Elements Consulting

Facilitating Pathways to Success

Weekly Communications

Renewal Leadership: Am I Making Bad Decisions?

Posted by elementsconsulting on May 13, 2016 at 12:40 AM

Making decisions is the most important responsibility of any leader. It can also be one of the hardest and riskiest responsibilities that a leader assumes. Making a bad decision can damage a team, an individual and at times be irreparable. Many times we are unclear where our bad decisions come from, however if we look close enough we can trace it back to the way the decision was made – we had unclear alternatives, we did not collect the right information, and we did not appropriately weigh the cost and benefit of the decision. These are easier paths to uncover however sometimes the bad decision does not come from the process but from the mind of the leader making the decision and at times our own brains can sabotage our decisions.

 

Reflect upon a recent decision you made that may not have been your best decision. Below are three of the seven hidden traps that can lead a leader to make the wrong decision, the other four will be in next week’s edition. See if any of the hidden traps align with your decision making process and uncover the ways to avoid the trap.

 

The Anchoring Trap

When considering a decision, the mind gives disproportionate weight to the first information it receives. Initial impressions, estimates, or data anchor subsequent thoughts and judgments. Anchors take many guises. They can be as simple and seemingly innocuous as a comment offered by a colleague or a statistic appearing in the morning newspaper or when attempting to project this year’s sales we begin by looking at the sales volumes for the past year. The old numbers or comments or stats become the anchor. This approach tends to give too much weight to past events and not enough weight to other factors. In situations characterized by rapid changes in the marketplace, historical anchors can lead to poor forecasts and, in turn, misguided choices.

What can you do about it?

• The effect of anchors in decision making has been documented in thousands of research projects and anchors influence the decisions of almost everyone. No one can avoid their influence; you can reduce their impact by using the following techniques:

• Always view a problem from different perspectives

• Think about the problem on your own before consulting others to avoid becoming anchored by their ideas.

• Be open-minded. Seek information and opinions from a variety of people to widen your frame of reference and to push your mind in fresh directions.

• Be particularly wary of anchors in negotiations. Think through your position before any negotiation begins in order to avoid being anchored by the other party’s initial proposal.

 

The Status-Quo Trap

We all carry biases, and those biases influence the choices we make. Decision makers display a strong bias toward alternatives that perpetuate the status quo. The source of the status-quo trap lies deep within our psyches, in our desire to protect our egos from damage. Breaking from the status quo means taking action, and when we take action, we take responsibility, thus opening ourselves to criticism and to regret. Not surprisingly, we naturally look for reasons to do nothing. Sticking with the status quo represents the safer course because it puts us at less psychological or emotional risk. Often the status quo may find itself wrapped in the “wait and see” philosophy of many leaders who want to ride out the storm and wait till things stabilize.

What can you do about it?

• Maintaining the status quo may be the best choice, but as a leader you do not want to choose it just because it is comfortable. If you utilize the status quo trap, here are some techniques that might work for you:

• Always remind yourself of your objectives and examine how they would be served by the status quo.

• Never think of the status quo as your only alternative. Identify other options.

• Avoid exaggerating the effort or cost involved in switching from the status quo

• When comparing alternatives, always evaluate them in terms of the future as well as the present.

• If you have several alternatives that are superior to the status quo, don’t default to the status quo just because you’re having a hard time picking the best alternative. Force yourself to choose.

 

The Sunk-Cost Trap

Another bias we have is to make decisions that justify our past choices, even when those past choice are no longer valid. For example, we may have poured enormous effort into improving the effectiveness of an employee whom we knew we should not have hired in the first place. Our past decisions become our sunk costs – old investments of our energy, time and resources that are now irrecoverable. We know that these sunk costs are irrelevant to the present decisions, but they trap us and lead us to make inappropriate decisions.

Why can’t people free themselves from past decisions? Often it is because we are unwilling to admit to a mistake. In our personal life, acknowledging to a poor decision is a private matter and may only impact one’s self-esteem. In leadership a bad decision is often a very public matter and may invite critical comments from colleagues, supervisors and others. If you fire the poor performer whom you hired, it is like making a public admission of your poor judgment. It seems safer to let them stay on, even though that choice only compounds the error.

What can you do about it?

• For decisions that have a history to them, you will need to make a conscious effort to put aside any sunk costs that will muddy your thinking about the current choice. These might help:

• Seek out and listen carefully to the views of people who were uninvolved with the earlier decisions and who are hence unlikely to be committed to them.

• Examine why admitting to an earlier mistake distresses you. If the problem originates in your self-esteem, deal with it directly.

• Remind yourself that even smart choices can have bad consequences and that even the best and most experienced leaders are not immune to errors in judgment.

• Don’t cultivate a failure-fearing culture that leads employees to perpetuate their mistakes. In rewarding people, look at the quality of their decision making, not just the quality of the outcomes.

 

Categories: None

Post a Comment

Oops!

Oops, you forgot something.

Oops!

The words you entered did not match the given text. Please try again.

Already a member? Sign In

0 Comments