Decision MakingOn January 6, 2019 in peopleware • 12 minutes read
Table of Contents
- Making Decisions
- Implementing Decisions
Today we live in a “fast” business world requiring leaders to enable their organisations to react quickly and effectively to threats and opportunities.
- Threats are things that are predicted to make our organization worse off if not dealt with;
- Opportunities are things that are predicted to make our organization better off if took advantage of.
This capability is called agility, and the best leaders use their influence to make their organisations agile, by influencing others to work together effectively as they can achieve far better results than working alone.
This is an important difference between managers and leaders, as managers rely on their authority to get others to act, while leaders use their influence to get others to want to do what the leader (and organisation) needs them to do.
Decision Making & Implementation
Leaders face two tasks in dealing with threats and opportunities. Leaders must make decisions that help mitigate threats, or take advantage of opportunities. And then leaders must implement those decisions.
The two primary levers that leaders have available to them to make and implement decisions are the head and the heart. The “head” is the management of information; the “heart” is the management of motivation.
The problem is that leaders often overestimate their ability to make high quality decisions without input from others, underestimate the critical importance of idea ownership to commitment and enthusiasm by the targets of implementation, and fail to see the connection between requesting input and fostering enthusiasm and commitment for implementation.
The quality of a decision is always limited by the ability to implement that decision, so any decision maker should always keep an eye on implementation, as the process of making a decision can be used to build a solid foundation for implementing that decision.
Inclusiveness is a key leadership skill that helps manage both information (head) and motivation (heart). Inclusiveness is about getting others involved – including others who are party to a decision in the decision-making process.
Firstly, inclusiveness helps the leader come up with better decisions by involving people representatives of the necessary domain expertise and multiple point of views, so the leader can build a better understanding of the problem and avoid overestimating their capabilities, so they’ll be more likely to pick the correct path forward than if they had worked on their own.
Secondly, inclusiveness supports the effective implementation of a decision as the implementers, which were asked for an opinion ahead of time, will be more bought in and enthusiastic, and so more likely to actively support its success of the initiative.
A key concern is making inclusiveness manageable. Getting everyone involved in decision-making can appear prohibitively time-consuming. Representative inclusiveness means including some individuals – but not everyone – party to a decision in the decision-making process. If done thoughtfully, representative inclusiveness can provide most of the benefits of getting everyone involved in helping make the decision, without most of the costs. Even those not involved in helping make a decision may still feel a sense of ownership of the decision if they feel their voice has been adequately represented in the decision-making process by someone like them.
Managing Information (the Head)
Making a decision is really about selecting the best available option for getting you to your goal. So we can think about decision making as involving goals, that is the outcomes you want to achieve, and the options or actions for getting you there. We’re specifically going to talk about decision analysis today, because decision analysis provides a framework for thinking about making decisions.
What makes any decision-making difficult, is uncertainty. Uncertainty is captured in the idea of a decision dilemma. A decision dilemma occurs when you make decisions under uncertainty. That is, there are probabilities attached that you have to manage.
Decision analysis provides us a systematic way to integrate action options, uncertainty and the probabilities, and the outcomes that we might achieve, allowing us to calculate the expected outcome for each action option and to select the action option with the best expected outcome.
Subjectivity & Anchoring
When we start making decisions about how we make decisions, that introduces subjectivity into the process. Subjectivity means that the information that goes into decision-making is often as much about the decision-maker as it is about the decision. So often we fill in the blanks when there isn’t enough information. For example, we estimate probabilities.
When we interject subjectivity in decisions, we often rely on heuristics. Heuristics are cognitive shortcuts that help us fill in the blanks when there is too little information and they limit our search when there is too much information for us to consider to be exhaustively comprehensive decision makers.
In the process of using these heuristics, our subjectivity can create bias. Bias means not objective, not neutral, maybe something which reflects our own tendencies or prejudices, maybe something that is influenced one way or another without our even realizing it.
Creativity is an important topic for effective leadership, mainly for two reasons:
- Leaders are dealing with the most complex problems you can face, and they don’t have off the shelf answers. And as a result it’s important to think flexibly and creatively to generate answers to incredibly complicated problems.
- It’s very easy to fall into typical responses, typical answers, and so creativity is necessary to avoid getting locked in. I’m either going to do a or b, and maybe the answer is q, right? Creativity is key to generating those additional options that otherwise you may never have considered and therefore you miss an opportunity.
