Decision-making in times of crisis

22 May 2020

An article by Radu Atanasiu, Lecturer of Critical Thinking at MSM Romania. You can keep in touch with Radu on his LinkedIn page.

Few businesses have continued through March, April, and May without a major change. Most have slowed down because of the restrictions, some have picked up. These peculiar months have influenced the mindset of business leaders, taking them from denial that anything should be done differently to major pivots and epiphanies, in a cascade of intense experiences that seemed to have lasted a year, not two months. This is not the end of the interesting times; it might still be the beginning.

However, not all leaders have translated their mindset changes into new strategies. Many, be they the winners or the victims of these hectic times, have just made a series of slight or abrupt corrections to the course, have put out some fires, have exploited some weird opportunities, but did all these on auto-pilot, without reflecting on the big picture. If you haven’t yet taken the time to define your new strategy, stop reading this for a minute and schedule a strategy meeting asap, don’t let this crisis go to waste!

Decision-making in strategy meetings

This article is a small toolbox for that strategy meeting. The main ingredient in a strategy meeting is decision-making. Most successful managers like you are experienced in making successful decisions, that is what got you where you are today. However, in these unusual times when speed is essential, problems are unfamiliar, and stakes are high, we need to brush and update our decision-making style.

The first step is to acknowledge that we have one, and the second is to admit that, while it may have served us well until mid-March, it can always be improved. These two steps require a moment of introspection and a bit of intellectual humility. After guiding you through this unusual ritual, this article will provide a few decision-making tips and tricks that can structure the process.

Step one: how do you make decisions? Decision-making styles can be arranged on a spectrum from plunging-in to paralysis by analysis. Plunging-in bias is the tendency of many experienced managers and many entrepreneurs to come up with a solution and to start implementing it way before they read the second half of the memo describing the problem.

Diagnose problems before making a decision

In his best-seller Principles, billionaire-hedge-fund-manager-and-philanthropist-turned-management-guru Ray Dalio makes the case for dedicating a bit of time for diagnosis: “Diagnose problems to get at their root causes. Focus on the what is before deciding what to do about it. It is a common mistake to move in a nanosecond from identifying a tough problem to proposing a solution for it. Strategic thinking requires both diagnosis and design.

A good diagnosis typically takes between fifteen minutes and an hour, depending on how well it’s done and how complex the issue is. It involves speaking with the relevant people and looking at the evidence together to determine the root causes.” In the opposite corner lies the  manager who needs to have all the data, all the computation, and all the analyses before deciding.

Jeff Bezos, the boss of Amazon, uses two simple principles to tackle this tendency. First, he splits decisions in reversible and irreversible, and, “if a decision is reversible, we can make it fast and without perfect information. If a decision is irreversible, we had better slow down the decision-making process and ensure that we consider ample information and understand the problem as thoroughly as we can.”

Then, even for the irreversible ones, Bezos advises acting “once we have 70% of the required information, instead of waiting longer. Making a decision at 70% certainty and then course-correcting is a lot more effective than waiting for 90% certainty.” I was always puzzled by this precise percentage, but you get the point.

Both types of managers need to borrow a little from the opposite style. The experience-based intuition of the fast movers is trained on different environments, this landscape is new and their intuition might miss, so they need to insert some reflection and data-based analysis in their decision-making. Over-analyzers need to adapt to the speed of the times and to sacrifice accuracy for efficiency. They should favor action over reflection and try to test scenarios with fast and cheap pilots. Which type would you say you are?

Consider more alternatives

Most decision-making meetings are flawed by the lack of a remarkably simple parameter: the number of alternative solutions considered. One of the most prominent researchers on business decision-making, Ohio State University professor Paul Nutt has studied a large number of decisions made by top management teams and found that in 70% of cases, the number of alternative solutions they considered is… 1. That cannot even be called considering.

The false sense of choice arises from counting a yes-or-no discussion as a decision. If you and your team are considering whether or not to embark on project A, that is not considering two alternatives, that is considering just one. Considering two alternatives is having the project A compared to project B (and, please, dare to include C and D). But, apparently, that does not happen a lot. Should it?

Well, the same researcher studied 10 years of important decisions made by the board of a medium-sized German tech company and found that, when the board had a shortlist of at least two alternative solutions, the final choice was more successful than in cases when they just debated whether or not to go with one option. How much more successful? Quite a bit more! Six times more. 600% more. So, if you consider launching a new line of business, it will have more chances of success if your decision will be made between three different lines or three business models of the same line.

In their best-selling book Decisive, Chip and Dan Heath describe another pitfall in considering alternative solutions: the and/or confusion. Usually, faced with multiple alternatives, people only consider one versus another, in a mutually exclusive or mindset, ignoring the many ways they could do one and the other in various combinations. This false dilemma arises in simple one-option scenarios (Should we move our shop online? is framed as a limited, yes-or-no problem, guiding us to think that keeping a physical presence and having an online shop cannot work together).

Also, in situations where there are more alternatives in the consideration set (Should we expand by launching our platform in a country from the region or directly in the US? – is framed as to guide us away from the possibility to launch in both Hungary and the US, and also from considering the possibility to launch first in South-East Asia, or to scale without going international). Please think about a recent or upcoming decision and check whether there is more than one alternative and there is no bias towards or.

Decision-making is so natural that thinking about our own decision-making style is a bit awkward, like thinking about the way we run. It may prompt us to do peculiar moves at first, but if we take a bit of time and focus to analyze what and how we do, we can improve both our decisions and our running.

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