Sunday, October 21, 2012

Decisions - Emotions and Logic

So far, I have suggested that getting good results from our decisions is strongly correlated to employing an improved decision making process based on three things. I would like to start describing such a process right now. First let’s recap the three things that must be considered in our decision making process
·         Perspective

o   One would like to include all important perspectives in their consideration. A perfect decision making process would consider the points of view from anyone impacted or involved in the decision. This is seldom possible, so we try to get as close as practical.
·         Impact

o   One would like to be able to estimate and express the amount of impact and likely consequence and benefit from a problem scenario (“current state”) and a solution scenario (“proposed state” or “future state”) in order to assign the correct priority and resources.  A perfect decision making process would completely and correctly predict all possible consequences from all possible outcomes of a decision. This is seldom possible, so we try to get as close as is practical.
·         Basis for Decision

o   One must understand the strength and coherence of the facts being used to portray the problem and solution scenarios. A perfect decision making process would use only information that had been vetted and confirmed to be accurate, and we would have ALL of the information necessary to present a complete picture. This is seldom possible, so we try to get as close as is practical.
A good process evaluates all three of these elements constantly and “spirals into” a decision, meaning that the first iteration takes us from zero information on all three elements to our initial understanding. If there are gaps in our initial understanding, we iterate through again, and again.

If we imagine the theoretical PERFECT process I eluded to before, we would require just one iteration and it would be instantaneous. Your current process is probably near perfect for simple decisions (e.g. only one perspective matters and it is yours, the decision doesn’t carry very great consequences, and you don’t have to deal with a great deal of data or strong conflicting emotions). This is the kind of decision we often face when ordering lunch. For decisions in which there is more complexity in these elements (i.e. risk), our process needs to be more robust.

The first thing we concentrate on are the stakeholders, their identity, their input (and its basis), and the impact of the direction that their input implies. Note that we haven’t discussed who is going to make the final decision, whether it is a group decision or an individual decision; we are just gathering data.

Since the last 150 or so articles I have written have been about how to have these kinds of conversations with people, I am going to summarize that towards the end of the Decision Making series. For now, I am talking about the middle step –basis for decisions.

We have touched on the idea that there are emotional decisions and logical decisions, and that we would prefer to eliminate emotions from our decisions because they tend to distort reasoning. The fact is, almost all (greater than 95%) of decisions have an emotional content and, as long as it doesn’t distort reasoning there is no reason to exclude an option because it is emotionally based (“Logically, I know I need to wear a tie to dinner. Emotionally, I am going to pick the red tie because I like it more”). If, however, you know that the person you are trying to impress tends to distrust people with red ties, then you shouldn’t allow your emotion (liking it) distort your reason (my purpose is to impress this person).

Since we are talking about business decisions, the following emotional components are likely NOT useful and should be scrutinized carefully if they are the primary reason you are making a business decision:

·         Indifference (Whatever – I don’t care – it’s not MY company)

·         Addiction (We should hire more people because I WANT a bigger department)

·         Faith (We are too big to fail; I just know that customer would never drop us)

·         Emotion (We should acquire that little company that makes cellphone applications because EVERYONE is buying cellphone app companies these days and I don’t want to look out of touch)

·         Intuition (I have a feeling that that this is going to be a great quarter…I can feel it in my bones)

I am not saying that you can’t think or feel these things, or that if you do something is going to go wrong. I am saying that if your process recognizes these as adequate support for business decisions, then your process is going to disappoint you more often than if you DON’T rely on them.

In fact, emotion adds certain aspects to decision making that are valuable:

·         Improve Speed (fear increases speed of decisions)

·         Provide Information (a potential course of action that may bring regret or disappointment will promote greater discussion and reflection about alternatives)

·         Assessing relevance (we consider the likelihood of getting a result that will make us feel regret or disappointment and assess the associated factors relevant and worthy of consideration)  

Here are some bases that tend to produce better results than the above. These bases are viewed as “reasoned” or “logical” and are arranged in order from lowest to highest likelihood of success:

·         Pressure (The boss says we should do it this way. He wouldn’t be in his position if he didn’t know something about this)

·         Policy (The law directs a particular way in which we deal with customer issues. Or, could be our policy or regulatory requirements)

·         Experts (the reasoned conclusion of someone with experience in the issue at hand)

·         Facts (use of decision analysis tools such as criteria ranking, prioritization and weighting, or compliance tables. The Kepner Tregoe decision making model is such a tool)

·         Probability (requires modeling to determine certainty and uncertainty and to determine specific values of various outcomes)

It is important to note that I am NOT saying that unless you have a probability based process, your decisions will be wrong. Can experts be wrong? Sure. Can intuition be right? Yes. I am saying that if your process recognizes that decisions that are decided solely on emotion are more risky than decisions that include logical elements, then you are likely to arrive at better results that if it doesn’t.

Also, I am saying that your process must recognize that almost all decisions contain some emotional content and it doesn’t hurt so long as that content isn’t the entire basis for the entire decision AND it doesn’t distort the reasoning that is present in the decision.

Next time we will talk a little more on this, and then move on to Assessing Impact and Consequences.

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