influenced by anchoring
In Vroom and Yetton's Normative Model of decision logic, two factors influence the dynamics: decision quality and decision acceptance. The model's logic assumes that participation increases decision acceptance, and decision acceptance increases commitment and effectiveness of action. It then parses out when to use autocratic, consultative and group approaches to decisions according to where information is distributed among the people involved and affected by the decision. In How Decision-making can be improved, authors Milkman, Chugh, and Bazerman summarize the primary challenges of decision-makers:
If we all behaved optimally, costs and benefits would always be accurately weighed, impatience would not exist, gains would never be foregone in order to spite others, no relevant information would ever be overlooked, and moral behavior would always be aligned with moral attitudes. Unfortunately, we have little understanding of how to help people overcome their many biases and behave optimally.
Decision-making processes can unfortunately also be prone to political influences and energy-draining bureaucracy. Both of these factors are self-reinforcing, and typically result in drawn-out delays for decisions, while diluting focus on achieving the outcomes originally intended. Fred Brooks describes these distractions as follows:
Product processes grow, and as with all bodies of rules, each mistake-experience begets new rules or new approvals to prevent repeats. There are few barriers to the birth of such extra rules, and, once they are born, there are no forces for their elimination until a crisis comes. By the very nature of things, bureaucracies become more Byzantine, processes heavier, and organizations less nimble.
In How Should We Make Hard Decisions, Jonah Lehrer describes several key strategies for decision-making in the face of these challenges:
Studies show that when people adopt an outsider’s perspective, they often reduce their overconfidence about their knowledge, the time it will take to complete a task, and the strength of the risks that may lie ahead. This outsider can be a real person familiar with the context, but neutral about possible paths to pursue, or can be accomplished by assigning individuals to emphasize this particular viewpoint during the decision-making. Other research suggests that adopting and arguing for a position opposite of what an individual actually believes can help reduces errors in judgment due to some of our most deep-seeded and powerful biases: overconfidence, the hindsight bias, and anchoring.
When we are under time pressure, our default tendencies are to trust what our gut tells us, though these studies indicate this trust is misplaced. We must therefore learn when to move our most intuitively compelling decisions into a more deliberative framework. The time pressure of decisions often distracts us from seeing important opportunities to learn underlying, generalized principles; more importantly, while we often seek change, the systems we operate within will only allow such changes if we think differently; our default decision-making processes will nearly always propagate the status quo. We can think differently by creating situations that enable us to collaboratively evaluate the options we have available to us, and stimulate dialog about how these options interact over time.
Decision-making approaches which promote dialog and interactions across stakeholders can thus be helpful in selecting the best strategic choices, since they deliberately involve those with different points of view. Research has shown that additional value is provided when a choice architecture is deliberately designed. The resulting interactions between decision makers and subject matter experts can also help to reduce the frustration and drain on all participants, since often they previously have been stuck in bring me a rock exercises. By proactively establishing a series of informational handshakes between subject matter experts and decision authorities, as depicted in the diagram on the right, the scope and target outcomes of the effort can be identified and applied earlier in the decision-making process. The options and criteria for these evaluations can also be made more explicit, and collaboratively identified options can be evaluated in a more transparent and structured fashion.
When we make poor choices, it is usually because of the context in which these decisions were made within. For example, the working size of our short-term memory is quite limited, and this causes us to want to make snap decisions, rather than engage in endless debates or multiple layers of approval required to change direction. As business pressures increase, we often also find ourselves needing to make multiple decisions about many different situations within the same timeframe. These time constraints drive us to need to make frequent cognitive switches, as we move from decision to decision. These repeated context switches force us to rely solely on what we are able to keep in our limited working memory. A frantic pace also causes us to fall back on our intuition, and on the choices we best recognize, rather than exploring new alternatives. This combination of effects usually drives us to make errors that can be quite costly later on.
To avoid making decisions that could cause a project to fail, the first step is to properly sort through the many factors which are associated with achieving the outcomes we are pursuing. A sorting mechanism is assumed which will organize these factors into different buckets for consideration by the various groups responsible for addressing each type of information. These categories usually include treatment of requirements from many different sources, and of many different types; some are real operating constraints, others are imposed by the mission we must support. Not all of these requirements will have the same value, and some may be design requirements that constrain consideration of other, more important alternatives. The categorization system must also consider the many uncertainties (whether they are risks or opportunities) that may influence our ability to realize. An influence diagram can be helpful to describe the relationships between these factors, as depicted in the lower left corner of the diagram on the left.
The decisions which must be made then need to be selected and organized into three types:
- the decisions we can delegate to others, or can be incorporated as immediate assumptions that can be subsequently validated through explicit courses of action
- decisions we can defer (though the impact of this delay should be understood and acceptable)
- decisions which are important and urgent to make now.
Strategies usually require a collaborative determination across the options of several different, but interrelated decisions. The options available for these decisions should be developed from credible alternatives using an organized process, and an eye on the target outcomes that are being pursued. The choices offered by each alternative will likely have appeal to different stakeholders under different scenarios. These options are depicted by the diagram in the lower right of the graphic. Strategic alternatives can then be formed by threading together selected options into a logical, holistic alternative. By utilizing such an approach, options from mild to wild can be more easily identified and evaluated from many perspectives. A final selection will still need to be made from these alternatives, but the decision authority can make them knowing that all perspectives have been considered, and that the basis of the decision has been captured and referred to in subsequent situations. These artifacts can thus provide essential information to refine the decision making methods over time.
Peter Drucker describes a set of essential actions which should be implemented once the decision has finally been made. The effectiveness of this decision downloading determine whether outcomes conditional on these decisions can actually be realized. When decisions are complex, difficult to parse, or controversial, the processes used to make the decision may have been deep, nuanced, or even contentious. This makes subsequent reflection and communications about the decision extraordinarily difficult, and since the decision process itself was exhausting, the commitments to follow it may be tenuous. When decisions are really important, it is essential for decision-makers to take the time to communicate them effectively.