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Beyond the analysis, Lovallo and Sibony also asked the teams about their decision process—the softer, less analytical side of the decisions. Had the team explicitly discussed what was still uncertain about the decision? Did they include perspectives that contradicted the senior executive’s point of view? Did they elicit participation from a range of people who had different views of the decision?
When the researchers compared whether process or analysis was more important in producing good decisions—those that increased revenues, profits, and market share—they found that “process mattered more than analysis—by a factor of six.” Often a good process led to better analysis—for instance, by ferreting out faulty logic. But the reverse was not true: “Superb analysis is useless unless the decision process gives it a fair hearing.”
They have a team arguing only one side of the case. The team has a choice of what points it wants to make and what way it wants to make them. And it falls to the final decision maker to be both the challenger and the ultimate judge. Building a good decision-making process is largely ensuring that these flaws don’t happen.
A better decision process substantially improves the results of the decisions, as well as the financial returns associated with them.
The discipline exhibited by good corporate decision makers—exploring alternative points of view, recognizing uncertainty, searching for evidence that contradicts their beliefs—can help us in our families and friendships as well. A solid process isn’t just good for business; it’s good for our lives.
“Any time in life you’re tempted to think, ‘Should I do this OR that?’ instead, ask yourself, ‘Is there a way I can do this AND that?’ It’s surprisingly frequent that it’s feasible to do both things.”
He shrank down the scope of the work so that it covered only the first step of the project, and then he hired five different firms to work on the first step independently.
With his horse race, Cole ensured that he’d have multiple design alternatives for the device. He could either pick his favorite or combine the best features of several. Then, in round two of the design, he could weed out any vendors who were unresponsive or ineffective.
Cole is fighting the first villain of decision making, narrow framing, which is the tendency to define our choices too narrowly, to see them in binary terms.
Have you exhausted other potential sources of income that might relieve the need for cutting? • Resist the urge to cut everything by a fixed amount. Think about ways to be more strategic with cuts. • Could you cut deeper than you need to in order to free up funds to invest in exciting new opportunities?
Is it possible the budget can be cut by delaying planned expenditures rather than by paring existing expenditures? I can delay a few IT hires. That will help a little but not a lot. • Have you exhausted other potential sources of income that might relieve the need for cutting? Not much promise here—we certainly can’t raise taxes in this climate. We can try to attract corporate sponsors, but those efforts wouldn’t pay off until next year. • Resist the urge to cut everything by a fixed amount. Think about ways to be more strategic with cuts. It might be wise to be strategic about the
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Praise by the media 2. Strong recent corporate performance (which the CEO could interpret as evidence of his/her genius) 3. A sense of self-importance (which was measured, cleverly, by looking at the gap between the CEO’s compensation package and the next-highest-paid officer—a CEO must think a lot of himself if he’s paid quadruple the salary of anyone else) Hayward and Hambrick were right on all counts. As each of these three factors increased, so did the tendency of a CEO to pay a higher premium for an acquisition.
mind: “Oh Lord, it’s hard to be humble / when you’re perfect in every way. / I can’t wait to look in the mirror / ’cause I get better looking each day.”)
Upton Sinclair’s observation, “It is difficult to get a man to understand something when his salary depends on his not understanding it!”).
Molloy said that “most women decided they were right the first time.” But one of his team members liked the first date enough to go on a second, and a third, and a fourth. She ended up marrying the guy! (By the power vested in me, I now pronounce you Mistake and Wife.) And not only did she find a spouse, but she also scored an inspiring victory over the confirmation bias.
imagine that you are indeed consulting an IP lawyer about a potential patent-infringement suit. The right kinds of questions to ask him are “What are the important variables in a case like this?,” “What kind of evidence can tip the verdict one way or the other?,” “In percentage terms, how many cases get settled before trial?,” and “Of those that go to trial, what are the odds that the plaintiff prevails?” If you ask questions like that—questions about past cases and legal norms—you will get a wealth of trustworthy information.
This is a sobering thought about our decisions in society and in organizations.
What would I tell my best friend to do in this situation?
