Avoiding Failures in Judgement & Decision Making

In Our View …

In the science of decision making, we find a well researched and proven “value chain”
that helps determine both the nature and the quality of the decisions a person makes. In
short, we all base our decisions, especially those we make in business, on a Premise. The
Premise (right or wrong), in turn, shapes the Assumptions we then make, which lead to
the Conclusions we draw and the Actions we take – or do not take. Technically, it is a
little more complicated than that (which we will expand on later in this paper), but for
our purposes right now, let’s simply say that Premise and Assumption are the raw
materials of all decisions.

It has long bewildered us that leaders do not seem to pay enough attention to the
decision making processes within their organizations. The same leaders who will spend
millions of dollars to improve the efficiency of an outdated IT system, or manufacturing
system, or a faulty sales process have, generally speaking, never really considered
spending any money on improving the corporation’s decision making processes.

We find that both curious and concerning!

In the next few pages, we will do our best to set out the facts and arguments for
understanding and improving the decision making process. We wholeheartedly suggest
the time is now to consider the obligation we have to lift our game and make sure we
do justice to the one element of organizational effectiveness we have been afraid to
address for far too long.

Yours truly,

R. Douglas Williamson
President & CEO

Redefining Failure …

There is a popular phrase we have all used, at one time or another, about how we “learn
more from our failures than our successes”. If so, then you have to wonder why we have
not done a better job of formalizing the “learning from mistakes process” in order to
improve the learning itself. Like so many other urban myths, the words are nice, and the
thought somehow comfortable and reassuring, but the reality is quite different.

Author and well known “blogger”, Seth Godin, wrote about just this a few years ago in
the Harvard Business Review. It caught our attention. His essential premise is that in
order to get better, we need to redefine what it means to fail. We need to broaden the
definition of failure so as to better capture the full magnitude of the disappointment we
create by the poor decisions we make.

In short, we will need to apply more rigour and scrutiny to our failures if we want to
create new opportunities to reinvent our organizations, the products we offer, the value
we create and the people we choose to be our leaders.

We need to examine failure not just through the lens of failed outcomes, but also in
terms of:

  • Failure of Opportunity
  • Failure of Trust
  • Failure of Will
  • Failure of Priorities
  • Failure of Respect

Decision Making :: A Master Competency

Think about it for just a minute.

The “value” created by any leader, team or organization is really the sum total of all of
the decisions made by the leader, the team or the organization over time. The
improvements we make, the breakthroughs we have, the innovations we spawn and the
outcomes we achieve are all, ultimately, based on the quantity and quality of the
decisions made, both large and small.

While there has been much literature on the importance of execution (which we do not
deny or dismiss) the fact of the matter is, there can be no more important attribute for
defining individual or collective success than the ability to make great decisions. In
others words, while executing the decision is important, the things that govern the
decision and the decision making process itself are equally important.

If so, then:

    • What are the processes that lead to the best decisions?
    • Who, in our particular organization, best exemplifies good decision making?
    • How good are the thinking and decision making processes we use?
    • What can we learn in order to improve results?

Flaws in Decision Making …

It turns out that, amongst the many factors that go into decision making, there are two
mysterious but incredibly powerful functions within the brain that are specifically
designed to help us deal with the issue of complexity, which in turn helps us cope with
ambiguity and uncertainty. Both of which are on the rise in today’s economic reality.
These two mental processes help us make decisions when we don’t know what to decide,
and they can either work for good or evil, as long as we know the difference.

They are:

Pattern Recognition

This is our ability to “fill in the blanks” because we have seen a certain pattern in
the past and we recognize it. It is enhanced through experience, and the broader the
experience repertoire a person has, the better the skill is developed and coded in the
brain. The more shallow the repertoire, the more likely we will be negatively
influenced by misleading judgments.

Emotional Tagging

Our ability to arrive at a decision, or make a choice, despite all the empirical or
analytical data we might assemble, still requires a human emotion in order to
activate it. The problem is, our emotional tag repertoire can either help or hinder our
decision making depending upon internal processes known as Inappropriate
Attachments and Inappropriate Self-interests.

