How do we make decisions?

Organizations value reason and predictability. In companies, quality control in production processes guarantees that, on average, products will come out better and clients will be more satisfied. Incentive systems reward desired attitudes and punish those that are to be avoided. However, in decision-making none of this happens. What is it that conditions the quality of the decision-making processes? 

Companies often place on the executive responsible for making decisions the burden of choosing the method, the information and the criteria necessary for making them. In this way, we know the decision trigger as well as the alternative selected; however, there is a black box in between. Everyone decides as he or she wishes, teams discuss decisions in their own way and companies make decisions just as they come up. The result: no one decides how to make decisions and, only rarely, is the quality of the decision-making process assessed.

The decision-making process is a process we normally do without being aware of how we do it, or at least, without being able to explain it. When executives are asked how they make decisions they frequently say: “it is a question of perception”, or “it has to do with your heart”, or else “you have to feel it deep inside yourself”. They use every part of the body except the one we would expect to. 

However, decision-making skills depend not so much on an instant of brightness as one may think. We are more conditioned by our beliefs and have less freedom to make decisions than what we would like to have, both as individuals and as groups and organizations.

Let us review these conditionings one by one:     

Conditionings at the organizational level    

Organizational design impacts on the way decisions are made. In some companies, people feel they are the owners and take the responsibility for and execute decisions; in other companies, people try to avoid making decisions as much as they can.    

The way we plan impacts on how we decide. Do executives take their time to make strategic decisions, or do they focus more on operative decisions? Are they familiar with the objectives of their area and, therefore, feel more confident when they have to make decisions? Are there any conflicts of interest that might be hampering an efficient decision-making process?     

We are more conditioned by our beliefs and have less freedom to make decisions than what we would like to have, both as individuals and as groups and organizations.

A manager that works within an organization is responsible for the achievement of certain objectives and for complying with certain tasks that have been pre-defined and for other tasks that he believes belong to him. The first are listed within the job description while the others are not. When many managers make decisions, these lists usually change according to the profiles, they tend to overlap when several managers share decisions, or to be left aside at times when there is a stronger need for centralization. These decision roles are almost never clearly known and designed to be more effective.

All important decisions are made in meetings (or committees) that involve several people, even when the idea comes from a single person and the rest know little about the process of analysis. In this way, responsibility is shared, and everybody is safer.    

There are companies where bureaucracy in decision-making demands so much effort that those who have to push them feel discouraged. There are other companies where decisions are made by lobbying instead of discussing ideas openly. In fact, in some companies, meetings are “as if” but they never deal with important issues there. The defensive routines that Chris Argyris studied some years ago play their part, keeping us from putting judgment under discussion, going through embarrassing situations or negative feelings situation. 

Conditionings at the group level    

Within the different areas, divisions and teams, decisions may also be conditioned by dynamics on which the manager has little control. Some of these group dynamics were studied more than 40 years ago by Irving Janis, a professor emeritus of Organizational Behavior at many universities. Janis studied strategic decision-making processes of foreign policy in the US that resulted in failures due to serious mistakes in group decision-making and identified some phenomena that are seen in companies every day.   

“Social conformity”, for instance, goes against the freedom of the decision-maker.  The more people approve of a decision, the more chances we’ll have of doing the same thing easier. If 5 people in a meeting said yes before us, it is more probable that we’ll also give our OK. Certainly, if our boss was included within those people, this phenomenon would be even worse.  

Direct pressure mechanisms (criticism, questioning of authority, among others) are applied to those members who doubt about or claim the validation of arguments that support alternatives different from those favored by the majority. In this way, group pressure prevents many ideas from being honestly questioned.   

This phenomenon is not necessarily something imposed and external; it is often self-developed directly. Self-censorship bias is the name given to the behavior by which members try to avoid deviating from the perceived group consensus, keeping their doubts silent, minimizing the significance of their discrepancies, and avoiding confrontation. What is the value of collective decision-making if the group members are afraid to talk or if they “take care of their thoughts” so as not to give bad news and make others feel uncomfortable or to maintain the belief that everybody agrees by means of an illusion of unanimity?    

There are several challenges in group decision-making that can be worked on with the suitable approaches, by recruiting the right people and assigning clear decision-making roles. We often see that in order to make a decision, managers “get together” to talk until they reach consensus. Empirical evidence shows that, in most cases, this is not so, and generally, one gets into long, exhausting meetings that not always end up with an effective and genuinely unanimous decision.       

Conditionings at the individual level    

The theory of decision-making has given us several tools to improve this process. From the psychological point of view, it has explained how feelings, fears, anxiety, and guilt affect the way we make our decisions.    

From the behavioral point of view, from Daniel Kahneman onwards, they have given us some insight into the common mistakes we make when deciding; bias and mental traps that for many years have filled book pages explaining why smart executives make the wrong decisions. There are many examples of business decisions that seem to go against their objectives, airline pilots that decide to continue flying without fuel, doctors that forget instruments inside patients and many other examples that make us think that we are fallible. 

Many of the decisions we make are made unconsciously and that is why we do not even have a record of how we make them. Understanding what the process is like and into what mistakes we may incur is the key to improve the way we do it.  

We know that how we make key decisions in our organization –and in our life- will most likely define the success or failure of our actions. And we also know that today it is hard to make high quality decisions when we have little time available, and we do not have the best tools. Therefore, it is essential that we become aware of the importance of decision-making, and that we think about the best way to overcome the barriers that may threaten the freedom of decision, both at the organization level, as well as in our team or as individuals.    

Only a decision-maker that is able to make decisions with ample freedom will have the tools to make them effectively and get the best results.

Ernesto Weissmann
Partner at Tandem.

Related Posts
How to optimize the decisions that matter

Technology is a powerful ally when it comes to improving decision-making processes. The key is to define which decisions should be optimized through digitization, based on their impact on the »

How about you, are you good at making decisions? 

It is difficult to find entrepreneurs or executives who believe that they do not know how to make decisions. However, some biases that make us systematically be wrong exist. What »