As organisations grow, people begin to specialise in skill sets. In the seed stage of a start up the founders do almost everything, however as resources become available so does expertise. Greater resources and expertise means improved processes and better judgement. However, more moving parts also creates a more complex system.

Leaders live and die by their choices, and tapping into the abilities and knowledge of those around them is an essential skill for success. Effective leaders in today’s make good calls more often. They do this by making best use the expertise and information at their disposal. This post outlines what gets in the way of good decision making, and which practices are common to leaders who develop superior judgement.

Why Good Decisions Differentiate The Most Successful Leaders

Leaders come in all shapes and sizes; maybe there are some traits more common to effective leaders, but the truth is there is no single leadership personality. Some are strong and self-assured (think Mark Cuban). Others are less dominant and assertive in their style (Richard Branson), though both can be equally effective in different environments. However diverse leaders can be in their approach, there is one skill ALL successful leaders possess: the ability to reliably make good choices.

A leader who possesses all the personality traits that endears him to others, yet makes poor decisions will inevitably struggle to succeed. Whereas the leader who may not relate quite as well, yet dependably makes good decisions has a greater chance of survival and success. Of course, the very best leaders relate well and make excellent decisions, yet superior judgement more often distinguishes the successful leader. The harsh reality is, the litmus test for leadership is results, not sentiment.

An organisations results are merely the consequence of a multitude of decisions made by leaders and their staff over time. Decision such as which market to pursue, how much to invest in marketing versus product, who to recruit and how much should to spend to get them. The aggregate effect of these and many other similar decisions have a huge influence on a firms odds of success.

The key to making good decisions is to first understand and address what gets in the way, then apply the timeless techniques used by those who demonstrate superior reasoning and judgement. First, lets look at what prevents good decisions.

The Three Obstructions to Effective Decisions

There are three principal barriers to good decisions. Together these obscure the truth and trick us into believing we are being logical and rational when in many cases we are not. The first is our lazy human brain, the second is an inflated ego and the third is the pressure to perform. These hindrances cause cognitive clangers that lead us to ignore key information, be overconfident in our assumptions, and succumb to short-term emotional thinking.

Our lazy brain has evolved to keep us safe and be energy efficient. In order to do this, the brain must choose which information it pays attention to, and which it ignores. The brain is so good at this that we don’t even need to think about it, it all happens automatically without our even being aware of it. When we make fast ‘intuitive’ judgement calls using only the limited information our brain has presented us, we use what psychologists call a ‘heuristic’. Sort of like a rule of thumb.

Heuristics are alot like computer algorithms; most of the time they work exceptionally well, but only for very specific well defined, well established problems.  Our brains use heuristics to cut cognitive load and conserve energy in case we need it (to survive) later. When a heuristics causes us to make an error in judgement, experts call it a cognitive bias.

We are all prone to make these mental mistakes if we are unaware of our tendency to rely on heuristics. No one is immune from cognitive biases, but we can apply systems to override them. The only thing standing in the way of our using these systems is our inflated ego.  When we believe our instincts are above question, we neglect to involve others or search for more information. This leads us to defend and justify fast, faulty judgements made by our lazy brain. Experts call this tendency overconfidence.

Overconfidence is common and easily addressed, however an inflated ego will cause its owner to dismiss new information and also at times those who present it. In sport, overconfidence can cause leaders to fall victim to another cognitive bias called the Dunning Kruger effect. This mental mishap causes those with relatively low knowledge or skill to overrate their abilities, and those with high knowledge or skill to underrate their abilities.

Leaders are particularly susceptible to the Dunning Kruger effect when an inflated ego leads them to mistake their authority in an organisation for superiority across all areas. When leaders overconfidence causes them to downplay or discard expert advice, they reject information that does not match their predetermined conclusions. This sees them dominate or manipulate decisions in areas outside their expertise. This interfering frequently leads to misinformed, misguided decisions that often undermine long-term success.

Why would leaders meddle in this way? Probably because they are often under immense pressure to produce wins. In business, where there are many stakeholders there is very little tolerance for taking ones time, the perfect leader acts with conviction and quickly turns a firms fortunes around. This unrealistic pressure can fuel intolerance for ambiguity, causing leaders to mistake the uncertainty exhibited by experts for indecision. This intolerance causes leaders to overlook or ignore important contextual information from others when making critical decisions.

At this point it might seem like biology, psychology and the environment are constantly conspiring against us, in some ways this might be true. However the good news is that in this case knowledge can indeed be power. Simply being aware of and acknowledging our inherently human flaws instantly makes us better decision makers. In addition there are five timeless techniques observed by leaders who make good decisions that lay the groundwork for success.