The Importance of Context …

In our own study of decision making, which has taken us from the works of Daniel
Kahneman and Herbert Simon to the more recent musings of people like Tim Brown and
Roger Martin, we have come across what we believe is the next great leadership insight.
It centres on the value and importance of a new leadership attribute called “Contextual
Intelligence”, or CQ for short.

It occurs to us that if “experience repertoire” is critical to improving the quality of the
decisions a person makes, then it is essentially based on having a rich, robust and diverse
past, rather than a shallow one.

However, since the past may not be a good predictor of the future, there must be a
companion competency that is forward oriented, and can help us deal with the
complexity of the unknown, and that is Contextual Intelligence.

Together, they create the powerful mix that creates decision making excellence.

Contextual Intelligence is the ability to:

      • Accurately assess the changing environment
      • Read and interpret the important shifts
      • Make sense out of things
      • Distil and simplify

The Bias Trap …

There is nothing more crippling to the decision making process than bias. Even with the
richest, most varied experience repertoire, and the best honed contextual intelligence,
there is still a huge risk of being sideswiped or derailed by bias.

In our work with organizations, we see bias all the time. It is always fascinating to see
how those who live within an organization, and are products of a certain culture and
way of thinking, simply do not see what can be so clear to the objective outsider.

As it turns out, there has been a wealth of study into the identification of the many
types of bias that infect organizational decision making and lead to errors in judgment.
The long list of biases fall into four broad categories.

Misleading Experiences

    • Conclusions we draw from the past that are incorrect

Misleading Prejudgments

      • Mental Mindsets that are flawed or irrelevant

Inappropriate Self-interests

        • Conclusions we draw that are too narrowly defined

Inappropriate Attachments

          • Beliefs which anchor our thinking in faulty ways

Inappropriate Responses …

Let’s just take a moment and summarize what we have been trying to explain so far, and
see whether or not the logic is sound, the argument valid and the conclusion reasonable.

Premise: Better decisions are the objective of any good leader.

Assumption: Value is created by the sum total of the decisions we make.

Conclusion: Decision making is a process and it can be improved continually.

If this is a reasonable and rational conclusion, then we should be interested in making it
happen, and the way to do that would seem to lie in improving the experience repertoire
and contextual intelligence of our leaders.

So, if bias is the “up front” risk in the decision making process that can shape or distort
our judgment, then we also need to understand it has to be the ”back end” risk of
inappropriate responses that equally jeopardize our success.

This list of these responses can also be bucketed into four broad categories:

    • Denial
    • Overcompensation
    • Ignorance
    • Blame

Thinking by Design …

A rich and wonderful body of learning has come forward in the past 10 years or so, led
by the design profession and matched by our own rising respect for how things look and
feel. Our aesthetic tastes have been developed to a point where we all now increasingly
appreciate and value the importance of design, whether it is in the cars we drive, the
appliances we use, the experiences we crave or the products that we allow to seduce us.

In this regard, we are huge fans of Tim Brown and his work at IDEO, the industrial design
firm from Palo Alto, California that has captured so much acclaim for its work and its
philosophy on how you make better decisions in order to innovate.

Their premise is elegant in its simplicity. They believe, as leaders and designers of new
organizational structures and new solutions for new markets and customer needs, we
need new choices. They also believe we have been limiting ourselves to too small a
tapestry, and that we have, primarily done so as a coping mechanism in response to
rising uncertainty.

They suggest the menu of choices lies across a spectrum as follows:

Design Thinking …

The essential premise of our argument is that better decisions come from better
thinking, and that we have not appropriately adjusted our thinking to the changing
context. If we want better choices, and we want to create new and different
possibilities, then we have to address the fact the more traditional linear thinking
approach is just not very well suited to the complex, ad hoc world in which we now live.

In fact, it is inappropriate, and will only lead to flawed or sub-optimal decisions. The
answer is simple, but certainly not convenient or comfortable. We need to change the
way we think, and then change the way we decide.

If the outcome is new answers to new questions, in order to create new solutions to new
problems, then we need to understand what actually leads to the generation of new
ideas, and that is something called Design Thinking. At the core of the Design Thinking
premise is the belief that new ideas, Ideation, need to be fuelled by something, and that
something is Inspiration. Simply put, we need to place a torch under that part of the
human spirit which sparks Imagination.

