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Decision Making

The Management Pocketbooks Pocket Correspondence Course

Pocketblog has gone back to basics This is part of an extended course in management.


In understanding decision-making, there are three key things to focus on:

  1. Using a structured process
  2. The role of intuition, gut instinct and hunches
  3. The effects of bias and automatic thinking

Let’s look at each of these in turn.

Structured Decision Making Process

… like the example below.

Structured Decision Process

One of the most important choices in your decision process will be whether to go for an adversarial process of setting the options against one another – perhaps even having advocates for each, competing with one another to win the decision – or to go for a process of inquiry, learning as much as you can before assessing the options.

Intuition

Although Malcolm Gladwell received a lot of attention for his book Blink, his work leans heavily on the research by Gary Klein and his books, The Power of Intuition and the more technical Sources of Power are first rate.  Klein shows how, in domains that are very complex and in which you have extensive experience, your intuition can quickly get you to the right understanding, well ahead of your ability to explain why or how you reached the conclusion you did.  But, if you don’t have sufficient experience, then your hunches are likely to be wrong, due to the existence of…

Bias and Automatic Thinking

Two psychologists, Daniel Kahnemann and Amos Tversky, were responsible for overthrowing the crude assumption that economics is based on rational decisions.  In fact, they showed that many decisions are a result of automatic thinking and biases.  The automatic thinking is a short cut that works well in the domains in which humans evolved, but leads frequently to wrong answers in a modern world context.  An example is the ‘horns and halo effect’ and another is our bias towards noticing examples that confirm what we believe to be true, whilst being blind to counter examples.  Daniel Kahnemann wrote the wonderful ‘Thinking, Fast and Slow’ to summarise a life’s research and it is, without a doubt, one of the most important and stimulating reads of the last few years.

Further Reading

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Holacracy: Circles within Circles

Holacracy

HolacracyFor hundreds of years, there has been little to challenge traditional hierarchies for their ability to organise at scale. Holacracy is doing just that.

It’s a form of Adhocracy, which we covered in an earlier article. But, whilst we are way past ‘peak adhocracy’, it seems that holacracy is is thriving.

Holacracy is a modern attempt to reform traditional hierarchies. It keeps the aspect of senior level overviews and subordinate focus. But it gives a far greater autonomy to individuals, and a more substantial decision authority to small teams at the focus of operations and change.

Continue reading Holacracy: Circles within Circles

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Victor Vroom: Motivation and Decision-making

Why do people make the choices they do at work, and how can managers and leaders make effective decisions? These are two essential questions for managers to understand. They were both tackled with characteristic clear-thinking and rigour by one man.

Victor Vroom

Short Biography

Victor Vroom was born in 1932 and grew up in the suburbs of Montreal. Initially, he was a bright child with little academic interest – unlike his two older brothers. Instead, his passion was big-band jazz music and, as a teenager, he dedicated up to 10 hours a day to practising Alto Sax and Clarinet.

Leaving school, but finding the move to the US as a professional musician was tricky, Vroom enrolled in college and learned, through psychometric testing, that the two areas of interest that would best suit him were music (no surprise) and psychology. Unfortunately, whilst he now enjoyed learning, his college did not teach psychology.

At the end of the year, he was able to transfer, with a full year’s credit, to McGill University, where he earned a BSc in 1953 and a Masters in Psychological Science (MPs Sc) in 1955. He then went to the US to study for his PhD at the University of Michigan. It was awarded to him in 1958.

His first research post was at the University of Michigan, from where he moved to the University of Pennsylvania in 1960 and then, in 1963, to Carnegie Mellon University. He remained there until receiving a second offer from Yale University – this time to act as Chairman of the Department of Administrative Sciences, and to set up a graduate school of organisation and management.

He has remained there for the rest of his career, as John G Searle Professor and, currently, as BearingPoint Professor Emeritus of Management & Professor of Psychology.

Vroom’s first book was Work and Motivation (1964) which introduced the first of his major contributions; his ‘Expectancy Theory’ of motivation. He also collaborated with Edward Deci to produce a review of workplace motivation, Management and Motivation, in 1970. They produced a revised edition in 1992.

His second major contribution was the ‘Vroom-Yetton model of leadership decision making’. Vroom and Philip Yetton published Leadership and Decision-Making in 1973. He later revised the model with Arthur Jago, and together, they published The New Leadership: Managing Participation in Organizations in 1988.

