Avoiding disastrous decisions and maximizing success through effective leadership decision making involves:
1) Deciding the decision criteria
2) Weighing the importance of criteria
3) Grading your options using the criteria
4) Checking with your head and gut
5) Sticking to your choice
This is the key takeaway message of this episode of the Wise Decision Maker Show, which describes the technique for Avoiding Disastrous Decisions.
Videocast: “Avoiding Disastrous Decisions via Effective Leadership Decision Making”
Podcast: “Avoiding Disastrous Decisions via Effective Leadership Decision Making”
Relevant Links
- Here’s the in-depth article on “Avoiding Disastrous Decisions”
- If you’d like case studies with in-depth guidelines of how you can apply the “Avoiding Disastrous Decisions” strategy as an individual or a team, see the Manual on Avoiding Disastrous Decisions.
- The book Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters is available here.
- You are welcome to register for the Wise Decision Maker Course and get a digital version of the assessment for free as part of the course.
- Article on the assessment to evaluate dangerous judgment errors in your workplace.
- Article on a quick technique to making the right day-to-day decisions at work
- Article on a thorough technique for making important decisions
- Article on an in-depth technique for making critically important decisions
- Article on a thorough technique to prevent failure and maximize success when implementing decisions
- Article on a thorough technique to make wise strategic plans
- Article on mental skills and habits to defeat dangerous judgment errors
Full Transcript
Welcome to another episode of the “Wise Decision Maker” guide. Have you ever heard the phrase “When the going gets tough, the tough get going”? Well, when the going gets tough for wise decision makers, wise decision makers get “mathing”. Don’t worry, you don’t need to know any calculus or advanced math to do this. Simple algebra, stuff you use on profit and loss statement works fine for you to make really complex and hard decisions relatively clear and simple.
Today, we’ll discuss a pragmatic and effective strategy that you can use to do that. That you can apply to the most critical, the most important, the most complex decisions that you are facing, and make them in a clear and transparent manner that will help you and your team make the best decisions possible, maximize your success and avoid threats and problems on these critically tough choices.
Now, why do you need to do math anyway, right? Many people like to ask me that. Well, because our brains are not really very good with intuitions and gut reactions. They are really bad, especially the tough, tough decisions that you have to make that are really complex, really big, and really challenging. Bet the company decisions, like hiring a new CEO, launching a major new product, choosing a major new company strategy, deciding to enter a huge new market. These are really tough decisions and that matter a lot and our brains are really bad at dealing with them.
Or let’s say, bet your career decisions like leaving your cushy corporate job to start a new non-profit or joining the leadership team of a failing company that you’re really hoping to turn around, or perhaps really important personal decisions like deciding to move to a new city or buying a house. These are huge decisions and we need in those cases to get as far away from our intuitions as possible and numbers using math help us do so.
Now, If you’ve been following the Wise Decision Maker guide for a while, you know that our gut is adapted for the ancient savannah not the modern world. So our gut reactions are really bad indicators for making wise decisions in situations that don’t involve savannah-like saber-tooth tiger fight or flight reflexes like getting out of the way of a moving bus. Yeah, go with your gut in that state, but if you are making a decision about which house to buy, don’t go with your gut. If you are making a decision on which new job to accept, don’t go with your gut. Think about these things, if you are deciding about a new product to launch, don’t go with your gut. And our instincts are really terrible at numbers and in-depth analysis and numbers and in-depth analysis are exactly what you need to use for those really complex, tough decisions, matter a great deal to your success.
Now, unfortunately, you’ll very often hear business gurus, self-help gurus, and fire-walking gurus telling you that especially at the most critical decisions, you need to go with your gut. Really terrible, terrible advice. And it’s not like they’re evil, it’s not like they’re wanting you to fail, but they’re just telling you what’s comfortable and going with your gut is always the most comfortable thing. That’s the nature of going with your gut, it’s comfortable, it feels good. Going with our gut feels good but it’s really bad for us, especially in those critical decisions. They do what gets them paid: telling you to do what’s comfortable for you and that’s really unfortunate for your success. It’s very bad for your success on those really critically important decisions.
