Lies, Bias and Dirty Data: How to stop making bad decisions

Most startups spend more time thinking about where to eat lunch then how to solve management problems. Seize control of your brainpower with a free quiz and some new ideas on iterative decision-making.

Image: McLeod | via Flickr Creative Commons

Image: McLeod | via Flickr Creative Commons

If I asked you “Do you always know what’s best?” chances are you’d respond “No”. But if I asked you a slightly different question: “Do you know always what’s best for your business?” there’s a very strong chance that you’d respond “Yes.”

Hypothetical: Your company’s product development team has been stumped by an ongoing parts availability issue. A teammate proposes adopting a solution you’ve never heard of. She provides examples of notable companies successfully employing this approach to solve identical problems. She concludes with “I think this is what’s best for the business. Can I implement it?”

If you tell her “Do it”, you’re either part of an infinitesimally small minority or—according to research by numerous social scientists and business scholars—you’re not being entirely honest.

How would you respond?

Our Fickle Psyches

Despite our best intentions, the brain often sabotages our ability to make good decisions.

[note color="#dddddd"]Anchoring makes us believe numbers, even when they’re wrong. See: Enron, Lehman Brothers or Bernie Madoff

Confirmation Bias ensures the results confirm our hypothesis; aka self-fulfilling prophecy. Couple this with anchoring and you’ll understand why double-blind studies exist.

Escalation of Commitment Bias causes us to adhere to a failing course of action due to fear, a belief that the situation can’t be improved, or because of our attachment to sunk costs.

Positive Illusion erroneously shapes our beliefs about what’s accurate, to include our ability to make unbiased decisions.[/note]

Each of us believes we’re the exception to, well, pretty much everything. We see ourselves as intelligent, rational, and open-minded. We tell ourselves that our decision-making skills exceed those of others. And it’s others, not us, who are victim to psychological phenomena. The truth is that small business failure statistics and science say otherwise.

Decision-Making Resources

So how do we prevent decision-making bias? And how do we design an organization that makes decisions well? While there’s no one-size-fits-all model, there are plenty of tools to help:

Self-Awareness: Take a free assessment of your Preferred Decision-Making Style. MindTools.com offers a free, online quiz: How Good Is Your Decision Making.

Explore Options: Familiarize yourself with various decision-making methodologies. Buy a copy of the pocket-sized The Decision Book: 50 Models for Strategic Thinking.

Organizational Structure & Decision Making

Many businesses put more thought into where to eat lunch than they do their structure, which greatly influences decision-making culture. Those businesses typically default to an autocratic hierarchy (top-down, directorial management); however, the opposite of directorial isn’t pure democracy.

Here are some approaches that show decision-making authority doesn’t have to be an all-or-nothing proposition:

[pullquote align="right"]
PROCON
Greater org-wide flexibility and focus Requires parameters and periodic reevaluation
Better allocation of managerial resourcesMicro-managers and control freaks will hate this
[/pullquote] Blended Decision-Making Models: A blended approach works for companies like Nordstrom, Rackspace, and Zappos, which grant each employee with customer service-related decision-making authority while assigning operational, project, strategic, etc. decision-making authority to select groups.



[pullquote align="right"]
PROCON
Introduces alternative paradigmsRequires the ‘right’ blend of people & facilitation
Better allocation of managerial resourcesFraming biases can influence decision making
[/pullquote] Group Decision Making: Speaking of which, don’t be afraid of group decision-making. James Surowiecki’s The Wisdom of Crowds provides case studies and scientific evidence that groups make much better decisions than do individuals. I know what you’re thinking; Surowiecki covers the pitfalls of group decision-making and explains how to avoid them.



[pullquote align="right"]
PROCON
Objectivity; data doesn’t lieCultural change that requires buy-in
Design of Experiments & KPIsRequires more time due to necessary research
[/pullquote] Data-Driven Decisions: Sometimes data-driven decision making works best. At the Pentagon, I helped a team comprised of eight functional silos—each with incredibly different responsibilities—embrace multi-voting in deciding how allocate scarce resources. I recently led the County of Los Angeles in their adoption of Nominal Group Technique as a way to define IT system requirements.



[pullquote align="right"]
PROCON
Offers opportunity to implement Lean principlesRequires mapping of decision-making process
Allows quick, predictable decisionsYou’ll hear “This can’t account for all possibilities”.
[/pullquote] Decision Making Tools: Other times, tools can simplify the process. I facilitated an aerospace engineering firm’s improved decision making by helping to design a problem-solving methodology (much like this one), for example.


Launch a Decision Lab

For each environment and every situation, numerous effective decision-making approaches are available. When designing your approach, think holistically and consider personal assessments, organizational structure, roles and responsibilities, short-term objectives, and long-term strategy. If you’re unsure what model’s best, then become a decision-making laboratory: Explore hypotheses, search for alternatives, run multiple pilots, and customize models for your needs.

So let me ask again: “Do you know always what’s best for your business?”