It is also worth mentioning that Vroom had a bruising experience while pursued through the courts by an organisation he had earlier collaborated with. They won their case for copyright infringement so I shall say no more. The judgement is available online. Vroom’s account of this, at the end of a long autobiographical essay, is an interesting read. It was written as part of his presidency of the Society for Industrial and Organizational Psychology in 1980-81.

Vroom’s Expectancy Theory of Motivation

Pocketblog has covered Vroom’s expectancy theory in an earlier blog, and it is also described in detail in The Management Models Pocketbook. It is an excellent model that deserves to be far better known than it is. Possibly the reason is because Vroom chose to express his theory as an equation: bad move! Most people are scared of equations. That’s why we at Management Pocketbooks prefer to use the metaphor of a chain. Motivation breaks down if any of the links is compromised. Take a look at our short and easy to follow article.

The Vroom-Yetton-Jago Model of Leadership Decision-making

This one is  a bit of a handful. Vroom has expressed some surprise that it became a well-adopted tool and, more recently, noted that societies and therefore management styles have changed, rendering it less relevant now than it was in its time. That said, it is instructive to understand the basics.

Decision-making is a leadership role, and (what I shall call) the V-Y-J model is a situational leadership model for what style of decision-making a leader should select.

It sets out the different degrees to which a manager or leader can involve their team in decision-making, and also the situational characteristics that would lead to a choice of each style.

Five levels of Group Involvement in Decision-making

Level 1: Authoritative A1
The leader makes their decision alone.

Level 2: Authoritative A2
The leader invites information and then makes their decision alone.

Level 3: Consultative C1
The leader invites group members to offer opinions and suggestions, and then makes their decision alone.

Level 4: Consultative C2
The leader brings the group together to hear their discussion and suggestions, and then makes their decision alone.

Level 5: Group Consensus
The leader brings the group together to discuss the issue, and then facilitates a group decision.

Choosing a Decision-Making Approach

The V-Y-J model sets out a number of considerations and research indicates that, when a decision approach is chosen that follows these considerations, leaders self-report greater levels of success than when the model is not followed. The considerations are:

  1. How important is the quality of the decision?
  2. How much information and expertise does the leader have?
  3. How well structured is the problem or question?
  4. How important is group-member acceptance of the decision?
  5. How likely is group-member acceptance of the decision?
  6. How much do group members share the organisation’s goals (against pursuing their own agendas)?
  7. How likely is the group to be able to reach a consensus?

A Personal Reflection

I have found both of Vroom’s principal models enormously helpful, both as a project leader and as a management trainer. I find it somewhat sad that, in Vroom’s own words, ‘the wrenching changes at Yale and the … lawsuit have taken their emotional and intellectual toll.’ Two major events created a huge mental and emotional distraction for Vroom in the late 1980s. At a time when he should still have been at the peak of his intellectual powers, he was diverted from his research. I think this is sad and wonder what insights we may have lost as a result.


 

Pocketbooks you might Like

The Motivation Pocketbook – has a short introduction to Vroom’s Expectancy Theory, which it refers to as ‘Valence Theory. It also has a wealth of other ideas about motivation.

The Management Models Pocketbook – has a thorough discussion of Expectancy Theory, and also Motivational Needs Theory, alongside eight other management models.

 

 

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Team Decision Making

The Management Pocketbooks Pocket Correspondence Course

This is part of an extended management course. You can dip into it, or follow the course from the start. If you do that, you may want a course notebook, for the exercises and any notes you want to make.


Managers often need to reach decisions as a part of a team; either as:

  • a member of a management team
  • a facilitator of their own team

In both cases, it will serve you well to understand some of the do’s and don’ts of team decision-making*.

Group Think

In the 1970s, the social psychologist Irving Janis examined how groups make decisions. He found that the group’s dynamic often inhibits exploration of alternatives. People find disagreement uncomfortable, so the group seeks consensus before it is properly ready. As the group approaches consensus, dissenting voices are rejected (and, indeed, often self-censored). Janis said:

‘Concurrence-seeking becomes so dominant in a cohesive group that it
tends to over-ride realistic appraisal of alternative courses of action.’