The barriers to creativity that leaders need to worry about are:
- Habit, so just doing what I do all the time: as the world changes, our environment changes, our needs change and we still need the same old thinking that we’ve used previously. And if we still used the same old thinking that we’ve used previously, you get the same old answer.
- Haste, it’s the same kind of argument, really. If I’m forced under time pressure, I’ll react with a typical response. And so I simply never notice an opportunity to be creative. A second reason that we think about is lack of interest.
- Interest, if you’re not interested in what you’re doing, you’re just trying to be done with it, you’re not going to be creative. You’re going to go with the simplest answer you can to get through it and get to the other side.
- Sanctions or penalties, if by doing something different, deviating from the norm, there may be penalties, people will avoid being creative so they don’t have to suffer those punishments.
A leader can foster more creative decision by:
- Not rushing to a solution, it’s incredibly common when you encounter a decision or a problem to want to think immediately of answers. Yet the first thing you should do is immediately think about what is this decision. What is this problem that we are confronting? So rather than maybe problem solving, we move towards problem finding, if that’s a useful way to think about it.
- Thinking broadly about our goals and objectives, as this could generates new solutions, avoiding getting blindsided by a particular problem or solution someone else might have generated, and that might not really show the idea in it’s best light.
Decision Making in Groups
When dealing with groups, leaders should address the composition, participation and influence problems so that a high quality decision can be picked, and later implemented, by avoiding process loss:
- Composition problems occur when the right people are not included in the decision-making process. In order to make high-quality decisions, decision makers must realize that they may not have all the information needed for a good decision, or a successful implementation. Including a good representative group in the decision-making process can help both decision quality and implementation success.
- Participation problems occur when group members don’t participate in the decision-making discussion and therefore do not share their unique information, resulting in process loss for the group. Group members may not participate because the group is too large for everyone to have a chance to talk, or as a function of culture or learning, and making sure the participants know constructive conflict is necessary and welcome;
- The influence problems occur when the inclusion of influential people causes other participants views to change their min. This can be addressed by making others can express their views first.
Managing Motivation (the Heart)
It’s not enough for people to know what to do. That’s the information side of things. They also have to want to do it. And that’s the motivation side of things.
Most of what we know about motivation starts with the Law of Effect. The Law of Effect is really very simple. The Law of Effect says that effort is controlled by the consequences that are contingent on it. So, the Law of Effect basically says that motivation is all about two things, contingencies and consequences.
- Consequences are the things that we get;
- Contingencies are the if-then relationships that determine when we get those things.
So getting a reward or punishment for putting forth effort is important because it makes you think your effort controls whether you are rewarded or punished.
Effects on Consequences
Intrinsic and extrinsic motivation both influence our behaviour regarding the possible consequences, but differ slightly in very important ways:
- Extrinsic rewards: what we receive in exchange for the outcome;
- Intrinsic rewards: the outcome itself is the reward.
Effects on Contingent Rewards
There are three key perceptions that control whether or not contingencies and consequences actually can influence our behaviour:
- Expectancies: If employees think they are capable of performing well enough to be rewarded;
- Instrumentalities: If employees think good performance will ultimately be rewarded;
- Valences: If employees value the reward that’s offered.
So we can think about motivation as managing perceptions, and the key here is that individuals have to have self-efficacy. They have to believe in their ability to do the work.
Training provides individuals the skills necessary to translate their effort into accomplishment and provides individuals the confidence to translate effort into their accomplishments.
Social dilemmas have to do with how individuals allocate resources, their time and their effort between individual and group tasks or initiatives, and remember in most organizations, performance is interdependent. You can’t really achieve anything alone, you have to depend a little bit on other individuals. The problem is those other individuals become a potential disrupter of your perceived control between your effort and the rewards that you would like to achieve.
Defection is when people decide they’re not going to do their fair share of the work. Free riding and social loafing are both examples of defection. And we can imagine defection actually occurring for two reasons. Offensive defection is when people are trying to behave opportunistically. That is, they are hoping, if they don’t do their fair share of the work, the public good will still be created, but they will not have had to invest to do it.
