Source: Chief Executive|April 03, 2019

Three Small Actions To Make Better Decisions

Critical thinking and decision making skills frequently rank as the top attributes companies believe effective leaders should possess. And researchers at Bain & Company have found that decision effectiveness is 95 percent correlated with financial performance.

At the same time, a study of 500 managers and executives concluded that 98 percent of business leaders fail to apply best practices when making decisions. The problem stems from a fundamental leadership trap: a deadly cycle of overconfidence fueled by a leader’s limited mindset and confirmation bias.

Thankfully, there are three small actions every leader can take to help them escape this trap.

Ask yourself how others would see your problem differently.

Most of us have encountered this famous image, popularized by british cartoonist William Ely, before. It’s sketch of an old woman with a large nose, wearing a headscarf. Or is it a young woman with a delicate chin, wearing a fancy hat? Both answers are correct. The image is a popular optical illusion created more than a century ago.

But even those who are well aware of the illustration’s trick tend to see the image one way or the other. Our perspectives are often stubbornly fixed, informed by our individual, differentiated experiences. We rarely realize just how set in our ways we are. Too often, leaders either ignore the past or they ignore current trends; both actions are mistakes that limit a leader’s ability to make good decisions. Whenever a decision comes to their desk, leaders should ask themselves, “how would someone else see this issue differently?”

This should not be a vague thought experiment. Leaders must get specific. How would real stakeholders involved in this decision — from colleagues, to employees, to customers — define this problem differently?

Start with the assumption you would make the same mistake as others.

When Amazon was first created as an online bookstore in the mid 1990s, traditional book sellers doubted the website could be successful. After all, stores like Barnes & Noble had only recently disrupted the market and redefined the image of a successful bookstore. Barnes & Noble and other big chains were designed as places where customers could take their time exploring titles, even sitting in armchairs to read books before they bought them.

This, clearly, was an experience Amazon could not replicate, and book sellers never anticipated how successful Amazon could be without those offerings. They were, of course, wrong. Amazon is now the most valuable public company in the world.

Today’s bookselling entrepreneurs would be wise to recall the mistakes made by bookstore chains of yesteryear, and they should assume they would make a similar kind of error. Conventional wisdom might say that Amazon is here to stay, but even its founder, Jeff Bezos, has predicted that, “one day, Amazon will fail.” Savvy leaders should explore why, exactly, leaders made a wrong choice in the past, and remember they can just as easily be on the wrong path, too. We will not learn from others’ mistakes if we continue to assume we would never have made the same mistakes.

Question available data and seek out data blind spots.

Trends are solid — until they are not.

How often do leaders ask themselves if they are using the right data to make their decisions? When leaders are making a decision, they often receive large amounts of data to help them make whatever determination is necessary. Combing through that data seems like the best way to make an informed choice, but, in reality, that data can be a trap.

If the answer was in the easily available data, chances are another company would have already found it. Throughout our educational lives, we are trained to find the answer in the data that we receive. It is, afterall, how we solve math problems. But not all problems are math. Leaders should, instead, determine what important questions they need to ask before they ever seek out the data that could help make their decision.

When most people approach a decision with a hypothesis already in place, their natural instinct is to be right about that gut feeling. They want to “win,” and humans have an amazing ability to discount data that does not support what they want it to. Making better decisions requires leaders to embrace being wrong.