When we fall prey to Group Think, decisions tend to be based on ‘what we all know’ – members feel inhibited from challenging the consensus and relevant information, ideas, challenges are not fully introduced.

The group tends to a higher collective confidence in a decision than individuals have in the same decision made individually. Groups tend to endorse higher risk decisions than the individuals would – perhaps due to the degree of confidence resulting in group members agreeing to decisions that they would not make as individuals. This is called Risky Shift’.

Other features of Poor Group Decision-Making

People with more extreme positions are more likely than others to have clear arguments supporting their positions and are also most likely to voice them. This enhances risky shift.

The order in which people speak can also affect the course of a discussion. Earlier comments are more influential in framing the discussion and moulding opinions.

Once people have expressed an opinion in a group, it can be hard, psychologically, for them to change their mind.

Charismatic, authoritative and trusted individuals can also skew the debate around their perspectives – which will not always be objective or ‘right’.

Finally, it takes time for a group to discuss a topic and time is often at a premium. There will be pressure to curtail discussion and move to a decision.

Towards Better Group Decisions

  1. Start with a diverse team.
  2. Don’t let leaders, experts or charismatic individuals state their opinions or preference up front
  3. Start with a round robin of facts, data and evidence. Follow up with another round robin of comments, questions and interpretations of that evidence. This forms a solid base for discussions.
  4. If you must take a vote, put it off until after discussion and then ideally, do a secret ballot to establish the balance.
  5. Appoint a devil’s advocate to find flaws in data and arguments.
  6. Before a decision is finalised, ask everyone to take the position of a critical evaluator and look for errors, flaws and risks.
  7. Divide the team into subgroups to discuss the issues, and have them debate the decision.
  8. Invite outsiders into the team to create greater diversity of thinking and overcome prejudices and confirmation bias.
  9. Give all team members equal access to raw data, so they can reanalyse it for themselves.
  10. Facilitate the discussion to ensure every voice is heard and respected – even the least senior and least forceful members of the group. If they deserve their place in the group, consider their perspectives to be of equal value.

Further Reading 

  1. The Decision-making Pocketbook
  2. The Wisdom of Crowds

* Grammatical Note

To apostrophise do’s or not?

  • In favour of not apostrophising is that it is neither a contraction nor a possessive term, suggesting that there is no good grammatical reason for introducing an apostrophe
  • In favour of the apostrophe is the core function of punctuation to improve readability. The apostrophe stops it being dos and don’ts.

We sometimes forget that grammatical and punctuation ‘rules’ evolved to codify standard usages, but that language is fluid and grammar must serve the primary purpose of aiding communication.

By the way, you’ll see that I did not apostrophise 1970s.

If you think I should either have written dos, or found an alternative (thus subordinating words and meaning to style and correctness)… Sorry.

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The Fertile Mind of Edward de Bono

The Green Hat Fits

Without a doubt, one of the most fertile minds in personal and management effectiveness of the late Twentieth Century is Edward de Bono.  His almost constant stream of books about thinking skills (approaching 60 to date – the latest is Think!: Before It’s Too Late) has provided insight, provocation, practical skills and frustrating verbiage by turns.  The fact is that I’m a sucker for his books and have 17 on my shelf.  Many have inspired me.

Green is One of Six

Perhaps de Bono’s two most famous titles are The Use of Lateral Thinking (1967 – and the several similar follow-up titles) and Six Thinking Hats(1985).

Edward de Bono's Six Thinking Hats

Six Thinking Hats is the one I frequently return to – both in my own thinking and in offering it as a valuable tool to workshop participants.  In a nutshell, de Bono advocates deploying different thinking modes to examine an issue, consider a decision or work on a problem from different points of view.

The Green Hat – Creativity

Put this on to think innovatively, creatively, and from a new perspective.

Yellow Hat – Positive

Put this on to think constructively, develop ideas, identify benefits and find practical ways to implement them.

Black Hat – Judgement

Put this on to evaluate risks, downsides and problems with an idea and evaluate it critically to protect us from mistakes.

White Hat – Factual

Put this on to focus on facts, evidence and logical analysis of the situation.

Red Hat – Feeling

Put this on for one of two reasons: to think intuitively and also to use your emotional response to generate and evaluate ideas.

