Why your decision-making process is skewed

Leaders don’t often discuss their decision-making process for a variety of reasons, notably that it’s probably something that feels proprietary to them (“Only I understand this!”) or it’s not something that can be breathlessly analyzed on a balance sheet (“The Spreadsheet Mentality”) or (most likely answer) they have no idea what their decision-making process even is. That’s the same reason People Analytics is so far off, even though it’s a logical business idea.

This has boggled my mind in every place I’ve ever worked: all a “business” really is at base is a series of people needing to go through a decision-making process to optimize and direct overall revenue and the workflow of others. Instead of any logical decision-making process taking place, it’s all a series of Chinese fire drills, hair-on-fire moments, and shifting and unclear priorities.

I talk to people at bars all the time, because I’m a weird, chatty person. Every single person I’ve ever met at a bar, regardless of age, job, industry, or any other factor — they always say their organization is a cluster-mess in terms of priority and decision-making process. Why is this, though?

Decision-making process and Freud

Here’s a new article on Harvard Business Review called “Why we pick leaders with deceptively simple answers.” I clicked on it initially because it does tend to describe a lot of leaders. Leaders like to speak in buzzwords — “Our mission is to drive value for our end consumers!” — as opposed to any specifics around what the mission is, what the values are, or who the end consumers might be. The theory is always that leaders discuss that stuff with their lieutenants; discussing it with the whole company (i.e. transparency) makes no sense to many people with formal power. That’s a major flaw, but I’ve discussed that concept in a different post.

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Back to this HBR article. The author talks a lot about Freud, and specifically Freud’s 1922 book Group Psychology and the Analysis of the Ego. As the author notes, Freud was not a fan of groups. Here’s the takeaway:

As Freud saw it, groups amplify emotions and inhibit critical thinking. When people come together in numbers, they are more likely to be swept up in a shared fear or to be enthused by a common faith than they are to engage in reasoned problem solving. For Freud, group membership is a kind of love that makes people vulnerable and often spells trouble.

Right. Personally, I’ve always been of the belief that collaboration — i.e. working in groups — actually hurts productivity, even though many managers would try to claim it’s the backbone of effective productivity. Groups create so many problems around priorities, decision-making process, incentives, the ability of one person to rise above, people skating on work, etc. that they’re almost a major hindrance on a lot of legitimately important projects.

Basically, though, what Freud was saying in 1922 is that a leader can be a total asshole-jerk-narcissist and the group will still get behind him if the message resonates with ideals they cherish. Since a lot of life is structured around in-groups and out-groups, effective leader messaging tends to be “Us vs. Them!” When leaders ride or die with that, they can typically get groups behind them pretty quickly. That’s a little bit dangerous.

Now move over to Kellogg School of Management and their research on emotions and decisions:

The researchers analyzed millions of instant messages (IMs) and trades from 30 traders over a two-year period. They observed that the best trading decisions, and highest profits, happened when traders showed a moderate level of emotion in their IMs—that is, not too much, and not too little. Beyond simply improving trades, this finding could help anyone tasked with making risk-related decisions, from air traffic controllers to humanitarian aid groups.

OK, now let’s combine the two. Here’s what we get:

• Harvard article shows that groups can amplify emotions
• Northwestern research shows that amplified emotions can reduce effective decision-making process

Ruh roh.

Decision-making process: How it typically works

Above I talked a little bit about People Analytics, which is an emergent branch of Human Resources dedicated to using data to make better managerial and hiring decisions. The problem is, it’s pretty far off — because it violates most tenets of basic human psychology. People want to feel relevant. One of the ‘promises’ of leadership or increased responsibility is the idea that your now formal power means you know everything (not true), and so in a given decision-making process, you will want to trust your gut.

This is logical at one level, sure: if we’re going to lead every business decision-making process off of data, there’s really no need for hierarchy or executives anymore. Since hierarchy probably will never actually die out, what I just described is a pipe dream. Let’s instead try to deal in reality.

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Most places I’ve worked, this is how a decision-making process tends to unfold:

• A HIPPO mentality (highest paid person’s opinion) is the backbone of it
• The most senior people can change direction and decisions and priorities on a dime
• These changes are often based on improper analysis of a situation or information provided to them
• This shift in decision-making process and priority sends all the silos and middle managers scrambling to keep up

You can call this “The Shiny Penny Problem” of most senior leadership. A competitor is doing something they like — let’s pivot and do that! One senior team conference call revealed a potential revenue problem — all hands on deck for a new strategy! This silo might miss its yardsticks — demand your entire team do more with less!

In reality, business is based on a series of relationships and interactions that occur over time. These involve companies and customers, executives and employees, employees and customers, etc. It’s a large quilt with many things, both rational and irrational, affecting it. We need to take all this into account when we think about how to structure any decision-making process.

Decision-making process: Emotional vs. logical

One of the core issues of work is that we want it to be logical — that’s why we mostly love process — but it’s made up of people, so it’s inherently emotional. Failing to understand the emotional component of a workforce — which many executives tend to do as they ignore concepts like ‘talent strategy’ — is a blow to your overall business and your decision-making process. But because these things don’t always show up at your Q2 revenue plays stand-up, you can ignore them and go on with business as usual.

How can we make decision-making process more effective?

It’s hard. Start with this basic idea, for example: managers (i.e. people with organizational authority) are often bad judges of new ideas. So how they can be expected to launch into a decision-making process and be successful at it? In short answer, they can’t.

I’d say this: any effective decision-making process is rooted in information, and the information needs to be both content (the “what”) and context (the background or “why”). Many managers and senior leaders entirely skip over the context portion of this discussion, and that hinders effective decision-making process.

So you need information, and that information has to have context and content. You also need information that’s rooted in clarity and you need systems to make sure you’re not withholding information down a business chain. (Many companies do this thinking everything they work on is “proprietary,” but then no employees have a clue what’s going on and often miss their targets, which infuriates the execs. Weird cycle.)

Once the information set-up is accurate, you need people who own the decisions. Tons of things in business become ‘Death by Consensus,’ where suddenly 94 people are weighing in on something relatively simple — and any effective decision-making process around that thing just died in the flood. I had a gig not too long ago where I sent a one-pager to my boss. A simple one-pager, right? It was on Google Docs. Within about 2-3 days, I had 19 people — nineteen — request access to this document and start putting in edits. It was a one-pager. It wasn’t even really revenue-tied, to be honest. It was a pretty dumb, no-ROI deliverable. And yet somehow, 19 people were chiming in. Point is: you need to know who owns things.

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The final advice I’d toss here is understand how to link short-term decisions to long-term goals. Many businesses are evaluated in the short-term, i.e. quarterly. But those businesses want to be making money in five years too — and heck, hopefully more money. If you only focus on short-term decision-making process, well, your decisions are now happening in a vacuum. Because a series of off-task short-term decisions means that in a year, everyone who works for you has their head all spun around and/or are leaving in droves because of organizational confusion. Neither thing is good. You can’t make decisions just based on what’s in front of your face at that moment.

Think about this, right? I don’t have kids at present, although I would like some. Saturday I did a 5K fun run and I go to this brewery afterwards. I see this adorable little two year-old, OK? He’s got two toy race cars and he’s racing and crashing them. Cute kid. Now, I could see this and rush home and tell my wife “We’re doing this thing right now!” That’s short-term decision-making, and it makes sense on one level. On another, it ignores a bunch of other long-term constructs. Now, my future children have little to do with your widgets company, but sometimes personal examples help.

I’ve written a lot here about decision-making process, so now I’ll turn it over to you: what have you seen be effective? How can companies and individual leaders get better at this?