An important aspect of all our roles at work concerns the making of decisions, particularly if you are in a position of responsibility. Of course, the greater your responsibility the greater the consequences of any decision.
Think for a minute about how many decisions you make during your average day? Dozens? Hundreds, perhaps? Psychologists believe that the number is actually in the thousands. Obviously, some of these decisions have a much greater impact (signing a high value contract) than others (what type of sandwich to have for lunch).
Robert Townsend, former Managing Director of Avis, commented that something like 40% of the decisions he made turned out to be wrong in some way. Until all top executives are more self-aware and open in their admissions about their effectiveness at decision making we won’t know where on the scale Mr. Townsend sits.
One of the most common traits of senior executives, although not exclusive to this group is high self-belief, which can easily lead to overconfidence. In the most comprehensive study to date on expert predictions, Phillip Tetlock, Professor at the University of Pennsylvania, gathered a large group of experts to analyse their ability to predict future events.
In this study experts predicted the probability of various events occurring i.e. would the dotcom bubble burst? Not only were the results analysed, but also the approach the experts took to decide.
Twenty years later and after collecting and studying 82,361 forecasts from experts, Tetlock came to a comical conclusion. According to Tetlock, the average expert…“is not much better at predicting the future than a dart-throwing chimpanzee.”
The study found that in many cases the experts would have been just as successful if they had made random guesses – Robert Townsend is starting to look a good bet with his 60% success rate now.
However, deeper analysis found a group whose success rate was higher than the group average. These experts had a distinct approach to decision-making, thinking and solving problems.
These experts tended not to assume they “knew it all” and they tended to make more modest predictions. Crucially, though, they only made their predictions after analysing a wide range of external data and information. In addition, they were comfortable with uncertainty and complexity. They were open to reviewing ideas that challenged their beliefs and assumptions.
By contrast, the experts who had, or claimed to have, the most knowledge were on average, the least reliable. More importantly, even after reviewing the results, they struggled to admit they were wrong – possibly you work with someone like this.
In essence, they were overconfident and held onto their beliefs, regardless of any contradictory valid evidence.
Better Decision Making
In an excellent Harvard Business Review article (click here for the full text), by Erik Larson, the author suggests some tips for better decision-making. I have summarised these below, and although the original article was for executives and applies to work situations the suggestions apply equally well for any decision-making. They also mirror the approaches that the more successful experts followed in the study by Phillip Tetlock.
- Consider the consequences. Write down five pre-existing priorities that will be impacted by the decision. Having a focus on what is currently important to you will help you to avoid the trap of making up reasons for your choices after the fact.
- Look at options. Write down at least three, but ideally four or more, realistic alternatives. It might take a little effort and creativity, but no other practice improves decisions more than expanding your choices. Going with our first option is a classic overconfidence mistake, made worse by feeling the need to make a quick decision.
- Test your assumptions. Write down the most important information you are missing. Assumptions are brilliant for short-cutting the decision-making process, but they leave us open to making errors that some basic research could have helped us avoid.
- Look ahead. Write down the impact your decision will have one year in the future. Telling a brief story of the expected outcome of the decision will help you identify similar scenarios that can provide useful perspective.
- Involve others. Invite at least two, but no more than six, people to offer you perspectives. Getting more perspectives reduces, or at least helps you to acknowledge, your bias and increases buy-in if the decision will impact others. By all means ask trusted advisors, but for a more rounded view involve those you feel may be more challenging.
- Write it down. Write down what was decided, as well as why and how much support you have. Writing things down increases commitment and establishes a basis to measure the results of the decision.
- Review. Schedule a decision follow-up in one to two months. We often forget to check in when decisions are going poorly, missing the opportunity to make corrections and learn from what’s happened.
The above list will help anyone improve their decision-making, but overconfidence, in particular, causes us to be close minded towards different ideas than ours. It can also make us slow and rigid in adapting to change that we didn’t initiate. Worst of all, it leaves us vulnerable to making bad decisions that could cost relationships, time and money.
Next time you feel absolutely certain about a decision, remember that you may be wrong. Stay open-minded to the possibility that there is a lot more information that you don’t know yet.
After all, as George Bernard Shaw once said, “Beware of false knowledge; it is more dangerous than ignorance.”