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How we make decisions – and how we can improve

 In Business decisions, Decision-making, Realizer Blog, Science

How we make decisions, and how we can improve

Critical decisions

A fire fighter has just arrived at the scene of a house fire. The blaze is coming out of the top floor windows. How does he decide what to do?

Classic decision-making advice would be to generate options, compare them and pick the best one.

It turns out that in 99% of cases, s/he does not do this. In fact fire fighters don’t relate to the idea that they make decisions at all.

Instead fire fighters use a specific approach which Gary Klein has studied and labelled natural decision-making.

Natural decision-making. (Also called recognition-primed decision-making).

  1. Do I recognise the problem? Is it similar to a fire I’ve been at before?
  2. If so, what is the first idea that comes to my head to solve this problem / deal with this fire?
  3. Now I play out that idea, visualise it, imagine doing it. Does it work in my visualisation?
  4. If it works, I do it. If not, I generate a second option and run that through step 3 and 4.

This model is quite different to the widely taught “rational model of decision-making”  which you can summarize in four steps which spell out the acronym WISE…

Rational decisions using the WISE model

  1. What’s the problem
  2. Identify potential solutions
  3. Select the best one
  4. Execute and review

Natural vs Rational decision-making

The reason that fire fighters use the natural model 99% of the time is simple. It’s generally quicker and more efficient. And crucially, it works to deliver good outcomes most of the time IF you are experienced in facing the problem in front of you. A lot of the time, when you’re experienced, you can recognise a problem and your first solution will be a good one. No need to waste time generating and comparing multiple options.

One term we use to describe this approach to making decisions is “satisficing” – picking the first option you can think of that’s “good enough.”

The rational model is quite different, it’s designed not to satisfice, but to “maximize”: to find the single best possible solution. It does this by generating more options and then finding a way to compare them side by side at the same time and then picking the best one.

In the natural model we look at ideas one at a time to see if they will work, we don’t compare options side by side.

The least mental energy

What’s really important to understand about humans is that we don’t really like making decisions. We find it mentally taxing. So we are drawn to tools which allow us to take shortcuts and to come to a conclusion quickly. The natural model is in effect a way to shortcut the decision by finding the first solution that fits. We avoid the taxing part of weighing pros and cons of multiple options. It’s not that we’re lazy, it’s that it we have found a way of calling on our experience to come up with a good enough solution most of the time. It is in fact very clever.

It’s not just fire fighters

Additional proof came to me from the field of software development, where I was speaking at a conference on Agile development and discovered research showing that software developers use natural decision-making at least 75% of the time too. Rarely do they compare options.

And my work with many leaders and managers reveals, just like fire fighters, they rarely stop to make a “rational” decision of weighing up options, most of the time they see themselves as a problem-solver. What’s the problem? What does my experience tell me I should do? Will that work? If not, what’s my next best solution?

But here’s the problem

So far, so good. Keep doing what you’re doing and don’t beat yourself up about not always stopping to make a “rational” decision.

However…the natural approach doesn’t work very well when you aren’t experienced in an area, or you’re encountering a new or complex situation, or if you don’t know if the way you solved a similar problem last time was effective or not. And that’s the case with an increasing number of business decisions.

How decision-making evolves over your career

 What we see therefore, is that when you’re experienced in a role, in a company, in an industry your experience lends itself to you making quick and effective natural decisions.

But when you’re new in a role, you don’t have the experience to call on and so you revert to rational decision-making which feels harder and can take a bit longer.

How to improve your decision-making

With fire fighters and other emergency responders who use natural decision-making, the most effective way of improving their decision-making skills is to put them through simulations so that if they see a similar situation in the real world, they can call on their experience.

Likewise in business we see the increasing importance of leadership and management simulations where senior staff head off for a week (or take an online course) which puts them in the drivers seat with lots of big decisions, and shows them the consequences of their actions and decisions. It’s an excellent approach.

In addition, for big decisions in novel situations, we can’t create a simulation for every possible situation so we need to train people how to use the WISE or rational decision-making process accurately.

Challenges and solutions with the rational model

If you are facing a decision where your experience isn’t guiding you accurately, or your initial analysis doesn’t reveal a good option, or if you’re working in a team to make a decision – then you need to master the WISE approach. In particular, you need to be able to ask questions like these:

Whenever you’re making a hard, high stakes decision I advise you to take the rational approach and not just use the natural model.

The steps and questions above are also designed to speed up the rational model by simplifying the problem, reducing the number of criteria, setting a deadline to decide. In today’s business world, we can’t afford to circle around the same decisions repeatedly, we need to know that we’ve made the best decision we can – and move on confidently.

Knowing which approach to take

 Following is a summary to guide you between the two approaches. If you can stop for a second before a major decision and pick one of these approaches, you’ll be more in control of your decisions and be able to balance speed and satisficing  (natural) with accuracy and maximizing (rational).


A case study: High Velocity Decision-Making at Amazon
 

In the twenty years since Amazon was founded, Jeff Bezos has not only become the richest man on earth with a fortune of $131bn (as at May, 2018), he has also become famous for writing an annual letter to Amazon shareholders. In its very first iteration, he laid out his philosophy on decision-making. He made it clear to investors that he would make decisions with a very long term view (aiming for market leadership) and would not be accountable to Wall Street’s typical focus on quarterly earnings updates. As a result, he has managed to create one of the world’s most valuable companies whilst still, as of 2018, barely making a profit.

His decision-making strategy appears to have paid off handsomely.

Bezos has more to say about decision-making. In his 2016 letter to shareholders he outlined his principles for what Amazon calls High Velocity Decision-Making. This is Amazon’s attempt to get the best of rational decision-making, but with as much speed as possible.

In summary

If you feel like sometimes you rush to the first solution, then you need to train yourself how to quickly generate a second option and compare it.

One of the first steps to making great decisions is to understand how you personally make decisions at the moment. How do you mix it up between comparing options (rational) vs finding the first solution that fits (natural)?

If you feel like to take too long to endlessly compare options and go round in circles, then you could work on simplifying your problems and reducing the number of criteria to make a decision, and even make sure you write it all down so you can see the full picture all at once.

You could also try and fast track gaining experience in your role by doing a simulation course or talking to people who have more experience about the key decisions they’ve had to make.

If you work for an organisation which moves slowly, try to identify and overcome the barriers to speed by taking inspiration from Amazon, a half-a-trillion dollar company which still manages to move quickly.

 

Written by Rob Pyne, Director, Realizer

 

Realizer runs decision-making training courses and change programmes across Australia