Decision making 201

book-notes , manager

Decisions are hard because we have Narrow Framing, Confirmation Bias, Short Term Emotion and Overconfidence. We can overcome this by Widening our Options, Reality-Testing our Assumptions, Attaining Distance before Deciding and Preparing to Be Wrong.

A typical decision progresses through the following stages, with a villain appearing at each stage, but a weapon appropriate to each villain.

Decision making in a nut-shell

Stage 1: You encounter a choice.

  • But narrow framing makes you miss options. So …
  • Widen Your Options How can you expand your set of choices?

Stage 2: You analyze your options.

  • But the confirmation bias leads you to gather self-serving info. So …
  • Reality-Test Your Assumptions How can you get outside your head and collect information that you can trust?

Stage 3: You make a choice

  • But short-term emotion will often tempt you to make the wrong one. So …
  • Attain Distance Before Deciding How can you overcome short-term emotion and conflicted feelings to make the best choice?

Stage 4: Then you live with it.

  • But you’ll often be overconfident about how the future will unfold. So …
  • Prepare to Be Wrong How can we plan for an uncertain future so that we give our decisions the best chance to succeed?

Widen Your Options

Break out of a narrow frame and expand the set of options you consider:

  • Expand your options.
  • Consider opportunity cost.
  • Run the “vanishing options test.”
  • Multitrack – think AND not OR.
  • Toggle between the promotion and prevention mindsets.
  • Find someone who has solved your problem.
  • Try “laddering.”

Expand your options: What other options have you considered?

Heidi Price helps families widen their options for college because she knows the landscape of choices so well. Could you locate someone who would have an equally broad knowledge of options in your domain? You’re seeking someone who could help shift your spotlight to options that you wouldn’t normally consider.

Vanishing options: What would happen if this option disappeared?

If you’re skeptical that people are not considering the full range of their options, run the Vanishing Options test. Say: “That option you were considering? Yep, it just disappeared. Now what are you going to do?”

Opportunity cost: What’s the next best use of these resources?

Think of a “yardstick” you could use to measure the opportunity cost of the time or money you are about to invest. (Recall that Eisenhower compared the cost of a new bomber to schoolhouses, power plants, and hospitals.) For business investments, you could consider a yardstick like: How many additional customer service reps or salespeople could we hire instead of making this investment? (Would we be better off?) For a personal expense, the yardsticks might include: How many songs could you download? How many dinners out could you have? Or how much extra time could you spend with your kids?

People don’t naturally consider their opportunity costs. Ask them, “What’s the next best use of the resources you’re talking about spending?” Force them to push their spotlights around by asking about different domains: For instance, if they’re waffling about whether to remodel their bathroom, ask whether they might be happier spending the money on a vacation or new furniture for the family room. You’re in a better position to help them avoid narrow frames and your probing can help them clarify their preferences.

Multitrack: How can you do A AND B (not A OR B)?

Can you follow multiple paths at once? If not, can you embrace one and sample another? (E.g., if you’re contemplating a career shift, you might keep your current job but volunteer a few hours somewhere else)

Think AND not OR. Describe all your options on one piece of paper (or a whiteboard at work), then compare and contrast to spot patterns. See if you can cobble together a “Perfect 10” option that combines the best features of multiple alternatives.

When Anne Mulcahy turned around Xerox, she knew that personnel decisions were the most important. She forced people to consider at least three candidates for any open position. If you’re a manager, can you require 3 options? Tell people to imagine that the ultimate decision will be made by someone else—as in the kid’s game of divide and choose–—that way, they’ll cultivate 3 high-quality alternatives.

Try a decision technique recommended by Silicon Valley venture capitalist, Randy Komisar: before brainstorming about a topic, ask everyone to write down their ideas privately on a piece of paper. Then, go around the table and have people share one idea at a time—logging the answers on a white board—until all ideas are exhausted. Then, and only then, start your discussion. (This keeps the discussion from starting and staying on a single narrow track determined by

Promotion and prevention mindsets: How would you decide if you had double the resources? Half the resources?

For promotion: Suppose you had a sudden windfall of time (or money). How would you spend it? For prevention: Suppose there was a traumatic 25% cutback. How would you handle it? This “toggling” can help you spot new options that might combine elements of both.

