Decision making for business: How to make the right decisions

For the last three years ABSTRACT, experts in improving businesses through people, has undertaken research on decision making. They have looked in depth at the human brain and studied people at various levels of seniority in the Military, Financial Services, BioChem, Pharma, Sport, Media, Clinical Manufacturers, and Politics and more. Here’s what they found…

Every person we spoke with when asked “how do you form judgement and make decisions?” responded – “gut-feel”, “intuition” and/or “experience”.

We used the Hogan Principle to break this down further:

What is character?

Whilst avoiding the nature v nurture debate, research confirms that a significant part of our character is created early on by our parents, our upbringing, our family, our community, and our education. From the age of seven this is cemented by experiences confirming our beliefs.

Apply this to business

If character helps you to make decisions and decisions drive business, then you need a shared ‘organisational character’ to enable your colleagues across the business to take appropriate decisions to drive progress.

The company’s vision, purpose and values should give rise to an organisational character that gives colleagues a clear set of criteria with which to ‘instinctively’ know the right thing to do.

Identifying the problem to solve

Albert Einstein was once asked if he had only one hour to solve a problem what would he do?” He said he would spend 55 minutes trying to understand the question, then he wouldn’t need any more than 5 minutes to find the solution.

This powerful concept, of really getting under the skin of the question before attempting to find the solution, requires great discipline and is a difficult habit to embed.

Our research has shown that the key is to distil the key question into the following structure: A closed question beginning with ‘do’, with personal accountability (I or we), complete with specific ‘where and/or when’ details.

e.g. Do we want to open an office in Milton Keynes this year?

Suggesting it should be a closed question may feel counter intuitive because open questions create interesting discussion – And that’s the point! We don’t want interesting discussion and load of options – we want decision.

The closed question will require a ‘yes’ or ‘no’ answer, or indeed a third option – the next best alternative.

Forming sound judgement through the concept of consequence

We undertook this research because we wanted to make the complex simple and we endeavoured to invent a practical model to help individuals and teams make the best decisions.

We came up with The Spectrum of Consequence model which uses two factors – risk and control. Combined, they create four categories within which a situation can be assessed.

Spectrum of Consequence Matrix

How does this help with judgment in business?

The Spectrum of Consequence model’s axis are sliding scales and invaluable in determining the equilibrium required between the amount of risk and therefore the amount of control required. Businesses can use it to empower employees to make appropriate judgements and decisions where there is lower risk. It prevents micro-management and creates happier, more effective teams.

The quadrants Regulation and Restriction, on the right, both have high control and therefore the answer to the closed question is not a trilogy of answers but simply binary – ‘yes’ or ‘no’.

For example, it’s 5.55pm and you’ve parked your car in an area that has its parking restrictions lifted at 6pm. A traffic warden asks you to move your car otherwise you will get a ticket. You stress that it’s 5.55pm and surely the warden can show some discretion. No, these are the rules! The question – do I park my car here at 5.55pm and risk getting a ticket? No. It is binary question. In light of no discretion by the warden, you drive off avoiding a ticket but feeling very frustrated. High control/Low risk = frustration!

The quadrants Danger and Choice, on the left, have low control and therefore we can apply the ‘trilogy of answers’ theory.

For example, on January 15, 2009, Captain Chesley Sullenberger (Sully) and co-pilot Jeff Skiles took off from LaGuardia airport in an Airbus A320 with a full quota of passengers. As you would expect, even with thousands of flying hours between them they were operating in the Regulation (confidence) quadrant. Seconds after take-off they suffered a catastrophic bird strike which wiped out power in both engines. They moved uncontrollably to Danger (uncertainty). Sully had a conundrum on his hands…

The question? Do I try to land this aircraft with no power at LaGuardia airport?

1. Yes – they would hit a skyscraper killing everybody on board and innocent civilians.
2. No – they would hit a skyscraper killing everybody on board and innocent civilians.
3. Next best alternative – I could try to land it on the Hudson River and we might survive.

Thankfully, he chose the ‘next best alternative’ and successfully landed the aircraft on the river with everyone on board surviving with only a handful suffering minor injuries.

We appreciate that sound judgement and decision making in business is a deep and complex topic. Hopefully we have given you some food for thought through our research, thinking and solutions.

This article is an extract from the ABSTRACT Critical Thinking Series. You can read more in-depth article on this topic at the ABSTRACT website. If you would like to know more or discuss, get in touch with Nick Goddard on [email protected]