Blue Hat – Process

Put this on to direct your team’s and your own thinking process; to provide an orderly structure for problem-solving, decision-making and evaluation, using all of the hats to see the topic in all possible ways.

The Thinking Hats Controversy

I don’t want to take sides: I don’t have a basis to do so.  But it is worth noting that Dr Michael Hewitt-Gleeson puts forward a case that the idea was developed not by de Bono, but by the directors of The Edward de Bono School of Thinking Inc – now defunct – but which Hewitt-Gleeson argues is the predecessor of his own School of Thinking.

What I do agree with Hewitt-Gleeson on is his rather lovely suggestion for a seventh hat.

The Grey Hat

Hewitt-Gleeson proposes a Grey Thinking Hat for Wisdom and I love the idea.  In his words:

Grey Hat Thinking is the ability to see consequences, immediate, short term and long term. It is the ability to look back over history and to see forward into the future. To understand cycles, passages of time, the passing of fashions, eras, eons and the many possible futures including extinction, the possibility of no future at all.

‘Grey Hat Thinking also means the wisdom to see other points of view. It includes the sagacity of patience to see beyond one’s own immediate viewpoint and the wisdom to see the viewpoints of others involved in situations: your partner’s viewpoint, your children’s, your children’s children, your neighbour’s, your customer’s, your enemy’s.’

From School of Thinking: Seventh Hat for Wisdom

Wisdom is a topic of great interest to me and, from now on, I intend to add The Grey Hat to my descriptions and credit it clearly.

Grey Thinking Hat of Wisdom

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Decision Failure

Young Apprentice candidate, Hannah RichardsIn episode 3 of the current series of Young Apprentice, the candidate Hannah Richards lost her place in the competition because of her poor decision making in the boardroom.

In Hannah’s case, she let personal loyalties and enmities over-ride good judgement, but this is not the only reason for failed boardroom decisions.  In fact there is a whole array of decision-making traps available to us.  Let’s look at a small sample:

1. The Anchoring Trap

In a discussion at a board meeting, if the first speaker has a strong opinion, they can sway the whole tone of the debate, focusing not on what is right, but on the extent to which the first speaker is right.  This “first speaker advantage” can lead to poor decisions, when the first speaker takes an extreme position.

2. The Confirming Evidence Trap

When a Board approaches a consensus view it will rarely discuss information that conflicts with this view, focusing rather on evidence that confirms it.

3. The Sunk Cost Trap

Board members invest a lot of political and social capital in key decisions that can make those decisions hard to reverse if the situation changes or new information comes to light.  Errors can be perpetuated and good money thrown after bad.

4. The Seduction of Appearances Trap

Beautifully and eloquently presented evidence often carries more weight than more robust but less attractively presented evidence.  This is one of the reasons why PowerPoint-style presentations are a dangerous component of any board meeting.

5. The Prudence Trap

Caution is wise.  Risk is dangerous.  Uncertainty is risky.  Prudence is called for.  But risk can be managed and the status quo is also a dangerous strategy in fast-changing times.  Risk-taking is neither good nor bad, but a strategy to discuss and evaluate in the light of all options and all mitigating strategies.

Good Decision Making is an Art

… and a science too.  There are a lot of tools you can draw upon and it is also important to understand the vital role of intuition, when you are operating in complex environments, where you have substantial relevant experience.

Management Pocketbooks you Might Enjoy

The Decision-Making Pocketbook

The Decision-Making Pocketbook is filled with practical tools to support decision making.

Also try:

The Problem Solving Pocketbook

The Thinker’s Pocketbook

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Management New Year’s Resolutions

Welcome to 2011!  This blog is published on the first working day of the New Year, so we have culled five Management New Year’s Resolutions from our Management Pocketbook library.

Resolution 1: Evidence-Based Decision-Making

After all, what is the alternative to evidence-based decision-making? Decision-Based Evidence Making

FrancisLSullivan-as-JaggersOne of our favourite quotes comes from Charles Dickens’ Great Expectations, in which the lawyer, Jaggers, says:

`Take nothing on its looks; take everything on evidence. There’s no better rule.’

Image of Francis L Sullivan as Jaggers in the 1946 movie by David Lean – if you’ve never seen it, do so this year.

So, resolve never to make an important decision without first critically reviewing all of the evidence available to you.

