Every day, senior leaders make countless decisions. Some of these decisions will have an influence on the survival of their careers and companies. Effective decision-making is an executive’s most important responsibility and one that can easily go wrong.
Let’s review the three biases that derail effective executive decision-making and the seven steps of an effective decision-making strategy.
The Three Biases That Lead to Poor Decision-making
Confirmation bias occurs when we interpret events so that they support prior conclusions. Senior leaders can make fatal decisions that are steeped in their own desires or beliefs; in other words, they are motivated by wishful thinking. This error leads them to stop gathering information when the evidence they’ve collected so far confirms the views or prejudices they would like to be true. Once leaders form this view, they will only accept data that confirms it, and they will ignore or reject any information that casts doubt on it.
In many cases, anchoring bias, or overreliance on a single piece of information, is closely related to confirmation bias. Leaders will use one piece of information to justify a decision and will reject any information to the contrary. Making decisions based on a single piece of information can result in lost revenue, productivity and even employment. Sometimes, the person who makes the decision retains his or her position, while whole departments are laid off.
It is important for senior leaders to review all sources of information to make an informed decision. To save time and avoid confirmation and anchoring biases, they can assign work to small teams or work groups to gather the information and provide an executive summary of the results.
Bias Blind Spot
The bias blind spot occurs when we are not aware of our own biases. Senior managers often do not see that they have a bias, but every decision they make will revolve around it. The bias could result in a lack of input from a certain team member. For leaders to makes good decisions, they need to be able to consider information from all sources.
This bias involves overestimating the degree to which other people agree with our decisions. Leaders with this bias tend to assume that others think, feel, believe and behave as they do. They assume that their way of thinking or behaving is typical and, therefore, that their customers, vendors, teams and colleagues will respond in a similar manner.
Seven Steps to Effective Decision-making
The following seven steps can help executives avoid biases and make effective decisions. Decision-making is the process of making choices by identifying a need, gathering information and assessing alternative resolutions. Using a strategic decision-making process will help leaders make more thoughtful and thorough decisions by organizing information and alternatives. The following approach increases the odds that they will make the right decision for their organization.
1. What Is the Need?
Clearly identify the need of your department or organization. This step is critical, as correctly pinpointing the need will drive the rest of the process.
2. Gather Relevant Information
Collect relevant information before making a decision. Find out what information you need, the best sources of information and how to collect it. This process may involve both internal and external research. Some of the information will be available in your organization’s policies, procedures and internal databases. Other information may come from online sources, books, surveys, polls or consultants.
3. What Are Your Alternatives?
You or your team will likely find several possible paths to take. You can also use your resourcefulness and additional data to identify new choices. List all possible and desirable alternatives as well as the associated risks.
4. Weigh the Evidence
Review the data you’ve gathered to determine the impact each alternative will have on your organization. Evaluate whether each choice would meet the need you identified in step 1. As you go through this process, you’ll begin to favor certain outcomes that appear to have a higher potential for reaching your goal. Order the choices based on the likelihood of success.
5. Choose a Path
Once you have evaluated all the evidence, you are ready to select the solution that seems to be the best one for your organization. You may even choose a combination of options that will provide you with a more robust outcome. Your choice may be the same or close to the option you placed at the top of your list when you were weighing the evidence.
6. Develop an Action Plan
Now, you are ready to begin implementing the option you chose. At this stage, form a project team — a cross-organizational team or a team of members of your department. Decide who will serve in each role, such as the project manager and the subject matter expert.
7. Review Your Decision and Its Risks
Finally, consider the results of the project and evaluate whether it resolved the need of your organization. If not, what is the risk to the organization? How much time and expense will it take to repeat certain steps of the process to make a new decision? Conduct this review throughout the duration of the project to keep it from going off the rails and minimize risk.
Eliminating biases and creating a strategic decision-making plan will help senior leaders make decisions and will drive productivity and growth within their organization.