The Five Elements of Good Decisions

The best decision makers learn to tame their ego, manage external pressure and stay sceptical of their overconfidence. They achieve this by following a specific pattern. First they decide how to decide, then they establish the specifications a decision must meet. Next they encourage dissenting opinions. Once a decision has been made they commit to it and expect the same of others. Finally, good decision makers learn and improve their process by paying close attention to outcomes compared to expectations.

Decide how to decide:

Abraham Lincoln is famous for assembling a ‘team of rivals’ to help him lead the country as president. Some of these men thought they should be president, some openly despised each other, and others were far from trustworthy. Despite this, Lincoln made excellent use of their diverse perspectives to form superior judgement and consistently make good decisions in the best interests of his country. He got the best out of his team by respecting all opinions, while being transparent about how a decision would be made and by whom.

There are four types of decisions: command, consult, vote and consensus. To command is the quickest, yet generally the least effective means. To consult assumes responsibility for making the decision, yet defers authority on the matter to experts where necessary. To vote yields responsibility to the majority. To reach consensus requires all involved agree on the same course of action.  All decisions that involve others are superior to the use of command, since they allow a leader to see outside their own incomplete outlook. Yet to make suitable use of others, it is important to clearly define the desired outcome.

Establish the Specifications

Seeking the opinions of experts and trusted advisors is the mark of a wise man and a good decision maker. In today’s information economy it is impossible to know enough about everything. However, where a counsel is formed for the purposes of making a decision, ego will inevitably emerge.  ‘Distracted purpose’ occurs when people become more concerned with pushing their own agenda for resources, favour or power than achieving the central objective.

Lincoln and other good decision makers moderated the influence of distracted purpose by assembling the right people and clearly defining what a decision is about (and if required what it is not about). Establishing the specifications a decision must meet requires two steps; the first is describing what constitutes success, the second is clarifying the deeper reason why a particular decision matters in the context of the bigger picture. Effective leaders include the right people and also ensure the group is clear on the specifications a decision must meet. Then they encourage honest opinions from all.

Encourage debate

Some leaders assemble a team (of yes men), whose real job is not to offer an expert, honest opinion, but guess and mirror their own. This is a recipe for mediocrity, failure or even disaster. If everyone unanimously agrees, some are not thinking, or are subjugating their truth for the truth of others. Experts call this ‘groupthink’. When President John F Kennedy approved the Bay of Pigs invasion to overthrow dictator Fidel Castro in Cuba, he thought all his advisors were united in their recommendation. In reality his team told him what they thought he wanted to hear, and the result almost created a nuclear war.

The best way to avoid overlooking crucial information is to create an environment where people feel safe to speak truth to power. In his brilliant management book ‘Creativity Inc’, Pixar President Ed Catmull advises teams to put honesty before harmony when making decisions. The way to do this is to de-emphasise symbols of hierarchy, and help people separate themselves from their ideas. Catmull writes: “you are not your idea, and if you identify too closely with your ideas, you will take offence when they are challenged”. Google’s CEO Eric Schmidt also encourages dissent, but demands relevant data to validate opinions.

Demand Commitment & Congruency

When the decision has been made and it comes time to take action, success demands conviction. In many cases a poor strategy executed perfectly is still more likely to succeed than a perfect strategy executed poorly. Uncertainty invites distraction and causes errors. Effective leaders understand that commitment and congruency is essential for execution, so once deliberation has ended and a decision has been reached, they commit to it and demand that others do the same.

At this stage harmony takes precedence over honesty, and leaders present a united front to the team. Graham Henry and the All Blacks coaching staff observed the maxim ‘disagree and commit’ to reinforce the importance of unity among leadership. Where leaders assume responsibility, and the process has been transparent and fair, most people will accept and defer to the judgement of superiors. But good leaders don’t stop there, they continuously evaluate the effectiveness of decisions, and review the process for improvement.

Observe Outcomes vs Expectations

If you want to get better at something, you need to pay attention to feedback. Feedback helps you identify your weaknesses. ‘Black box thinking’ is a trendy term at the moment that encourages people to look back on ‘failures’ to see what can be learned. A black box that records all interactions and experience makes this easy, but without this technology we are dependent on our own subjective (often incomplete) interpretations of reality.

Reviewing decisions and interactions within the context of a process makes it much easier to spot and learn from mistakes or areas for improvement. For example, dominant leaders often find they typically need to take more of a back seat during deliberation stages, while passive leaders often need to be more assertive when decisions are communicated. Actively observing and reviewing outcomes versus expectations helps leaders learn, improve and adapt their approach faster.

Conclusion:

Mediocre leaders come to believe their instincts are above question, while the best leaders work to examine and overcome them. The fact is, our nervous system is wired for a very different world for the one we live in, and this often works against us when it comes to reasoning.

The future is fundamentally uncertain, this means not every decision is going to work out the way we like. Despite this, possessing the awareness of our weaknesses and adopting a systematic approach for important decisions can dramatically improve our judgement and stack the odds in favour of long-term success.