Does your decision process compel people to consider both the prevention and promotion focus? The “SWOT” framework does, for instance. (It includes “Strengths and Opportunities” but also “Weaknesses and Threats.”)

Find someone who has solved your problem: Who can you talk to who has already experienced this?

The internet is a handy place to look for someone who’s solved your problem. Spend 20 minutes on an internet search, using 3-4 keywords that relate to your predicament. It sounds simple, but consider this finding: A study in medicine found that 58% of diagnostic cases in the New England Journal of Medicine—selected because they involve tricky clinical diagnoses—could be solved using this methodology. If your dilemma is more common, you’ll likely do better.

Send an email to 5 people in your network who aren’t close friends or colleagues. Describe your dilemma and ask if they know anyone who might have some insights. (The motivation here is to tap different networks—most of your friends and close colleagues probably know each other, so their networks aren’t as independent and you probably already know what they know.)

Laddering: What’s the best resolution to this decision you’ve seen? What’s the “more abstract” version of this decision?

“On this issue you’re struggling with, what’s the closest thing to a ‘success’ you’ve seen to date in your life (or organization)?” If they can answer that, you’ve got a bright spot. Analyze it so that you can potentially reproduce it. [For more depth on the idea of “bright spots,” see Chapter 2 in our previous book, Switch.]

Can you point people toward another arena/field/ group who has tackled a similar problem? Lexicon gets name designers to consider a range of alternatives by thinking of other domains where solutions might arise—one group trying to name the Pentium microprocessor was assigned to think of names for high performance skis.

Reality Test Your Assumptions

To fight the confirmation bias and ensure that, when you are assessing your options, you are gathering information that you can trust.

  • Fight the confirmation bias.
  • Spark constructive disagreement.
  • Ask disconfirming questions.
  • Consider the opposite.
  • Make a deliberate mistake.
  • Zoom out: Respect the base rates.
  • Zoom in: Take a close-up.
  • Ooch.

Consider the opposite: Why is this a bad decision?

If you think Jane is the right person for the job, consider why Jane might be exactly wrong. If a new market looks appealing, consider why it may be unappealing. If you’re considering a particular location for a vacation, consider why it might be a bad idea. These quick tests might suggest new information to gather. (E.g., if lousy weather is the reason your vacation spot might be a bad idea, you can go double-check the average weather for the time you’ll be there.)

Spark disagreement: What would need to be true for the other option to be the right choice?

Can you find someone you trust who will disagree with you? In her study of Silicon Valley firms, Kathy Eisenhardt found that the CEOs who made the quickest, most effective strategic decisions had a senior counselor. The counselor was usually someone who knew the industry well but didn’t have a personal agenda, which meant they could provide unvarnished, trustworthy guidance.

Ask around to find out who has concerns about the direction the organization is going. Schedule a group lunch where they can air their concerns. Or, give them license to hand-pick a few colleagues and compile a “devil’s advocate” case against what’s being considered.

If you’re part of a meeting that has broken up into factions, don’t forget to ask the Roger Martin question: “What would have to be true for each of these options to be the best possible choice?”

Ask disconfirming questions: If this would be a bad choice, why would that be?

When you ask for advice on your decisions, don’t just ask people “What do you think?” or “Do you like my idea?” Ask disconfirming questions: “What’s the biggest obstacle you see to what I’m trying to do?” “If I failed, why do you think it would be?”

Zoom out: Respect the base rates. Objectively speaking, how does this outcome go on average?

Even a little bit of expertise can help. If you have access to Amazon or Yelp or Trip Advisor reviews, you’ll probably use them instinctively to establish base rates. But if there are no easy averages to consult, look for a smaller sample: Relying on even one on-target data point is better than just making your best guess. If you’re thinking about going in a nightclub, ask someone coming out, “Was the dance floor good?” For medical decisions, find someone in your network who’s faced a similar situation (or track someone down on the internet and send them an email). Don’t settle for intuition—look for experience, even if it’s only one or two other people.

