Hurry, a decision must be made

SPEED AND INTUITION IN DECISION MAKING

The prevailing cultural model in business holds that leaders have to be people 'of character' who make decisions in the blink of an eye. However, gut decisions often fail, and what is worse, they do not allow us to learn from experience. Is it possible to train intuition? How do we take advantage of our thinking system to improve our decision making?

In companies, there is a bias towards action  that proposes that decisions must be made  quickly, in order to prevent them from getting  bogged down in endless meetings or by  excessive bureaucracy that slows everything  down. 

In contexts of uncertainty, however, this bias  towards action is often used to justify the  power of intuition, or even the lack of analysis  of those decisions that, due to their  complexity, would require assessment. Thus,  this culture of 'getting issues out of the way'  works for some executives as a good excuse  to skip perhaps the most uncomfortable  stages of the decision process and focus fully  on the details of execution. 

Furthermore, in a rapidly changing world, this  space for reflection, analysis, or even doubt, is  often perceived as a symbol of weakness. If a  leader does not make decisions quickly, they  will be seen as lukewarm or indecisive. Hence,  the value of intuition is often favored over  analysis, even when the analytical capacity  that companies can use today is enormous  and provides many advantages. It is usually  believed if a decision is the product of one's  'gut', it has more merit than if it was thought  out. We applaud the waiter who remembers  our order by heart, instead of applauding the  one who writes it all down and never gets it  wrong. 

Complex decisions, those with high  uncertainty, great ambiguity or simply lack of  information, require a space to fully  understand the situation, review assumptions  or consider new points of view. 

In recent years, the more intuitive approach  has seen its main advocate in Malcolm  Gladwell, the author of Blink. While those who  tout that analytics is crucial to their company's  success have found it in Thomas Davenport,  author of Competing on Analytics. However,  all decisions cannot be made by method, nor  based on gut feeling. 

Thinking Systems  

The 2002 Nobel Prize in Economics, Daniel  Kahneman, explains there are two systems of  thinking. The first is fast, automatic, and done  almost unintentionally. For example, when we  calculate the distance between two objects  when walking, or when we recognize that  someone is 'angry' just by looking at their  frowning face. This way of thinking is very fast  and one has no control over it; it just happens  to us. 

Intuition is nourished by this non-conscious  thinking system, which is the result of  accumulated experience or repetition.  Through it, we can 'know', even without even  knowing how we know (this can be a problem  in companies when trying to explain how we  arrived at a given conclusion). This system of thinking can save us a lot of time and is very  useful for many decisions. As experience is  gained, executives empower themselves to  use it in a wider variety of situations when  speed is critical. 

However, the countless errors we can fall into  by relying solely on our intuition means that  only the most experienced can have the  confidence that allows them to make these  decisions with no other basis than what their  'heart', 'stomach', 'gut', and other parts of  their body (except their head) dictate to them.  This way, intuition ceases to be a 'sixth sense'  and is reserved for those who have the  knowledge acquired from having experienced  the same decision-making situations many  times. 

Following Kahneman, there is a second  system of thinking that is slower, more  reasoned and controllable. For example, if we  want to calculate how much 54 x 12 is, we  need to make the decision to solve. Changing  business environments require us to  consciously make the decision to evaluate the  decisions that need to be made. 

However, the culture of action often  undervalues the use of more consistent  approaches, or even decision-making  methodologies that, of course, never suffer  from distractions, fatigue, boredom, anger,  nor do they make mistakes from time to time. 

The complexity of many decisions requires a  rigorous process that can ensure their quality  and minimize the risk of making mistakes. We  would not want an executive who, faced with  a complex situation, and in order to show  determination, shot from the hip without  having properly studied the decision and its  consequences, would we? We need these  types of thinking to complement each other. 

One system controls the other 

For intuition to help in business decisions, the  second system of thinking needs to control  the first. That is, there needs to be methods  for recognizing when to use intuition, how to  evaluate information, and how to make  decisions. In the last twenty years, studies  have proliferated on cognitive errors: the  traps that our mind sets for us when making  decisions, and how to identify them. 

Nowadays, it is already known that even the  most talented executives in the world have a  'method' for being intuitive. In their book  Judgment, Tichy & Bennis have studied the  way in which great executives -such as the  CEO of General Electric, Jeff Immelt, or the  CEO of Boeing, Jim McNerney- make their  business decisions, and have found that the  most successful executives are those who do  so following a pattern that includes  mechanisms to analyze information before  giving their 'judgments', during the decision making process, and even providing feedback  after making their decision. 

It is known that in order to learn a skill, in  addition to practice, immediate and  unequivocal feedback on successes and  errors is needed. If this feedback is delayed or  ambiguous, the learning fades away. Much of the difficulty in learning from business  decisions lies in the fact that we do not keep a  record of our estimates and our judgments,  which would allow us to learn from them  when the results arise. 

In short, we know that intuition can help us  gain time in some decisions, but the risk  involved in interpretation, analysis and  estimation errors is high. We also know that  our capacity is limited, and that our  judgments are influenced by our mood,  amount of sleep and more. Therefore, in each  particular case, we must evaluate which is the  most convenient method to use in order to  maximize our decisions, so that the culture of  action is one of effective actions while  minimizing all avoidable risks ■ 

 

Ernesto Weissmann
Partner at Tandem, Decision Solutions.
ew@tandemsd.com