How To Make Great Decisions
We get rewarded, and judged, based on the decisions we make. However a decision is like predicting the future, you don’t really know if it is the right decision or not, at the point when the decision is made. What you can really control is the quality of decision making — the decision making process, which is the focus of this post.
We can use a lousy process, get lucky and land on the right decision. Or do everything right and still get the decision wrong. Jack Welch, GE’s legendary CEO, is rumored to have a 70% success rate on decisions. If Jack can get 30% of his decisions wrong, what is a good success rate for you and me?
Like an iceberg, the decision is what others see, but a lot goes into the decision making process — the parts of the iceberg that are submerged under water. To get excellent at decisions, you need to develop an excellent decision making process.
Here is what I use to make my decisions. I will skip some of them when the decision is relatively lightweight or of lower importance.
My Process — How I approach Decisions
- Identify the real problem.
- Problems are easier to solve once you know what the real problem is. Don’t simply go by how others have framed the problem.
- Assumptions stated as facts. Trust your team but verify information you get from them. If you are a senior manager, you will be told what to think. Is your team telling you something that is indeed a fact? Is it a personal opinion, an assumption or their interpretation of a situation? How do they know what they know?
- Having identified the real problem(s), make a decision on if the problem is even worth solving. Is a decision even needed and is it needed now? Not everything is worth solving especially because we have limited time and need to focus on what is important and high ROI vs urgent. Be comfortable with not solving something knowing that you are choosing to focus. This is not an excuse to avoid solving problems, but focusing on the right problems to solve at any given point in time.
- A good way to assess if a problem is worth solving is to evaluate in the context of the company goals. For example, if your organization has a goal to increase adoption of a product, and the problem directly impedes product adoption, then the problem is worth solving. On the other hand, if a small number of users complain on Twitter that your product does not support languages other than English, and localization is not an organizational goal, then this is not a problem to solve.
- Gather as much information as possible, but set time frames so you are not caught in exhaustive analysis paralysis. All decisions have to be made with imperfect data and a timely decision is more important than inaction.
- Consult with others — mentors, other manager — who have solved similar problems. For example, I led the successful acquisition and integration of a company. I consulted with people who had made similar acquisitions and share my own perspectives with others that are considering acquisitions.
- Be able to hold two or more opposing ideas / approaches for as long as possible before you decide. This enables you to invite diverse opinions and be curious in learning more because you are not trying to prove or disprove a decision your mind has already made. It is well known that people decide on emotion and justify with fact. The longer you resist committing to an approach, the sounder your decisions will be. Resist the temptation to make a decision (look for the Sherlock Holmes quote on data)
- Identify the stakeholders and what are their interests. There will be other stakeholders that have an opinion on the decision. While many employees are able to genuinely put their organization’s interest first, not everyone’s actions are aligned with what is best for your organization. Remember that there are no permanent friends or permanent enemies, just permanent interests. People go to great lengths to advance or preserve their self-serving interests. By asking open ended questions, you can tease apart what is fact and what is their personal opinion. Process the information accordingly.
- One of my mottoes is Hard decisions, easy life. Address important issues head on. Don’t avoid them, simply because they are hard.
- Remove or minimize emotion from the decision, especially in a business or work context.
- Ego, envy, spite, anger, self-pity, victim mindset lead to sub par decision making because we were confused on the goals. Emotions can seriously derail goals, so keep them out or minimize their impact by setting pre-conditions. For example, if you are going to retain an employee by raising their salary, have a clear “ceiling” on how much you will offer and stick to those limits even if the discussions get intense.
- A common scenario is making people happy at work and avoiding hard conversations. Avoiding conflicts can appear attractive, especially in organizations where peer/team feedback is a strong component of performance reviews. Conflict is hard. Delivering hard messages is hard, particularly to people that you like. For example, someone that worked for me wanted to be my successor. This person was competent in many areas but needed to develop in a critical area — how they collaborated with others, before they could take that role on. The peer feedback was skeptical if this person could even bridge that gap. I liked this individual and wanted to have a more supportive message (“you can get there with more work”). But I realized that deep down, I didn’t really share that assessment — I had given this person a few chances, and based on the data thus far, I was quite skeptical myself. I had to deliver the harder message that I was not supportive and I don’t see them overcoming these challenges in the time frame they desired. They would be better served in an organization where the culture closely matched their working style. As much as I delivered the message with empathy, it was not a pleasing message to deliver or receive. I ended up losing a competent person from my team. But it was the right decision for them and for my team. It gave them a path to continue their career and it gave me the opportunity to find the right successor for my role.
- Use regret minimization and other techniques to assess opportunity cost, and ensure it is aligned with goals. For example, I had these weekly meetings at 7 am with my CEO (it had many participants with a multi topic agenda) and this was also my time to drop my daughter off at school. I chose to take the time to drop off my high school daughter because I cherish the time I spent with her. My manager told me I was missing out on face time and visibility which was true. For me the opportunity cost of missing out on being with my daughter was higher than some potential slowdown in my career. This wasn’t an emotional decision. I saw multiple ways to make up for the missed meeting with my CEO but did not see how I can compensate for lost time with my daughter. I knew what I was optimizing for, and I was happy.
