Life in general – and organizational life in particular – is full of decisions. Some of these are huge decisions: Should we go to war in Iraq? Should I eat some ice cream? Vanilla or chocolate? At each end of the spectrum are the myriad small decisions that we make every day.
Lots of times we make decisions based on a mix of information, experience and assumptions or biases that are unexamined and come under the heading of "gut." Gut decisions are often correct because they are really made in our brain, which has processed a lot of stuff and come up with the right answer. These are not really gut decisions.
Why do people make so many wrong decisions, and, specifically, why do decision makers in organizations make so many? There are several reasons, some of which overlap.
Reason No. 1: The decision is based on bad or inadequate information, like there are weapons of mass destruction or this is low-calorie ice cream. Sometimes decision-makers don't have enough information. In those cases, we understand that we are taking a risk and find ways to hedge our bets or monitor developments.
Reason No. 2: The decision-maker isn't very bright, can't assimilate the relevant information or doesn't know to ask the right questions. To say that someone "doesn't get it" has become a cliché and an attack phrase, but there are many people who have risen to their level of incompetence and truly don't get it. They will make bad decisions.
Reason No. 3: The decision-maker is arrogant and doesn't feel a need to use the information or wisdom that is available. As Herodotus once said, "All arrogance will reap a harvest rich in tears." Unfortunately, the shedding of tears often goes far beyond the arrogant decision maker.
Reason No. 4: The decision-maker doesn't test the basic assumptions that are driving the decision. In our post-modern society, because we have vast amounts of information and many ways to aggregate it, decision making is data driven, especially in large organizations. As a result, the assumptions that provide context for the data an on which these decisions are based often go unexamined.
Assumptions are a lot like cultural norms; they are buried so deep in our consciousness that we are not even aware of them. Some of them are simply translations of our biases and prejudices. Like cultural norms, a starting point of both wisdom and good decisions is making our assumptions explicit, testing them against known facts and reality and challenging our biases and beliefs.
It is possible that the war in Iraq will be one of the great case studies in our lifetime with respect to both arrogance and untested assumptions. The most fundamental assumptions–numbers of troops, what constitutes victory, the need for a clear post-war strategy–went untested. This despite the fact that there was voluminous information that would have fundamentally undermined almost every assumption that our leaders made. A big problem with decisions based on unexamined assumptions is that the decision makers often get blindsided by events that they never expected.
When you combine this failure with arrogance, the result is often that leaders and managers are operating in a parallel universe divorced from the reality on the ground. Iraq is far from the only example of this phenomenon in our world. Taken together, arrogance and unexamined assumptions provide a big part of the explanation for many of the corporate scandals that have occurred in recent years.
The failure to test our assumptions has similar – although obviously less far- reaching – consequences for leaders and managers in organizations. If I assign this project to Joe, it will get done (despite the fact that Joe has failed to complete three similar assignments in the recent past). One assumption known to be correct is that if we repeat decisions in similar circumstances and based on similar facts, the results are unlikely to change. Is there a reason to think that Joe will do a better job this time? Maybe I have spoken to Joe about these failures, and these "come to Jesus" sessions have improved his performance in the past. Okay, the assumption has been tested, and it may be worth another try.
Let's say I want to give bonuses to my closest aides, but not to those in similar positions down the food chain. I make three (implicit and unexamined) assumptions: I have the legal authority to do it; it won't have any negative side effects; and, even if it does, there isn't anything anyone can do about it. Well, assumptions one and three may be correct, but we know from wide experience in organizational life that No. 2 – no negative side effects – is not. Those in similar circumstances to the ones who got the bonuses will be aggrieved, and again, based on experience, they will find a way to exact revenge.
The simplest kinds of assumptions are ones where we believe that if I do X, the result will be Y. Why do we believe that? In our experience, in similar circumstances, when we have tried X, has Y been the result? If we are making a longer-term decision, what are we assuming about the relevant environment? Typically we assume that it will be static and that our decision will be implemented in a stable environment. Is that a logical assumption, or are there relevant changes taking place? Will X produce Y under these changed circumstances?
For most managers making day-to-day decisions, the critical assumptions to be tested on a regular basis are: I have enough information to make this decision. I need to make this decision now. I trust the information that I am using. Everyone understands my message and what we are going to do in sufficient detail to execute the decision. They have the resources to do it. I will know in sufficient time if something goes wrong. I know what my choices are if I have to make adjustments.
And finally, I understand my own biases and how they affect my decision making. To get at this last one, it's useful to have a trusted colleague who will give you honest feedback on what they perceive your biases to be.
Editor's note: Dr. Frank Schneiger is the president of Human Services Management Institute, Inc., a 25-year-old management consulting firm that focuses on organizational change. Much of his current work is in the area of problems of execution and implementing rapid changes as responses to operational problems.
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