Test Your Decision-Making Instincts
We highly recommend subscribing to the McKinsey Quarterly. Registration is free, and the firm supplies a good deal of information and news that is of interest to businesspeople from top management, to middle management, to entrepreneurs. We found a piece in the June edition of particular benefit to our wide range of clients: How to test your decision-making instincts (free registration required to view the entire article).
The article asserts that to protect your decisions against bias, you first need to know when to trust your gut feelings – that you must first feel confident that you are drawing on appropriate experiences and emotions. They supply four tests in order to get this information:
1. The familiarity test: Have we frequently experienced identical or similar situations?
Familiarity is important because our subconscious works on pattern recognition. If we have plenty of appropriate memories to scan, our judgment is likely to be sound; chess masters can make good chess moves in as few as six seconds. “Appropriate” is the key word here because many disastrous decisions have been based on experiences that turned out to be misleading—for instance, the decision General Matthew Broderick, an official of the US Department of Homeland Security, made on August 29, 2005, to delay initiating the Federal response following Hurricane Katrina.
The way to judge appropriate familiarity is by examining the main uncertainties in a situation—do we have sufficient experience to make sound judgments about them? The main uncertainties facing Broderick were about whether the levees had been breached and how much danger people faced in New Orleans. Unfortunately, his previous experience with hurricanes was in cities above sea level. His learned response, of waiting for “ground truth,” proved disastrous.
Gary Klein’s premortem technique, a way of identifying why a project could fail, helps surface these uncertainties. But we can also just develop a list of uncertainties and assess whether we have sufficient experience to judge them well.
2. The feedback test: Did we get reliable feedback in past situations?
Previous experience is useful to us only if we learned the right lessons. At the time we make a decision, our brains tag it with a positive emotion—recording it as a good judgment. Hence, without reliable feedback, our emotional tags can tell us that our past judgments were good, even though an objective assessment would record them as bad. For example, if we change jobs before the impact of a judgment is clear or if we have people filtering the information we receive and protecting us from bad news, we may not get the feedback we need. It is for this reason that “yes men” around leaders are so pernicious: they often eliminate the feedback process so important to the development of appropriate emotional tags.
3. The measured-emotions test: Are the emotions we have experienced in similar or related situations measured?
All memories come with emotional tags, but some are more highly charged than others. If a situation brings to mind highly charged emotions, these can unbalance our judgment. Knowing from personal experience that dogs can bite is different from having a traumatic childhood experience with dogs. The first will help you interact with dogs. The second can make you afraid of even the friendliest dog.
A board chairman, for example, had personally lost a significant amount of money with a previous company when doing business in Russia. This traumatic experience made him wary of a proposal for a major Russian expansion in his new company. But he also realized that the experience could be biasing his judgment. He felt obliged to share his concerns but then asked the rest of the board to make the final decision.
4. The independence test: Are we likely to be influenced by any inappropriate personal interests or attachments?
If we are trying to decide between two office locations for an organization, one of which is much more personally convenient, we should be cautious. Our subconscious will have more positive emotional tags for the more convenient location. It is for this reason that it is standard practice to ask board members with personal interests in a particular decision to leave the meeting or to refrain from voting. Also for this reason, we enjoy the quip “turkeys will not vote for Christmas.”
A similar logic applies to personal attachments. When auditors, for example, were asked to demonstrate to a Harvard professor that their professional training enabled them to be objective in arriving at an audit opinion, regardless of the nature of the relationship they had with a company, they demonstrated the opposite.
In general, the author states if a situation fails even one of these four tests, you need to “strengthen the decision process to reduce the risk of a bad outcome.”