decision making

How to make better decisions

A review of Decisive by Chip and Dan Heath

I think most of us would like to make better decisions. This doesn’t mean that we will go through life without making mistakes. Firstly, that is impossible and secondly, it would make life very boring. But, we can change the way we work as a team and how we evaluate the information provided.

I have a small fan crush on Chip and Dan Heath. I have smashed through 3 of their books recently and enjoyed them all. But, Decisive, is my favourite because it helped me realise I’m not that great at making decisions.

Key lessons from Decisive 

Process over analysis

1,048 businesses were investigated over 5 years, tracking not only how decisions were made, but the outcome on profits, revenue and market share. Pretty much all the companies compiled analysis prior to making strategic decisions, but what differed was the process they employed it to make decisions.

They found that process mattered a lot more than analytics. By a factor of 6.

An improved process stopped faulty logic from driving the wrong decision. We know data is powerful, but we often choose to read the numbers in a way that fits our preconceptions. A lot of making a good decision is about fighting the internal biases we all hold.

WRAP it up

WRAP is the acronym the Heath brothers have developed to help with better decision-making:

Widen your options – Avoid narrow framing by taking in the bigger picture. What would you do if you had no budget?  Or if it was limitless? Or if you couldn’t action any of the ideas you’ve already thought of?

Reality-test your assumptions – Are you being led by bias? How can you get impartial and accurate information? Are you just using data to confirm your own reality?

Attain distance before deciding – Are you thinking long-term or short-term? It is important to manage your emotions in decision-making, so you reach the best decision

Prepare to be wrong–  No one can know the future, so it is about trying to make a robust decision that you are proud of.

Brown M&M genius

You may know the story of Van Halen’s David Lee Roth anger upon finding a brown M&M backstage when his contract rider explicitly said they needed to be removed from the mix.

But, do you know why he got so angry?

The M&M clause was buried deep in the middle of the complex technical specifications. So, if Roth walked backstage and saw brown M&Ms, he could be pretty sure that they hadn’t 100% followed the detailed instructions regarding the stage set up. This gave a clear signal to the band when it was important to do a top to bottom quality check of the set up at a venue.

Roth was an operations genius! The M&M clause was a way of ensuring safety and making sure he was able to make the right decision at the right time. Brown M&Ms will never be the same again.

In Decisions they call this a tripwire. A smart way to help us identify the right decision.

We act like teenagers

Shocking I know.

Many of us, when it comes to making decisions have a very narrow frame when it comes to making decisions:

  • Should I get a divorce or not?
  • Can we increase our price point or not?
  • Should we launch a vegan range or not?

Each time you say “or not” you are immediately working with a narrow frame and acting like a teenager.

Another way we act like teenagers is when making decisions on gut instinct. We follow our emotions and don’t even seek the advice of others. In Decisions an example cited is the Quaker acquisition of Snapple. It wasn’t even a narrow frame decision, it was a

I want to do it and I am the CEO

decision. It is now known as one of the worst decisions in business history.

The decision has probably been made before

Part of escaping the narrow frame is “laddering up”. This means looking further than your standard frame of reference. The problem you are trying to tackle has probably been solved elsewhere. Perhaps not by someone in your immediate network, but in another industry, in nature or in another country.

To disagree is divine

Traditionally the naysayers are mocked in meetings. But, if you make a decision, where no objections are raised, it might cause more pain further down the line.

How you let objections be heard is up to you. It might be through a positive working culture, or it might be by creating mini counter teams who research against decisions to highlight challenges. Or, as included as an example, it might be asking the question:

What would have to be true for this option to be the right answer?

Ego is the enemy

When we are overconfident in our abilities we stop listening and often start following our “gut”. As we’ve seen with Snapple, this rarely turns out well.

Another interesting phenomenon is acquisitions. CEO’s keep making costly acquisitions which don’t pay off.

Research by Mathew Hayward and Donald Hambrick found there were three factors that lead to an overpriced acquisition:

  1. Media praise
  2. Strong company performance
  3. The size of the gap between the CEO’s salary and the next highest-paid officer

Staggeringly, they found that for every positive article about the CEO written in a major publication, the acquisition premium went up by 4.8%. Doesn’t sound like much? This is per article!

Don’t interview – test

We think we are brilliant judges of character, but candidates are better matched and stay longer when standardised and quantifiable questions are used. Intelligence tests, emotional intelligence tests and exercises are much better predictors of future performance than competency-based questions and a “gut feel”.

If you want to hire the best person for the job find a way to objectively test the skills you are looking for. Pre-define how you will score each candidate and stick to it!

Read Decisive now!

There are more examples and tips in this book. I’ve learnt from Decisive that better decisions can be made when we challenge our confirmation bias and try and take a broad view first before narrowing our options. We should also ditch the Lambrini and stop thinking like a teenager.

Photo by Marcus Wallis on Unsplash

About Good Words Online

This blog was designed to be a home for all the content I’ve created over the years. It is a mix of book reviews, personal reflections and business learnings. There is no definitive way to live or work, we all make our own choices. I in no way think I am right about any particular subject. This is simply about sharing what I’ve learnt and creating an online reminder for myself.

The name, good words, has no religious references. We can’t be good all the time. Each of us will make mistakes. All we can do is try to learn from them and try and attempt to be a little better next time.

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