We need to improve our decisions, and their originality, through better:

    • Insight – not just better information
    • Observation – not just better analysis
    • Empathy – not just more rationality

Steps to Take :: Actions to Consider …

In this paper, we have tried to be as clear as we can be about the pressing need to
improve our individual and collective decision making competence. We believe it will
become the differentiating factor in the separation of great from good. In our view, the
science of decision making is about to take centre stage, and the early adopters will
have first mover advantage in the New Economy in the same way they did in the
Agricultural Era and the Industrial Era.

We sit on the cusp of a new and exciting time where the stakes have never been higher,
the changes have never been more significant and the risks and opportunities have never
been greater.

To those who see it and feel it, it offers energy and excitement.

To those who don’t, it offers a one-way ticket down a very limited path to a dead end.

Here are some thoughts on how that fate can be avoided.

Decide to Improve:

Like so many things in life, the first step is to make a commitment to yourself. In
this case, the commitment has to be to acknowledge the likely existence of
breakdowns in the organizational decision making process and make a decision to
do something about it, in full knowledge it will not be any easy fix.

Identify the Gaps:

It is highly likely the breakdowns will be occurring at more than one point along the
value chain. It could be in any one of the most common trigger points. You need to
have the courage and tenacity to assess those gaps through a rigorous, but not
burdensome, process of fact based analysis.

Evaluate Cost & Consequence:

In our experience, once you have identified the gaps and breakdowns in the process,
you will then be able to put a hard number on the costs involved and project the
benefits of going forward. It is equally important to identify the non-financial
benefits related to improved knowledge sharing and cross functional collaboration.

Reprogram the Organizational DNA:

Since all decisions are fuelled by human emotion, you cannot avoid the necessary
work that will have to go into changing the mindsets, attitudes and beliefs of those
in the organization – at all levels. Changing the construct without changing the
DNA will not produce the maximum benefit.

Stretch the Frontal Lobe:

If the objective is to generate new answers, you will need to establish a new set of
references for how the organization thinks. If the desire is to move to true Design
Thinking, then you will have to role model and stimulate originality of thought and
promote lateral, rather than linear, thinking.

Formalize the Review Process:

The decisions you make going forward must be better than the ones you have made
in the past. The only way to ensure they are having the desired impact is to
introduce a Decision Review Process that looks not only at the outcome of the
decisions made, but examines the full value chain discovering ways to learn from
experience and continuously improve.

The Beacon Group …

We are a Canadian based professional services consulting firm supporting a diverse
portfolio of clients throughout North America and around the world. We work with
senior leadership teams in all sectors and industries, in the development of their
organizational strategies and in leveraging their human capital.

We advise senior leaders on how to transform their culture, improve performance and
build effective leadership capability at all levels. We help:

Identify critical gaps – which impact organizational and leadership effectiveness

Facilitate crucial conversations – in a direct, “straight talk” manner

Align resources – to achieve sustainable high performance

Develop talent – in order to navigate the future

Our practice is divided into four main areas of expertise.

Our Point of View …

Times have changed.

Organizations are facing difficult and complex challenges.

Leaders are being asked to make different choices to confront crucial problems.

In times of turbulence and uncertainty, The Beacon Group helps organizations navigate
the future. We help senior leaders redefine their strategic ambition and identify the
stubborn barriers that are getting in the way. We help them reimagine a new path and
then support them as they take practical steps to enhance performance, improve
effectiveness and achieve new levels of sustained excellence.

Our Promises …

We Believe – mindsets, attitudes, behaviour and character matter and that clear,
consistent and authentic relationships are at the very heart of any “Trusted
Partnership” with a client.

We Commit – to being a progressive, passionate, customer driven partner. We are
thought leaders who are not only responsive, but agile as well.

We Support – progressive leaders and ambitious organizations in transforming business
performance, organizational culture and leadership potential.

We Partner – with senior leaders to help create robust strategies, solid frameworks and pragmatic solutions to their most difficult challenges and intriguing opportunities.

We Achieve – results that make a difference and allow our clients to lead with
confidence, and execute with clarity and accountability.

Organizational Transformation I Leadership Development