Making Better Business Decisions

Rating:
Summary: You wll make better decisions if you read this book
Review: An employee talked over a problem with his boss who explained the rational decision-making process only to be told that as this was a really serious problem it should involve instinct, intuition and gut reaction. We are bombarded with so much sensory information that it is impossible to pay attention to everything so our subconscious triggers a process of selective perception whereby we perceive that which looks familiar and which past experience leads us to expect. Thus we expect guys who wear black to do bad things and it is not surprising that sports teams with black uniforms receive more penalties than other teams; we expect drivers of red cars to speed and they get a higher number of traffic violations than drivers of cars of other colors.

This book introduces us to the rational decision process, stressing the thorough evaluation of all components of a decision, including correct identification of the problem, identifying and weighting the criteria, generating and evaluating alternative solutions, through implementation and follow-up. Biological factors influence our decision and although we possess a complex and powerful brain housing our thinking, planning, and judgmental abilities, we are subject to primitive emotional reactions; the stronger our emotional reaction the more likely that our cool and careful rationality will be overwhelmed to fulfill immediate desires which are against our long-term interests. Often we must decide between what we want to do and what we should do. The want side is impulsive, emotional and hotheaded while the should side is rational, levelheaded, thoughtful, and planning. How often is it that when the other fellow takes a long time he is slow but if I take a long time, I am thorough. Or if the other fellow doesn't do it he is lazy but when I don't do it, I am busy. Thus our emotional attachment to our beliefs creates a filter that screens all comments and actions in light of how they relate to our position. Facts that appear to be opposed to our beliefs are not ignored but they are held to a higher level of scrutiny than when we are not so heavily committed to a particular way of thinking. First impressions are often lasting ones. You are impressed by your newly hired subordinate from a top-notch business school despite dismal work performance. You have positively judged the employee, and it generally requires persuasive evidence to overturn what was initially believed to be true.

How the facts are presented plays an important role and the author outlines proposals for a factory that faces downsizing. You are emotionally swayed to different decisions depending on whether the proposal is framed as saving jobs or losing jobs because the emotional discomfort we experience from losing jobs is more extreme than positive feelings derived from saving jobs. When we see we have made a bad decision, we should take steps to cut our losses but we tend to throw good money after bad due to escalation of commitment. Human decision-makers are actually flawed thinkers but we can minimize inconsistencies if we become aware of our own biased thought processes. Understanding judgmental biases is the first step in improving our decision-making. Critical thinking requires that we be open-minded to new ideas and concepts, yet skeptical of everything we hear and believe. We have to uncover the truthfulness of the evidence and determine whether it agrees with affairs in the real world. We have to consider the source of information to determine trustworthiness and credibility. We have to be open to alternative solutions that might be simpler, more objective or more plausible. To the extent possible, we should test the facts to determine if the evidence can be confirmed.

Creativity in problem solving means doing things differently and is affected by resources of knowledge, expertise and technical information available; by the techniques we use; by our internal motivation such as interest, challenge or love for what we are doing; and by balance so that skills match opportunities. All are required for creativity to occur and the more we have of each the greater our creativity. It is best to use a 5-step process: problem identification, preparation, idea generation using the SCAMPER checklist, idea validation and verification. "One of the most difficult aspects of creative problem solving is ensuring that we have defined the real problem. The time and energy spent on the creative process may produce a new and elegant idea, but that effort will be wasted if the solution fails to resolve the root problem. Therefore it is critical that we correctly identify a problem before we attempt to tackle it."

As I read the section on escalating commitment I could not help but reflect how the fate of the Concorde airliner would have been different if the author had been called in as an adviser in the early stages. It would be surprising if any decision-maker did not come away wiser from reading this book.