So, our emotions are especially going to steer us away from the right path on those really bet the company, bet the career, bet your personal finance decisions and they will cause us to fall into the dangerous judgment errors that result from how our brains are wired, from our evolutionary heritage, that scholars in cognitive neuroscience and behavioral economics, people like myself call “cognitive biases”.
So those critically important choices, you need to work especially hard to go against your intuitions and you need to work especially hard to use your head and not your gut, to not use your primitive instincts and instead focus on being as civilized as possible and using the learned complex behaviors of mathematics and analysis to have the best chance of making the right call on those tough job decisions.
I’ll share an easy-to-use strategy that you can use for this called “Avoiding Disastrous Decisions” that I developed to use with my clients. So in addition to my scholarship, I’ve been doing a scholarship for over 15 years in academia, including 7 years as a professor at Ohio State, I was also doing and am doing speaking, consulting, coaching and training for business leaders. And with them, I have been applying this strategy called “Avoiding Disastrous Decisions” and we’ve perfected it now and so I’m sharing it with you for folks who may not be able to hire me to actually help you make those tough, tough choices. But you can still take advantage of this research-based expertise, that has been tested on the front lines of business reality.
So, before I go into the strategy itself, let me share a story of how I used this strategy and I used this strategy when I was looking at my personal financial life to buy a house. In fact, it’s exactly this house where I’m living right now. You can see the house right around me – that’s my office.
So, let me tell you a story. My wife and business partner, Agnes, and I were doing house shopping and that was in… I believe in 2016, we were doing house shopping, looking for a house in the summer of 2016, and I remember entering the backyard of this house that we were in – it was an intense day of house searching, and it was beautiful, it was like entering a lush grove. It was just gorgeous, there were shady trees, they protected us from the summer heat. It was amazing and I was just thinking “oh, what will this backyard be like in the fall, all those gorgeous colors? I love fall colors, I just go watching the trees in fall colors so, it would have been amazing to have that in the back yard so I was thinking. So, it would have been kind of a magical experience and I imagined myself lying in the hammock under the trees in the early fall and watching the leaves fall, so I had a really great experience and Agnes, my wife and business partner, also had a great experience. She loved the house, it was great, the backyard, we were both in love with the back yard, she really liked the kitchen and it was great. So, we didn’t realize at that time that the backyard was kind of a trap. Yeah, it was a trap. It was essentially something that really couldn’t deliver on the emotional promise that it made when we entered that back yard.
But we didn’t realize it at the moment, so we were really excited and we asked our realtor to bid on the house. We were just motivated by the attachment to the one aspect of the house, the backyard, that was really great for us. And that’s a cognitive bias. That’s an error. It’s called “attentional bias,” where we are focusing on what is most emotionally appealing to us about the situation, as opposed to the whole situation, making a thorough, very effective and very considered judgment on such a hugely important decision.
So Agnes and I made that bad decision on the day of the house search, we were kind of exhausted. But we slept on it and we were more clear minded the next morning so we applied the “Avoiding Disastrous Decisions” technique to try to map our decision by comparing that house with the backyard to our second-choice house. And I took a photo of our calculations, actually. It’s in the book that I made, one of my first self-published books called “The Truth-Seeker’s Handbook: A Science-Based Guide.” Here you can see the photo of this calculation. It was kind of a back of the napkin calculation (not back of a napkin but you know what I mean). It was kind of on paper because we weren’t using a spreadsheet, we were just kind of writing it out together.