Often people overlook data about base rates that’s right in front of them. Remember the Dean on the curriculum project who didn’t bring up the base rates until he was prodded. Force people to consider the information they already have: “Think of the last five projects like this that you’ve done. How many have been successful? How long did they take?” (Recall, too, the story from Chapter 4 about Kaiser combating sepsis. It started with people excavating their own data, specifically, the last 50 people who’d died at their hospitals. That data proved shocking—and, ultimately, life-saving.)

Zoom in: Take a close up. What’s a concrete example of this happening?

Can you arrange a field trip for your group to “go to the genba”? Traditionally, this meant that manufacturing leaders would visit the factory floor, but for marketers, it might mean shadowing someone as they shop at the mall. For a youth minister or teacher, it might mean making a house call to meet the family of a teenager who is in your class.

Make a deliberate mistake: How can you make the wrong choice on purpose?

Force yourself to make a mistake. Instead of proof reading 4 times, try proof reading once. Instead of correcting all errors, put an error in on purpose. See what happens when there’s a flaw.

Get your work group together and read Paul Schoemaker’s story together (pp. 110-11). Follow his game plan for your organization. What are your assumptions? Which ones would it be most lucrative to discover are wrong? Pick one, then plot a deliberate mistake!

Ooch: How can you get a sample of what you’re considering?

(Think of the budding pharmacy student who would be well-served to do a two-week internship at the local pharmacy.) Cars Direct started with a very simple mission: Sell one car. Find ways to imitate their strategy: At work, can you sell one? Pitch one? Try one? Find one?

Can you get yourself to Ooch by lowering the barriers? Imagine that you could take a half-day to do something to assess one of your options. (Not talk about it, not think about it, not agonize about it – do something about it.) What could you do? If you had $100 to spend to aid your assessment, how would you spend it?

Rather than arguing endlessly about who is right, can you encourage your colleagues to specify what kind of experiment would resolve the issue once and for all? (For inspiration, remember the example of Intuit’s Indian-farmer product. Scott Cook thought it was “hare-brained” but he wisely let the experiment prove him wrong.) Don’t predict when you can know.

As a wise counselor, be careful that people are not ooching when they should be leaping! Remember that ooching can backfire if it’s used to enable “emotional tiptoeing.” Ooching is for gathering information about an ambiguous issue, not for delaying commitments.

Attain Distance Before Deciding

Resist the disrupting influence of short-term emotion and ensure that you make a decision based on your core priorities

10/10/10: How will I feel in 10 minutes, 10 months, 10 years?

Attain some distance by talking through a 10/10/10 analysis with a friend. This will force you to label the short-term and long term implications of your decisions, with the benefit of an outsider’s perspective on your decision. It can often be clarifying just to hear how your logic sounds when it comes out of your mouth.

Shift perspectives: What would I tell my best friend to do?

Here’s the key question to ask when you’re stuck on any personal dilemma: What would I tell my best friend to do? At work, ask the Andy Grove question: If I were replaced tomorrow, what would my successor do?

Identify and enshrine core priorities: What matters most to me?

Karen Douglas, a business consultant who owns her own firm, found herself with an overly packed calendar so she adopted a rule to assess new opportunities: “If it’s not a ‘Hell yes!”, it’s a ‘No.’” Is there a rule that would remind you of your priorities? (A person who moved to a new town without a good social network might adopt the exact opposite rule: “If it’s not a ‘Hell no!’, it’s a ‘Yes.’”)

Follow the “Wayne’s Rules” game plan for helping people act on their core priorities. First, talk to your employees and ask them about the toughest decisions they’ve made in the previous six months. Listen for patterns—try to identify the 3 most common types of decisions that they face. Then, come up with 2 “guardrail” rules that would make all 3 of those decision types easier to resolve in the future.

Start a meeting by spending five minutes on your core priorities– reminding everyone of what you’re trying to achieve. (“We’re here to figure out a way of handling product returns that makes customers more satisfied.”) State your core priority explicitly and return to it frequently, as you deliberate, so that it can tip your decision in the right direction.

Do a forensics analysis of your calendar. What would the outside investigator conclude about your core priorities? If you don’t think you’d be satisfied with the forensic analysis, ask yourself: Which activities can I stop doing to free up more time for what’s important?