More commonly, though, short-term emotion has the opposite effect, making us slow and timid, reluctant to take action. We see too much complexity and it stymies us. We worry about what
we must sacrifice to try something new. We distrust the unfamiliar. Together, these feelings make individuals and organizations biased toward the status quo. As we’ve seen throughout the book, though, a bias isn’t destiny. We can distance ourselves from these emotions by using some quick mental shifts—the time shifting of 10/10/10 or the perspective shifting of “What would I tell my best friend to do?” Those shifts let us see the outlines of the situation more clearly, and they help ensure that, in times when decisions are difficult, we’ll be able to make choices that are wiser and bolder.
Our decisions are often altered by two subtle short-term emotions: (1) mere exposure: we like what’s familiar to us; and (2) loss aversion: losses are more painful than gains are pleasant. • How many of our organizational truths are ideas that we like merely because they’ve been repeated a lot? • Students given a mug won’t sell it for less than $7.12, even though five minutes earlier they wouldn’t have paid more than $2.87!
5. Loss aversion + mere exposure = status-quo bias. • PayPal: Ditching the PalmPilot product was a no-brainer—but it didn’t feel that way.
7. Perhaps the most powerful question for resolving personal decisions is “What would I tell my best friend to do in this situation?”
The problem is that urgencies—the most vivid and immediate circumstances—will always hog our spotlight.
Our calendars are the ultimate scoreboard for our priorities. If forensic analysts confiscated your calendar and e-mail records and Web browsing history for the past six months, what would they conclude are your core priorities?
The adviser asked Collins, “What would you do differently, and, in particular, what would you stop doing?” Since that time, Collins said, he has prepared a “stop-doing” list every year.
As recounted in his book It’s Your Ship, one of Captain Abrashoff’s first moves was to interview every one of the 310 crew members on the ship. He learned their personal histories and their motivations for joining the navy, and he sought their opinions about the Benfold: What do you like most? Least? What would you change if you could?
Drawing from those conversations, Captain Abrashoff sorted all the jobs performed on the Benfold into two lists: List A contained the mission-critical tasks, and List B contained the things that were important but not core, “the dreary, repetitive stuff, such as chipping and painting.” After compiling the two lists, Captain Abrashoff declared war on List B.
What we’ve seen in this section is that, if we want our choices to honor our priorities, we need to Attain Distance Before Deciding. With some distance, we can quiet short-term emotions and look past the familiarity of the status quo. With some distance, we can surface the priorities conflicts that underlie tough choices. With some distance, we can spot and stamp out lesser priorities that interfere with greater ones.
Attaining distance can be painful, as with the interminable discussions held by the leaders at Interplast. But getting distance doesn’t require delay or suffering. Sometimes it happens almost instantly. Thanks to a guardrail—Do first, apologize later—we know what the right choice is. Thanks to a simple question—What would I tell my best friend to do in this situation?—we see the big picture. Thanks to a $10 wristwatch that beeps on the hour, we are more mindful of the priorities we’ve set for ourselves.
What kind of tripwire could Kodak’s executives have used? The answer is right in their own 1981 report. Notice how easy it is to turn a hopeful prediction into an early-warning alarm system. For instance:
Bargainers come to the table with different options, which helps the group dodge a narrow frame. (Indeed,
bargainers tend to act as devil’s advocates for each other, asking the disconfirming questions that people don’t always ask themselves.
Researchers call this sense of fairness “procedural justice”—i.e., the procedures used to make a decision were just—as distinct from “distributive justice,” which is concerned with whether the spoils of a decision were divvied up fairly. An extensive body of research confirms that procedural justice is critical in explaining how people feel about a decision. It’s not just the outcome that matters; it’s the process.
The elements of procedural justice are straightforward: Give people a chance to be heard, to present their case. Listen—really listen—to what people say. Use accurate information to make the decision, and give people a chance to challenge the information if
it’s incorrect. Apply principles consistently across situations. Avoid bias and self-interest. Explain why the decision was made and be c...
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Given the amount of animosity he has to contend with, it’s critical that he be seen as delivering procedural justice. So he doesn’t just listen; as he says, “I state back the other side’s position better than they could state it. And then they can relax because they feel heard.” When you can articulate someone’s point of view better than they can, it’s de facto proof that you are really listening.
And bolder is often the right direction.
Our decisions will never be perfect, but they can be better. Bolder. Wiser. The right process can steer us toward the right choice.
And the right choice, at the right moment, can make all the difference.