So we compared that house and that was the first-choice house that’s labeled 170 here, and that’s the second choice house labelled 450. So 170 and 450. Now, to avoid excessive attachment to any part of the house, we wrote out the various parts of the house, which is in the first column, and then we gave each a quality rating from one to three. And then, to account for the actual usage of the house, we again gave a similar rating for expected usage. So there is quality rating and usage rating. And next, we multiplied the quality by the usage to give an overall weighted rating. And of course we separated them individually. So, this was A for Agnes and this was G for Gleb for both the houses. So A for Agnes for house 170, which was our first choice. G for house 170, which was our first choice. And again, same thing for the second choice, for 450, A and G.
And finally, we added them all up at the bottom. And both of us were really surprised by the result, it’s kind of hard to see here, but basically, our second-choice house beat our first-choice house, by a lot. It was 95 to 67.5. That’s a huge difference, that’s – 95 to 67.5, that’s almost a 50% difference. So very big difference. Huge difference. We tried to jiggle the numbers, we played around with them and no, it was still a huge difference.
So, what was the nature of the difference? Well partially, we realized that we’d use the backyard for only a part of the year. Maybe half the year at most, we’d really get enjoyment out of the backyard. So the usage was lower for the backyard. So the house we live in right now, 450, it has a much less fun, fancy backyard but we are not going to use it nearly as much. However, 450, where we live right now, has a very nice screened-in heated porch, so Florida room, which we can just sit in year-round and we use that, and we check out the outside even when it’s snowing. Whereas the other house, 170, which used to be our first choice didn’t have anything like that. Also it had a kind of a poor arrangement for the furniture we wanted to bring, so that was not great. The kitchen was nicer in our original first-choice house, but I don’t use the kitchen much, so I rated it lower. And the first-choice house had less bathrooms, and that was going to be kind of inconvenient. It’s nice to live in the house that we currently live where Agnes and I both have a bathroom of our own. So, we realized we made a serious error. But fortunately, it wasn’t like something that cost us money yet, so we called our realtor, we asked her to change the bid from 170 quickly to 450 and, it wasn’t a problem and we didn’t put down any deposit money or anything like that. And we were very excited when our bid on 450, the house where we live in right now, was accepted. It was very exciting. So it was really awesome. We moved in and haven’t looked back since. We are very happy with this current house. And the backyard works out fine, although it doesn’t have the beautiful trees that the other one would have had.
So, I really shudder to think what would have happened if we got that other house, would have been really inconvenient, kind of crammed, with the layout of the house and it would have been really annoying to share the bathrooms. So that wouldn’t have been great. We’d have spent the long winter looking out the windows, whereas here, we still have the Florida room and we can see stuff around us – it’s very nice. Also, here there’s a pine tree in the front of the house, and we got evergreen right in front of the house all year round. It’s great.
So, what – I want to ask you – what problems attentional bias might cause you like it caused us for that house? When, perhaps you’d be too drawn in by an aspect of a new position that’s offered to you and forget to look at all other aspects of this position, think about and consideration. Perhaps you’d be very attracted by a certain aspect of a merger, perhaps a company has really great technology that you want, but then you’re not thinking about its internal culture and how that might very seriously clash with your internal culture. Or you could have the same sort of mistake when, let’s say, you are looking to buy a car and you’re not thinking about all aspects of the car. You’re just attracted by how you feel when you drive it. For example.
And remember, attentional bias is one of over a hundred cognitive biases that could pose a serious problem for you when you are making really, really important decisions. Now, by applying the “Avoiding Disastrous Decisions” technique, you can address a lot of these cognitive biases automatically. And that’s what helped Agnes and I make the wise decision on buying a house and can help you make a wise decision in critically important situations. So, use this technique when it’s worth it to spend some serious time on the calculation. It should take you probably about an hour or so to go through the whole technique and if you’re doing it together with a team, probably closer to 2 hours.
Now, why does it take that long? Partially because I suggest you use it together with the technique called “Making The Best Decisions” and that’s a more broad technique that applies to all aspects of the decision making process from start to finish, whereas “Avoiding Disastrous Decisions” technique simply applies to the step where you make a choice between 2 or more options rather than other aspects of the decision process. So I tell all of my clients to use the “Avoiding Disastrous Decisions” technique together with “Making the Best Decisions” technique. And that is much better, much more effective when you use those two techniques together for your really serious, critically important decisions. And the blog to “Making The Best Decisions” technique will be linked in the show notes of the episode.