A more subtle problem here is that sometimes people defect defensively. Defensive defection occurs when people defect, that is they don’t contribute their fair share of the effort because they’re afraid other people are not going to do their fair share, and they don’t want to be played for a sucker. That is, they don’t want to be taken advantage of by others. So defection that is either free-riding or social loafing in group efforts can occur either offensively or defensively.
At the end of the day, the result is the same. When people free-ride, when people socially loaf, that decreases the ability of the group to create value. And when the group fails to create value, the group suffers as a whole.
So motivation is not just about contingencies and consequences, it’s about the perception of contingencies and consequences, and in organizations one of the most important perceptions is the perception that other people are trying hard and working together to create value for the organization.
Progress Milestones & Process Revolutions
Unfortunately, regardless of their goodwill, some groups struggle to turn the informational and perspective advantage of groups into a high quality, informed decisions.
Even groups starting with a good idea of how much progress they want to make, by when they want to reach a decision and how this is going to occur might fall short of their expectations.
It’s not that they aren’t making progress, it’s just they may not be making as much progress as they need or they intended to make. The realisation that they are failing will encourage the group to change its ways. This is what’s known as a process revolution.
Process revolutions can only occur when a group can see its progress will not allow timely completion of its task. This requires enough proximity to the deadline for the group to be able to realise that the group’s process is not working effectively.
The solution is to create intermediate deadlines, milestones allowing the group to assess its effectiveness by evaluating its progress, and change the processes that aren’t working.
Leading change is about getting people to do things differently by making and implementing decisions to address threats or opportunities. These notes describe strategies for leading change, and specific tactics to make our plans more likely to succeed.
Sources of Resistance and Interest Alignment
One of the things to keep in mind when making decisions are the sources of resistance, the reasons others might not want to implement; we should expect these as everybody brings something different to the table, and has different perception about what’s going to happen when changes are made, and people have different preferences due to different priorities.
Sources of unknown are two:
- The unknown, as the fear of the uncertainty of what might happen if a change is made;
- The known, as anger about the decisions’ outcomes in case the decision is implemented.
Resistances can be addressed by either dictating terms, if we are in a position of authority, or by opening a dialogue about the change process, making the positions we want to implement look like good vehicles for them to satisfy the parts’ underlying interests, as positions can often seem incompatible, even though the underlying interests are not.
If we can shift our dialogue from the positions to the interests, we can find common ground by adjusting the change and finding positions that satisfy more of both sides’ interests.
A Recipe for Change
A recipe for change is to first address the Head, the management of information: include people in discussion, we want to get their feelings about the problem, about the solution, about their interests, so we want to use that dialogue to inform both sides about what’s going on and why.
Then we want to address the heart, by using the dialog to align interests on both sides and create positions that satisfy both sides underlying interests, because if a position satisfied the other side’s underlying interests, they’ll be completely engaged and on board about helping implement it, as they feel it represents a vehicle to satisfy their underlying interests.
This will make our organisation agile, able to very quickly address the threats and opportunities that appear in an organisational environment.
When a change is made, we hope it will inevitably make things better. Unfortunately, as the implementation unfolds over time, there can be unanticipated consequences (chaos!).
Unfortunately, this is rarely true, as changes can have not only additional benefits, but also additional problems, which could lead to a failure in the implementation.
As a consequence, one of the parts of implementation is thinking how we can minimise the pain, so we act as fast as possible, work out the kinks and eventually realise the expected benefits from the change.
We can deal with this through dialogue and inclusiveness, as diverse perspectives give us an opportunity to anticipate unexpected consequences. Inclusiveness also means people understand the underlying interests behind the change, empowering them to adjust the implementation over time, to make sure they stay on track to achieve the intended benefit, leading to less chaos.
Vision represents the endpoint the leader is trying to reach, and it’s a vehicle for increasing commitment and enthusiasm at implementation.
The most influential visions enable individuals to see a link between the success of the organisation and their personal success, hence accomplishing everyone’s goals and acting as a motivator.
Fostering alignment to the vision can be done by making sure people understand and own the vision, getting them involved in shaping it.
Other Peopleware Pages
- August 26, 2019: Business Strategy
- July 16, 2019: Organisational Culture
- June 22, 2019: Highly Effective Managers
- June 10, 2019: Organisational Design
- January 06, 2019: Performance Management
- October 11, 2018: Psychological Safety
- October 10, 2018: Radical Candor
- October 10, 2018: Objectives and Key Results