Resolution 2: Reduce Reuse Recycle

For a manager, this year is likely to be one with resources at their tightest.  So use what you have well.  Think carefully about every commitment to reduce what you do; look for solutions that already work and make sure you put redundant resources to good use in a new context.

TimeTime will be your most valuable resource, and unlike the others, you cannot save it up, so use it really well.

Photo by i-am-marvin.

So, resolve not to squander anything of value.

Resolution 3: Make a Difference

How much did you achieve in 2010?  Seth Godin, in his blog, asks what did you ship (or get out of the door) in 2010 and he’s right: answering that question is an uncomfortable exercise if you are rigorous in excluding the near misses and outright failures to deliver.  Accept no excuses from yourself.

Now, resolve to make a real difference this year; face your demons and get things done.  And reading Seth’s blog will be a great stimulus.

Resolution 4: Treat your Customers like Kings and Queens

Management Pocketbooks has five excellent pocketbooks in its Customer Care category, but if you boil all the advice down to two words, it’s these: ‘just care’.

If you are in the business of serving people or creating products for them, this is what you have chosen, so, resolve to put up or shut up.  Treat every customer as you would wish to be treated when you are at you most demanding and unreasonable.

And, for the ultimate in customer care training, this column will be buying the Remastered DVD box-set of Fawlty Towers.

Resolution 5: Chill Out

RelaxRelax.  Get more done by stressing less.  Make time for more of what you enjoy and the people you really love.  Find ways to discharge the pressures and tensions of your working life and give yourself more energy in the process.

So, resolve to be more mellow and easier to be with.

Ten Management Pocketbooks you might enjoy this Year

Resolution 1
Resolution 2
Resolution 3
Resolution 4
Resolution 5
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Learning Decision Making from Dr House

At its best, television can inspire and educate.  It can also make us think.  Some of us mourn the loss of House from free to air TV in the UK – ho hum: there are always DVDs.

So what can you learn from House?  Masses, it seems and there is even a book ‘House and Philosophy’ to guide you.  It is part of the Blackwell philosophy and pop culture series.

Introducing Dr House

image For those who didn’t catch the US drama series, House is an ornery, arrogant, self-centred and devious doctor who specialises in diagnosing and treating the most mysterious of cases that come into his hospital.

He is played by Hugh Laurie, about whom one American writer said: ‘does a terrific job with his British accent on Jeeves and Wooster.’

.

Don’t Care

House appears not to care about his patients – his concern is for solving the case.  Whilst there are episodes with exceptions to this rule, a distinct illustration of this is when he risks brain damage to a boy in order to find the evidence that will allow him to save the boy’s life.  When challenged about this, he replies to the effect that he does not worry about things he cannot do anything about.

Agent Regret

For most of us, however, the consequences of our decisions weigh heavily.  Regardless of our intention, if the outcome is bad, we have to live with the guilt.  This is known to philosophers as ‘agent regret’.  For House, the ends entirely justify the means, but it works both ways.

Moral Luck

If House makes a wrong decision – or indeed one of his subordinates does – it is not enough, for him, to hide behind ‘we followed procedure’.  In judging responsibility, it is again the outcome that matters.

A Good Decision

When we think about decision-making in organisations, we talk about a ‘good decision’ as one that can be defended.  It requires three things:

  1. The decision maker or makers have the authority and expertise to make the decision
  2. The decision maker or makers have the best information available
  3. The process that the decision maker or makers follow is sound – it is transparent, logical, and fair

But a good decision is not the same as the right decision.  We require good decisions, because they appear to maximise our chances of getting it right.  But we also require them, because we cannot require that all decisions are right.

How much do your decisions matter?

Agent Regret seems to me to be a fancy philosophers’ phrase for conscience.  Knowing about it can have two effects:

  • It could freeze you to the spot and stop you making a decision
  • It could galvanise you to take just a little more time to look for one more fact, or conduct one more test, before finally saying ‘go’.

So here’s the deal

Of course, when House takes the latter course, it usually works out.  Real life is rarely as obliging.  But even so, what is there to lose if you make one last check?

Management Pocketbooks you may enjoy

9781870471763

The Decision Making Pocketbook will give you a sound process and a range of useful tools to help you make your decisions.  They won’t prevent Agent Regret if you get it wrong, but they will limit your regret to the consequences, rather than ignorance or negligence.

You may also enjoy:

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