So, let’s go on to the “Avoiding Disastrous Decisions” technique, which is what we’re talking about today. It has 8 steps.
So first, you want to list your decision-making criteria. Write down all the important and relevant attributes of the decision that you will be making. So what kind of criteria do you want to use to make the decisions? You want to stick to no more than 10 criteria if at all possible and don’t get stuck in analysis paralysis trying to list all the possible things. Aim for 10. If it’s less that’s great, really don’t go for more, it really won’t help unless it’s a super super critically important decision.
Now, for making a key hire, let’s say you’re hiring the CEO or the COO. Think about using criteria such as “salary requirements,” “fit into organizational culture,” “ability to perform job,” “connections outside the organization”, “contribution to diversity,” and so on. So these are the kind of criteria that you are rating. If you’re going through this process as a team, brainstorm the categories and then vote which ones should make it into the top 10 and then put them into a web app for easy calculation. Now, the nice thing about “Avoiding Disastrous Decisions” technique is that to make mathing easier for you, we created a web app to help guide you through this process and that’s linked in the blog that is linked in the show notes about “Avoiding Disastrous Decisions” technique so you can easily find it and put the information into the web app.
Step 2: Weigh the attributes. Decide which ones are most important to you. So, use a scale of 1 to 10 where 1 is the lowest importance and 10 is the highest importance. When Agnes and I used the technique for the house we made 1 to 3. I later did some more research and revised that technique because it seems like that’s not a large enough interval to make meaningful differentiation, significantly important differentiation. That’s why I raised it to 10 based on subsequent research that has come out. Now, make sure to use this step honestly. Evaluate really truly what criteria are the most important to you. So for example, let’s say you have a great budget and you can say that “salary requirements” are not that important to you. So, you can put salary requirements at 4, but let’s say it’s critical that somebody matches your organizational culture, so you make “fit into the organizational culture” at 9, meaning again, it’s a critical factor for success in the hire that you make. And if you’re doing this with a team, come up with weights independently and anonymously and then just average them out together.
Alright, step 3. This is where you rank the options on the criteria. Rank each option on the criteria that you are choosing using all the attributes that you wrote up earlier. Use a decision matrix table, rank each option from 1-10. So, for example, 1 would be lowest, 10 would be highest. So again, let’s say you are preparing Mary, John, and Ella for this CEO job. You say that, for some requirements John doesn’t have very high salary requirements so he is an 8. So he’s quite good on that. Then Ella has high salary requirements so she would be a 5 on the salary requirements. And then Mary has really high salary requirements so then she would be a 2. So that’s how you would rank the options on each of the criteria that you choose. And if, again, if you are doing this as a team, brainstorm rankings together and then average them out.
Alright, step 4. You math it. The web app does that automatically for you. What you do, essentially you multiply the weight of the criteria by the ranking. I’m not going to go through it in detail. It’s all lined out in the blog and the web app does it automatically for you.
Now Step 5. Step 5. You might be surprised by this one. But I’m going to recommend that you check with your gut. Now the gut causes you to make many mistakes so you don’t want to rely on it too much; however, it can be quite helpful in certain situations where your intuitions might catch something that your rational logical analysis would not. So, you want to check with your gut. Think about whether you’d be surprised by the outcome. Think about, would you look back and wish you had a different decision? You made a different decision. So think about these things. Play around a little bit with the numbers, with the weighting and ranking – try not to fit them to your preferred option but play around with them a little bit and align them. See what would happen if you rejiggle them to align with your gut intuitions.
