The financial impact of recent events means that many of us are having to make decisions. This week I was chatting to a friend who has built up a service business yet now he is spending real money on overheads with no immediate prospect of business. Another friend is trying to decide if it is wise to go ahead with a house purchase – he and his wife love the house, but is the price now too high and is his income secure enough to take on the mortgage?
This got me thinking about the way people make decisions. And in particular how can we avoid making the poor decisions… and make the right decisions more often.
I recalled this Harvard Business Review article from a while back: “Why good leaders make bad decisions.” The authors looked at 83 decision which, with hindsight, they were able to classify as bad – either based on error or having adverse consequences or both. Here.
In summary, the paper suggests that when confronted with a situation (1) we rely on pattern recognition – to inform us if we have seen a similar situation before, and (2) we are influenced by subconscious emotional tagging which may bias our reactions and our responses. The problem here is that we often unconsciously process a situation without proper analysis. Thus our pattern recognition may seize on similarities yet miss subtleties or even significant differences between our current situation and some previous situation. Similarly our emotional tagging can introduce misplaced confidence or even emotions that may bias us away from some interpretation or to avoid certain actions.
The article says way out is to prevent these thought processes to be done “automatically”. From a mindfulness standpoint, we would say you need to be objectively-aware and questioning.
The authors highlight three “red flags” which if present can lead to misleading pattern recognition and unhelpful or erroneous emotional tagging) conscious or unconscious –
- The presence of self-interest, attachments to things ideas, bonuses etc.
- Presence of distorting attachments – people, places, processes, structures – in which we have invested time, effort… hope (dreams) and even our personal reputation. We don’t want to make decisions that is detrimental to these attachments or represent a retreat.
- Misleading memories – these can quickly cause is to skip over details or differences ( – and memories are often not accurate ); or we may attach emotions to these recollection that increases their influence upon us.
I would add that we all have biases… confirmations bias, or even cognitive dissonance when the facts start diverging – so we must always be wary of any tendency to be biased.
The article suggests working with someone who does not have the attachments or previous experiences or to go through the situation and out analysis objectively.
Yet I would go further.
When a crisis strikes people often expect leaders to demonstrate confidence and a clear route out of the situation. Yet this can cause leader to feel pressured to make snap decisions. IMO, a leader should resist kneejerk interpretations and responses – by remaining aware and curious – without rushing to judge. This can be difficult, as people expect a leader to act decisively… and it will take self-confidence to say “Hold on – we need to look this a little more.”
The McKinsey paper “How to demonstrate calm and optimism in a crisis” is a useful guide here. In any crisis a leader should exhibit calmness and realism – being open about the uncertainties and the unknowns while being optimistic that a solution will be found. The leader can then set in place the activities to deal with the situation, to analyse the information and to identify and plan the actions to be taken.
This mixing of confidence, hope and realism is the key. Humans are wired to pick up on signs of uncertainly and bewilderment from others. So, all communication needs to be carefully planned to avoid in appreciate phrases and to emphasise the key messages.
The McKinsey paper introduces “Integrative awareness” – being aware of the changing reality in the outside world and how you are responding emotionally and physically – to ensure that leader can make the right assessments and to assess the merits of the different actions available, before proceeding with the execution of the chosen actions.
And I would go further still.
A great book on my shelf is an old copy of “Crisis Management” by Michael Regester. This book taught me that in any crisis there are some key things that a leader must do:
- Empathise with those impacted by the situation – so that they know that you are aware of their experiences and difficulties. This reduces their need to tell you.
- Implement remedial actions – to clean things up and provide immediate relief (provide a pump and mop).
- Implement temporary processes or solutions to prevent any re-occurrence or worsening of the situation, yet allow activity to continue safely. (Turn the water off and provide bottled water.)
- Start to work a longer term solution – through investigation and then careful selection of the appropriate actions.
But is it this forth point that brings us back to the decisions we have to take – what is happening and what are we going to do? Analysis and Response.
To facilitate “clear thought” in a time of crisis there a few of things to put in place ahead of time.
- I have said before that in any crisis we don’t want to start questioning the integrity of any data /information streams – so if you don’t trust them now then change them before any crisis emerges.
- Further, it is important that we have a team of diverse colleagues with whom you can consult… and these should be from outside your business or organisation and from a wide variety of backgrounds (discipline, sex, age, race and economic demographics – see Matthew Syed’s “Rebel Thinking”). These colleagues may have different experiences of analogous situations – to help you determine what is going on and ways to address the situation – or they may spot downsides to any possible actions that you may have missed or have been insensitive to. Be ready to make contact with them and seek their input. Answer their questions.
- Work on improving you own mindfulness skills – both to become more aware and objective without rushing to judge situations and also to respond better to the behaviours and emotions of others. In any crisis people will believe they are seeing the real you.
So, when the dirt hits the fan, is our analysis right? And, In terms of the responses available to us, “our choices”, then have we considered the impacts of these choices… both if our assumptions are right and if they are wrong?
We can also note that choices with no downside and little cost may be taken in parallel with more significant actions (as safety nets or hedging out bets); while choices with the possibility of serious downsides may mean we need to further validate the situation more before going ahead.
I suggest that someone on your team (not you) should consider the following checklist – then you should discus and improve it:
Your analysis – understanding of what is happening:
- If your analysis of the situation is right then what will happen next – are there any signs that this is happening?
- If your analysis of the situation is wrong then what will happen next – are there any signs that this is happening?
Your choices of response:
- Look at your options and write down the downsides
- If your chosen actions fail – then how could put safety nets in pace? (Belt and braces)
- Look at the actions that might be helpful if your analysis is wrong (hedge your bets).
- Are there any low cost, yet low downside, actions to cover other versions of the situation?
Monitoring the effectiveness of you actions:
- If your actions are effective what will the early signs be?
- If your actions are ineffective then what will the early signs be?
The final aspects to consider are the execution and the communication.
The execution must be realistic. It should include ongoing monitoring for any early signs that the analysis on which your decisions were based continues to be valid and for any signs that your actions are not effective. Further, it is important that at every stage you should engage with staff and ask them if they have any concerns going forward – this will empower them to flag up any flaws that they foresee, but that you may have missed.
It is essential that all communication – with staff, customers or stakeholders – is carefully planned and that you consider the questions that may be raised. If you get a hard question then don’t ignore it. Explain that you are trying hard to get this message or that message across so that everyone understands what you are saying; yet be ready to accept that there are still some uncertainties or decisions to be taken… and that as things become clearer it will be problem to make better informed decisions. Be clear that there is a way forward. Calmness, realism and optimism.