Most decisions involve multiple factors, but force yourself to identify the most important of your core priorities. (E.g., in choosing a home, your core priority might be “good schools.”) If you made the decision based solely on that variable, what would be your choice? If you’re stuck between two options, it makes sense to let your core priority be your tie-breaker

Fight the status quo: If I didn’t have X would I leap to take it?

Because of loss aversion, many people would turn down a coin-flip bet where they’d win $100 on heads and lose $50 on tails. But any organization would happily sign up for a portfolio of 1000 of those bets! Try suggesting to your advisee that they view their decision as part of a portfolio—sometimes that can help combat the pain of loss aversion.

The status quo bias makes people reluctant to embrace new options. So try re-framing the status quo! Ask someone who is reluctant to sell their home: If you didn’t own your home today, would you buy it? (If not, why are you so hesitant to sell it?) Ask someone who has a troubled business relationship with a vendor: If you weren’t already working with that firm, would you start the relationship from scratch? (If not, what’s so bad about ending it?)

Prepare to Be Wrong

Avoid being overconfident about the way our decisions will unfold and, instead, taking the opportunity to plan for both good and bad potential scenarios.

  • Bookend the future.
  • Run a pre-mortem and preparade.
  • Use a safety factor.
  • Create a “realistic job preview.”
  • Set a tripwire.
  • Use “pattern-matching” tripwires.

Create a “realistic preview.” Who did this and can tell us the most common problems?

Who could you call for a “realistic job preview” that could prepare you to be wrong about the decision you’ve made? For example, if you’ve just bought your first home, ask your Realtor and a few older friends, “What are the most common problems that new home buyers run into?” At work, if you’ve committed to a major new software implementation, try to locate someone who has just survived a comparable cycle.

Premortem and preparade: Imagine this goes wrong. How will that look? Imagine it goes great. How will it look?

Run a Premortem for your decision: It’s a year from now and the decision was a disaster. Why did it fail? (Note that if you’re doing the pre-mortem with colleagues, don’t share answers until everyone has brainstormed on their own.) Then, later, run a preparade: It’s a year from now and our decision is a huge success. How did we do it? Make sure to consider these negative and positive bookends separately—that will help you surface more of the relevant issues on each pole.

Set a tripwire: How can I check I’m still doing the right thing in the future?

What tripwires can you set to make sure you’re focusing on the right things? Peter Bregman sets his watch to beep once per hour, which triggers him to ask, “Am I doing what’s most important right now?” Can you use certain events—the end of a quarter, the start of a semester— to trigger some reflection? Dating couples might use the occasion of attending a wedding to check in with each other about where their relationship is headed.

What’s something in life that you’ve always assumed you will do someday but haven’t yet started? Can you set a tripwire to make sure you don’t miss the chance? If you fear you’ll never make the time, go public with your desire so that your friends and family will help pressure you to move. Or if you fear that you’ll waste too much time or effort pursuing it, give yourself a strict deadline and budget and go for it!

Imagine that your organization is someday used as an example of the “frog who doesn’t jump out of the pot of boiling water” cliche. You got stuck in a slowly changing environment that eventually killed you. If that were true, why would it be? What industry forces do you need to keep an eye on? Can you encourage your team to set the right tripwires?

Pharmacy companies have learned to capitalize on unexpected opportunities, such as those that led to Rogaine and Viagra. Can you provide a label for the kind of pattern your colleagues and employees should watch for? (For instance, if you wanted them to keep an eye out for customers who are particularly zealous about your product or service, you might say, “Pay special attention to extreme users.”)

Bookend the future: What’s the best this decision can be, and what’s the worst?

Because we’re so poor at predictions, we need to treat the future as a spectrum of possibilities, rather than as a single “point” that we can plan for. Ask people: What are the top two or three factors that determine whether you end up closer to the upper or lower bookend? (For Brian Zikmund-Fisher, the bone-marrow transplant patient, these factors might have been: the experience level of the hospital and the health of the patient). Ask people to brainstorm about how they might influence those factors in a positive direction.

Use a safety factor: How can you have a buffer if your decision is the wrong one?

People tend to be overconfident. They think their plans will go more smoothly—and unfold more quickly—than usually happens. Probe to see if they can prepare to be wrong by giving themselves a buffer. Can they build in some extra slack in the schedule? Can they keep some powder dry in their budget in case things go wrong?