Now, the next step is when you check with your head. You want to make sure to always check with your head while consulting your gut. Always check with your head. Never trust your gut, simply by itself, always check with your head. So, here is where you check for potentially dangerous judgment errors. I mentioned there are over 100 potential dangerous judgment errors. I made a list of 30 that are most, most applicable to business settings and I made an assessment for you to evaluate whether they’re present in your organization, in your team, in your decision-making process. And that’s a blog that will be linked in the show notes to this episode. So, pay particular attention to cognitive biases which you know you are vulnerable to. So, I, for example, I know I’m vulnerable to optimism bias. I tend to think that the grass is greener on the other side of the hill. So, I know I need to really watch out for that. I tend to be risk-blind and not think about the negatives sufficiently. So, pay particular attention to those things and again, focus specifically on dangerous judgment errors that might come from looking at your gut and consulting it too much because you just did it from the previous step. So again, play around with the numbers by compensating for some of the dangerous judgment errors and see what kind of numbers you get this time.
Okay, so, you did that. Now, get to step 7: set red flags. Decide what kind of red flags you want to make for evaluating whether your decision is not going well. So if relevant new evidence emerges to influence the rankings, what kind of evidence would it be? So, for example, let’s say you are very close to hiring Ella. And then you are consulting the references and one of the references has something pretty negative about Ella. Then you want to be able to integrate that into the rankings and consider how the rankings would be impacted by this information. So that’s important so that you are not swayed by short-term emotions when any new information bubbles up because what this reference says about Ella, compared to all the other evidence you have, it might not be that relevant. So you want to be able to compare it effectively and not have attentional bias on this one thing that this reference said. And you also don’t want to deal with simmering disagreements within the team if you have different thoughts about what option should have been chosen. And then when anything goes wrong about the decision, when any problems come up, people say, “oh, I told you so. You shouldn’t have gone with that.” You decide on the red flags in advance and you say, “if this happens, we will reconsider the decision or we will play around with the rankings.”
Alright, at that step, the web app automatically allows you to math things, to multiply things out, and see what is the best option for you and what you want to do is make that choice and stick to it. Commit to it and go forward with the choice unless one of the red flags situations happens. Now, making a commitment has been shown by extensive research to make you personally much more likely to be happy with your choice and significantly, significantly decrease conflict in the team setting. So, you made that choice and that is the “Avoiding Disastrous Decisions” technique.
Check out, again, the blog. I mention a number of blogs. There’s the blog on “Avoiding Disastrous Decisions” technique itself that’s linked in the show episode notes. The blog on the 30 most dangerous judgment errors is linked there and the blog on the “Making the Best Decisions” technique.
Now, my goal with the Wise Decision Maker Guide episodes is to provide you with the utmost, best value possible in avoiding the mental blind spots, cognitive biases that’s caused us to make terrible decisions and really hurt us going down the road, going into the future and I hope that learning about the “Avoiding Disastrous Decisions” technique has helped you do so. Please share your thoughts about it. Has it helped you? Where do you think you might use it? In your personal life, in your professional life, in your organization? How do you think it might be helpful to you? Please share your thoughts in the comments to the episode.
Now, I would like you to click “like” if you liked this episode and to make sure to subscribe if you haven’t yet, to continue getting the “Wise Decision Maker” guide. Make sure to share this episode with other folks who you want to avoid disastrous decisions by using the “Avoiding Disastrous Decisions” technique. And follow me on social media, you’ll see some links to it, to get not simply, the new content on the Wise Decision Maker guide, but also all other content that I create on avoiding disastrous decisions and making the wisest decisions by addressing cognitive biases. And also content that I curate from other folk who make similar insights on how to address dangerous judgment errors. You can learn much more about this topic in my book on avoiding dangerous judgment errors in business settings and making the best decisions called “Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters”. Now the best free resource I can offer on this topic is to sign up for the Wise Decision Maker Course which is linked in the show notes to this episode. And I hope to see you on the next episode of the “Wise Decision Maker” guide. Wishing you the wisest decisions, my friends.
Image credit: Disaster Avoidance Experts
Originally published at Disaster Avoidance Experts on October 8, 2019.
