Your business is not breaking even in your second location. A tenant in the same building is moving out and you are offered their location at $1K more a month in rent. You accept!
In a conversation with an office manager of a former client I learned about this decision Monday. There may be much more to the answer, however on the substance of what she and I know the decision to move would seem absurd.
Why and how do we make decisions? And why do we make decisions so poorly so often?
In Heath Brothers authored a new book, Decision Making: Decisive: How to Make Better Choices in Life and Work they examine decision making revealing humanity does not have an impressive track record. Do you agree?
Here are some disappointing numbers on Decision Making:
- A study of 20,000 executive searches found that 40% of senior-level hires “are pushed out, fail or quit within 18 months.”
- More than half of teachers quit their jobs within four years.
- One study of corporate mergers and acquisitions—some of the highest-stakes decisions executives make—showed that 83% failed to create any value for shareholders.
- A research team asked 2,207 executives to evaluate decisions in their organizations, 60% of the executives reported that bad decisions were about as frequent as good ones.
- In the NFL Draft 69% of the first 13 picks become rookie starters, 44% of the remaining rounds start. The overall success of a first round draft choice is about 50%. DRAFTMETRICS comment “It does cause you to wonder, though, if the draft is more like blackjack than bridge.”
"Decisive" indicates perhaps the only decision making process in wide circulation is pros and cons which is credited to Benjamin Franklin. It’s a tool used in some sales training. Franklin called this technique “moral algebra.” The pros-and-cons approach is familiar. It is commonsensical. And it is also profoundly flawed.
Research in psychology over the last 40 years has identified a set of biases in our thinking that doom the pros-and-cons model of decision making. Decisive calls these the Four Villains of Decision Making. They are:
- Narrow Framing. Steve Cole, the VP of research and development at HopeLab, a nonprofit that fights to improve kids’ health using technology, “Any time in life you’re tempted to think, ‘Should I do this OR that?’ instead, ask yourself, ‘Is there a way I can do this AND that?’ It’s surprisingly frequent that it’s feasible to do both things. Implicitly, we assume that there is one vendor that is uniquely capable of crafting the perfect solution, and that we can identify that vendor on the basis of a proposal.
- Confirmation Bias. Our normal habit in life is to develop a quick belief about a situation and then seek out information that bolsters our belief. When people have the opportunity to collect information from the world, they are more likely to select information that supports their preexisting attitudes, beliefs, and actions. At work and in life, we often pretend that we want truth when we’re really seeking reassurance: “Do these jeans make me look fat?” “What did you think of my poem?” These questions do not crave honest answers. Why do you think an American Idol contestant is so surprised when they discover the judges kick them off because they can’t sing? It’s the first time in their lives they’ve received honest feedback
- Short-Term Emotion. When we’ve got a difficult decision to make, our feelings churn. We replay the same arguments in our head. We agonize about our circumstances. We change our minds from day to day. No doubt Andy Grove at Intel had been compiling his pros-and-cons list about whether to exit the memory business for many years. But the analysis left him paralyzed, and it took a quick dose of detachment—seeing things from the perspective of his successor—to break the paralysis.
- Overconfidence. We have too much confidence in our own predictions. People think they know more than they do about how the future will unfold. In Alistars Sims wonderful portrayal of Ebenezer Scrooge (Charles Dickens A Christmas Carol) as he repents, “Men's courses will foreshadow certain ends, to which, if persevered in, they must lead," said Scrooge. "But if the courses be departed from, the ends will change.” Here are some quotes that exemplify overconfidence:
- “The odds of a meltdown are one in 10,000 years.” —Vitali Sklyarov, minister of power and electrification in the Ukraine, two months before the Chernobyl accident.
- “Who the hell wants to hear actors talk?” —Harry Warner, Warner Bros. Studios, 1927
- “What use could this company make of an electrical toy?” —William Orton, president of the Western Union Telegraph Company, in 1876, rejecting an opportunity to purchase Alexander Graham Bell’s patent on the telephone
The key to better decision making is being aware of these Four Villains and then following the Heath Brothers formula, a mnemonic WRAP.
Interested in overcoming the four villains and making better decisions? Join me next blog to discover how to WRAP your decision making process up better.