- Decide if you are going to delegate or make the decision yourself. Form the core team that will be involved in analyzing the decision and making a recommendation.
- Delegate well and set clear expectations, especially on time frames. Use checkins to monitor progress and direct the work of the group vs coming in late and undoing their progress.
- Ensure your team’s incentives are aligned with the decision and outcome you are aiming for.
- Consider second and third order ramifications. For example, I have an open position, the work is piling up and I have an average candidate who is interested and can join quickly. Let me hire them! That is first order thinking. “And then what?” is the question to ask, and keep asking, depending on how deep you want to go, when analyzing the consequences of decisions.
- Inversion as a mental model — a lot of progress can be made by identifying and avoiding stupidity because being brilliant is hard. Avoiding stupidity is a lot easier.
- Think about a goal you want to achieve. E.g. improve retention in the organization.
- Now invert this goal i.e. people leave your organization is among the highest in your company.
- Identify various steps you would take to help people leave your organization.
- Compare this list of steps identified above to help people leave the organization and take an honest look at things your organization is already doing today. The results may surprise you.
- Stop those activities and see retention improve in your organization.
- Once you have decided on an approach, assess if you can take small steps and experiment before rolling out the decision at scale. For example, if you are making a decision to conduct performance reviews once a year vs twice a year currently, consider experimenting with a subset of the organization with carefully picked cohorts before making an organization wide decision.
- Create a checklist — you cannot hold this in your brain. Methodically work through the checklist. A checklist also makes it easy to divide and conquer the work across the team.
- Persevere. Pay attention to detail and be tenacious. As you execute the plan, particularly if it is ambitious, you will face headwinds and challenges. Having conviction and persevering is the need to see through difficult decisions. You want to send a clear signal to your organization that once committed, you stick to the plan and see it through. This does not mean you ignore feedback or other signals, but unless your goals have changed, you should see it through. An organization does not want to work for wafflers who change their positions quickly in the face of resistance.
- Prepare for both adversity and success, and have a plan for both outcomes.
- Minimize downside if your decision is wrong through techniques like pre-mortem (i.e. identify all the ways your decision can be wrong/fail and proactively build preventive measures to prevent that failure situation from happening) and devil’s advocate. The Catholic church assigns one person to argue against those that have been nominated for sainthood. Have a specific review where someone or a group of people are assigned to play the role of the devil’s advocate, advocating against your recommended decision. How can the decision fail? Encourage candid discussion on blind spots so you can have contingencies for them in advance. Planning is everything. If the decision you make does not pan out, have a contingency plan figured out in advance and communicate that to the team.
- Be prepared for wild success if your decision is right. Have a safety factor (more people sign up for your product launch than projected, so you display an “out of stock” message and lose orders. Could you have captured the additional interest in a waiting list instead and reach out to them when additional stock was available? Or commit the additional interest to pay a 10% deposit to capture commitment)
- Set tripwires and pre-commitments to catch faults early and protect us against our own emotions.
- In their book, Decisive, the authors, Chip and Dan Heath, give the example of Van Halen/David Lee Roth. Van Halen had extensive and specific requirements for their shows and they wanted a quick check to validate if their extensive instructions had been followed. So they insertted a clause that the rooms assigned to the band should not have brown M&Ms. The band would examine the M&M bowl and if they found a brown M&M, they expected other deviations from the contract. They used the brown M&M test to detect a quick flaw that might point to a bigger problem.
- One of my managers was very keen to grow his visibility and settled on sending monthly newsletters of his team’s accomplishments to a broad audience. As luck would have it, I was “voluntold” (told what to do, but made to look like an offer I cannot refuse) to author monthly newsletters. I was never fond of these lengthy memos and I inserted the line “the bird is blue” to see if anyone would catch it. No one did and I used that to convince my manager to stop sending these newsletters.
-Set limits upfront — like negotiating a counter offer for closing an employee or winning a contract. For example, we won’t bid more than $400,000 for this contract (stops overbidding)
- Highlight when something is not going well that you might have missed otherwise — for example, you said you would hire someone in 3 months, yet we have made no progress. What should we change in our approach? Creates safe space to have a conversation and prevents the rut of autopilot masking problems.
- Feedback loops post the decision — regardless of if you got the decision right or wrong, there is always something to learn. Use feedback loops to get stronger and stronger in your decision making skills and as a leader. Use setbacks as a setup for your success — career progression is a marathon and you should play the long game.
- Make this a teachable moment for your team
- Your decision making process might be a learning moment for the team. Consider sharing your decision making process. People love leaders who show vs tell. Seeing a specific problem and the various approaches and options considered will do more to grow the team than theoretical discussions on decision making.
- If you have your team involved and playing certain roles, invite them to complete the analysis and make their own decisions. Like a mock trial or a dry run, your team might relish the opportunity to hone their own decision making process.
Hope you find this helpful the next time you have to make an important decision!