Change Implementation Techniques for Forming Transitional Team, Creating Alignment, Maximizing Connectedness and Creativity

Technique 5.6 Understanding Types of Decision-making

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Introduction

Decision-making is one of the most important, toughest and riskiest tasks for senior management. Sometimes bad decision-making lies not in the process but in the decision maker's mind

Unconscious, flawed routines include sensory misperceptions, biases, irrational anomalies in our thinking, etc are used to cope with the complexity inherent in decision-making

There is a need to understand the ingrained flaws in thinking so that we are able to compensate for them

The traps in decision-making include

i. anchoring trap

ii. status quo trap

iii. sunken cost trap

iv. evidence trap

v. framing trap

vi. forecasting traps (overconfidence, prudence and recallability traps)

Questions

To identify these traps in your decision-making, answer by circling "yes" or "no" to the following questions. This will help determine in which area(s) your decision-making is flawed and needs improving; furthermore, it will show in which areas you are strong

Q1

Instead of sticking with your first perspective, do you use alternative starting points?

Yes No

Q2

Do you think about a problem before consulting others?

Yes No

Q3

Do you seek information from a variety of people before making a decision?

Yes No

Q4

Do you tell others that you are consulting as little as possible about your own ideas, estimates and tentative decisions?

Yes No

Q5

When negotiating, do you think through your position and the other party's before beginning negotiations?

Yes No

Q6

Do you always remind yourself of your objectives and examine how they are best being served by the status quo?

Yes No

Q7

Do you identify other options and use them as counterbalances to the status quo?

Yes No

Q8

Do you ask yourself if you would choose an alternative if it was the status quo?

Yes No

Q9

Do you avoid exaggerating the effort and cost involved in switching from the status quo?

Yes No

Q10

Do you evaluate alternatives in terms of the future as well as the present?

Yes No

Q11

Do you force yourself to choose amongst the options rather than default to the status quo when you are having a hard time picking the best alternative?

Yes No

Q12

Do you seek out the views of people who are not involved in the early decisions and are unlikely to be committed to them?

Yes No

Q13

Do you examine the reasons for mistakes in decision-making and realise that mistakes are not necessarily the fault of the original decision maker?

Yes No

Q14

Do you check for biases in the decision-making of your staff?

Yes No

Q15

Do you check to see whether you are examining all the evidence with consistent rigour?

Yes No

Q16

Do you get someone you respect to play "devil's advocate"?

Yes No

Q17

Do you build the counterargument yourself and identify the strong reasons to do something else?

Yes No

Q18

Do you gather information to challenge your point of view?

Yes No

Q19

Do you have advisers who challenge your point of view?

Yes No

Q20

Do you challenge the way the problem is initially framed?

Yes No

Q21

Do you pose problems in a neutral way that combines gains and losses and embraces different reference points?

Yes No

Q22

In the decision-making process, do you ask yourself how your thinking might change if the "framing of the problem changed", ie if the problem is looked at differently?

Yes No

Q23

When others recommend decisions, do you examine and challenge their frames?

Yes No

Q24

Do you factor uncertainty into your decision-making?

Yes No

Q25

Do you make decisions based on your forecasts of the situation, rather than the worst-case analysis, ie "to be on the safe side"?

Yes No

Q26

Do you ensure that your decision-making is not biased to memories of past events?

Yes No

Put your answers (place a tick) in the boxes in the table below

organisational development change management

Notes

i. Q refers to question number

ii. T refers to the total of "yes" and "no"

iii. Refers to the 6 different decision-making traps

The greater the total number of "no" answers, the more likely it is that your decision-making has flaws. The different columns identify where the most common flaws (traps) are located, namely the anchoring trap, status quo trap, sunk cost trap, evidence trap, framing trap and forecasting traps.

You should try to maximise the number of "yes" answers

Comments about each trap

Anchoring trap involves giving disproportionate weight to the first information received, ie first or initial impressions, estimates or data anchor subsequent thoughts and judgments. One of the most common types of anchors is a past event or trend, eg marketers attempting to project sales based on past performance. In other words, too much weight is given to past events and not enough to other factors

Status quo trap involves decision-makers displaying a strong bias towards alternatives that perpetuate the status quo. For example, the first electronic newspapers appearing on the Internet looked very much like their print precursors.

"...The source of the status quo trap lies in the desire to protect egos from damage. Breaking from the status quo means taking action, and when we take action we take responsibility, thus opening ourselves to criticism and to regret......Many experiments have shown the magnetic attraction of the status quo. Other experiments have shown that the more choices you are given, the more pull the status quo has..."

John Hammond et al, 2006

Sunken cost trap involves a bias towards choices that justify past choices, even when those past choices are no longer valid. In economic terms this refers to old investments of time or money that are now irrecoverable and these sunken costs should be irrelevant to the present decision. On the other hand, they prey on the mind and can lead to inappropriate decisions. People prefer not to admit to making a mistake. Sometimes an organisation's culture reinforces the sunken cost trap, especially if penalties for making bad decisions are severe. Again people should realise that in an uncertain world where unforeseeable events happen, good decisions can sometimes lead to bad outcomes. Furthermore, people need to be encouraged to "cut their losses".

Evidence trap involves obtaining confirming evidence bias. This bias leads to seeking information that supports our existing instinct while avoiding information that contradicts it. They are 2 psychological forces at work here

"...the first is our tendency to subconsciously decide what we want to do before we figure out why we want to do it. The second is our inclination to become more engaged by things we like than by things we dislike..."

John Hammond et al, 2006

Framing trap involves choice being influenced by the way a problem is framed or explained.

"...a frame can establish the status quo or introduce an anchor. It can highlight sunken costs or lead you towards confirming evidence..."

John Hammond et al, 2006

Forecasting trap involves making estimates or forecasts while assessing the probability of uncertain events. There are 3 subsets to this trap: overconfidence, prudence and recallability traps:

- most of us, when making forecasts, become overconfident about the accuracy; in making predictions, most people tend to set too narrow a range of possibilities.

- the prudence trap involves adjusting our estimates or forecast to the "worst-case" scenario or a "just to be on the safe side" approach. Worst-case analysis can add enormous costs with no practical benefit.

- the recallability trap relies upon making predictions about future events based on our memory of past events, especially dramatic incidents that have left a strong impression

(source: John Hammond et al)

 

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