Some Decision-Making Principles

Effective decision-making is one of those skills that separates good leaders from the more ordinary leaders. In this post, I summarise a few lessons I learned from good leaders I have had the privilege to work for in the past. These decision-making principles have served me well in the last couple of years as I was called to make more and more decisions in an ever wider range of issues beyond my immediate area of expertise. I hope they will benefit you too.

By far, the most common decision-making mistake I see leaders make is analysis paralysis. So the first lesson of effective decision-making is to recognise that the goal is not to avoid mistakes at all cost, but to make the best decision given the circumstances. If a decision turns out to be a bad one — and bad decisions have a habit of becoming self-evident quickly — one can (almost) always make another decision to fix it. Being paralysed is usually the worst possible thing a leader can do in the face of a situation requiring a decision.

In complex situations with conflicting forces, it is sometimes hard for a group of decision-makers to get to an agreed decision directly. In such a case, the next best thing is to agree on a process for getting to a decision, which is an easier thing to get agreement on, and then to stick to that process and respect the outcome, whatever it is.  That last part on “caucus view” is important: leaders do not undermine each other once a decision is made.

An important part of the decision-making process is a thorough exploration of all the decision options in the time available to make a decision. There are two principles worth remembering in that space. The first is to watch out for the False Dilemma, aka the either-or fallacy. An example of a false dilemma is the statement “You are either with us or against us.” It’s important to recognise that the options as presented to a decision-maker are not always mutually exclusive, and there are almost always other choices that are more palatable. Which leads us to the next principle: it’s hard to consistently think outside the box for options and solutions, but one can systematically enlarge the box in which one thinks through reading and conversing widely.

This next recommendation is probably a debatable one, but I am happy to stand by its effectiveness. A highly effective decision-making group is a team of one, consisting of a benevolent and smart dictator that consults widely. Without such a benevolent dictator, the decision-making group should be small in size, ideally 3, and certainly less than 7. Beyond 7, the group loses coherences as a group and you start having to deal with coalitions and subgroups that may have incentives that are different from that of the whole group. Regardless of the size of the decision-making group, consultation should happen as widely as possible, of course. (There are clear exceptions to the above recommendation, namely the decision-making problems where the Wisdom of the Crowd phenomenon is shown to perform better than individual decision-makers.)

A final principle to remember on decision-making is that one should never confuse luck with good decision-making processes in probabilistic situations (which is essentially all real-life business situations). A bad process may lead to a good outcome based on sheer good luck. Similarly, a good process doesn’t guarantee a good outcome every time. But, in expectation, a good process should lead to more good outcomes over time, which is yet another reason not to succumb to analysis paralysis when it comes to decision-making.

 

 


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