Three Ways to Improve Your Decision-Making in Business

Conduct an Internet search inquiring: “How many decisions does a person make in a day?” While the numbers vary, the consensus is that the average person makes 35,000 decisions each day.¹ Whether or not these estimates or statistics are based on fact, the reality is that we make a staggering number of decisions each day, even if the number does not reach into the tens of thousands.

To better understand how a person makes so many decisions each day requires us to consider how many habituated decisions we make. For example, as part of a person’s morning routine, an individual starts making decisions right from waking up, including getting into the shower, brushing teeth, getting dressed, making breakfast and many more. Thus, within the first 30 minutes of waking up, a person has made minimum of five decisions, all of which are born out of habit.

There is nothing wrong with habituated decision-making, as it makes a person incredibly efficient at completing tasks. There is little doubt that parts of a person’s job allow for habituated decision-making, but it is the non-habituated decisions a person makes that prove to be the most consequential. The following content outlines ways you can improve your decision-making in business and in life as well.

The first order of business is to clearly define the problem. At first blush, this may seem easy. While some problems are easily and clearly defined, others require significant critical and creative thought prior to analyzing potential courses of action. As a decision-maker, it is incumbent upon you to focus on the problem that needs to be solved and not the corresponding symptoms of the problem. In many ways, you are a diagnostician attempting to determine “root cause” in order to isolate it before analyzing alternative courses of action.

How Does This Help Improve Decision-Making?

Clearly defining the problem and identifying the root cause, or why the problem exists, allows you to narrow your focus. Problems too broadly defined inhibit effective critical and creative thinking. By narrowing your focus, you can diagnose the core issue and begin assessing alternative courses of action. This also gives you the ability to challenge your own assumptions. After you have diagnosed the problem, you can gather relevant information required to make an informed decision and take action.

For example, imagine you are an employee at a hardware store and a customer discusses with you they need a 2-inch drill bit. What is the customer’s problem? On the surface, the decision to show the customer where the drill bits are located and the various brands available for sale seems straightforward and easy. The reality, however, is that it does not directly define the customer’s problem.

Is the problem accessibility to drill bits? Is the problem the price of the drill bits? Is the problem that the customer wants to purchase Brand X over Brand Y? However basic and elementary, the problem that needed to be identified was that the customer needed to make a 2-inch hole. Unfortunately, a person, very often, makes assumptions before acquiring the necessary information needed to clearly define the problem before analyzing alternatives and taking action.

The basic distinction between programmed and non-programmed decisions relate to routinized or habituated versus novel decision-making. As mentioned previously, a person does not tend to give critical or creative thought to getting ready each morning. At work, if you make decisions about how to address common problems or tasks, such as managing reports or employee schedules, you are engaged in programmed decision-making. This type of decision-making allows for a high degree of mental efficiency given the frequency and programming of the decisions being made.

While programmed decision tends to be easier by comparison, non-programmed decisions are necessary to achieve customized solutions. These are decisions that must be made because there is little-to-no precedent for addressing the identified problem. Making non-programmed decisions require significant thought in order to identify the right problem, analyze credible courses of action and take the appropriate action.

How Does This Help Improve Decision-Making?

Understanding the role of both programmed and non-programmed decisions improves decision-making in several ways. Recognizing that you are engaged in programmed decision-making allows you to “take stock” and evaluate whether your decisions maximize results or whether a better decision could be made.

For making non-programmed decisions, scenario planning allows you to anticipate what you would do when encountering a new problem. Scenario planning allows you to consider and critically evaluate contingencies in order to anticipate a variety of outcomes and how your decisions could affect those outcomes.

For example, imagine you are a marketing executive and work for a company whose primary competitor just launched a new, highly innovative product into the marketplace ahead of schedule. You had been conducting an on-going competitive analysis and you were aware their product launch would occur, but you did not plan for it to happen ahead of schedule. You are now faced with the challenge of making a decision that can either help or harm your company’s business.

To address this, you may take a programmed decision to continue moving forward with existing marketing initiatives. Alternatively, you may take a non-programmed decision and re-work or scrap the current initiative since it may not work well in light of the competitor’s product release. Thus, once problems are identified, how you process information and make decisions proves critical.

There are a wide variety of cognitive biases and mental traps to which people fall victim. Two such mental traps are judgmental heuristics and escalating commitment. Heuristics, like programmed or habituated decisions, allow a person to think through situations in highly efficient ways. Unfortunately, heuristics, such as availability heuristic, can cause a person to fall into a mental trap.

A person using availability heuristic makes decisions based on the information they have most readily available in their mind. For example, commercial airline travel in the United States was greatly diminished immediately after the events of 9/11. The obvious reason why people decided not to fly was born out of fear. The information most readily available in people’s minds was that airplanes could be hijacked and they did not want to take the risk flying commercially.

The reality, however, is that once the Federal Aviation Administration reopened airports for air travel, it was the safest time to fly commercially in U.S. aviation history. The security measures put into place were unlike anything that had ever existed up until that point and yet, people still chose not to fly. This type of decision-making is inherently flawed.

As for escalating commitment, this mental trap exists when a person becomes committed to their thoughts, ideas, perspectives, etc. A person will escalate their commitment when they believe something so strongly that their thought process moves beyond what is reasonable or rational into decision-making grounded in emotion.

For example, suppose you are a CEO and you received approval from the Board of Directors for $5 million to develop a revolutionary customer relationship management (CRM) software application. You and your team are six months into its development and the situation could not be worse. Not only is your team behind schedule and over budget, but the number of technical bugs in the software makes it highly unlikely to be a viable product. But, since you believe so strongly that this is the panacea for your business, you escalate your commitment further and request another $3 million from the board to finish the project.

How Does This Help Improve Decision-Making?

Avoiding mental traps, such as judgmental heuristics and escalating commitment, requires you to always challenge your assumptions by asking yourself questions like: Why is this the best course of action? What can you learn from thinking about the problem differently? Is it possible that you are too close to the situation emotionally to make a reasonable, informed decision? Answering questions like these in an honest, forthcoming way will help you navigate mental traps while improving your decision-making dramatically.

Since people make decisions constantly, they take for granted their ability to do so effectively. Ideally, people should constantly challenge their decision-making ability and thought processes. This is done by improving at clearly defining problems, understanding the types of decisions that are made and avoiding mental traps. This is, no doubt, something we all can improve upon.

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¹ http://science.unctv.org/content/reportersblog/choices