This article about the Managerial Decision Making Process is the seventh article in a series of twelve about Self-Handicapping Leadership by Professor Phillip Decker and Professor Jordan Mitchell. All articles can be read without knowledge of the previous ones. You’ll find an overview of articles at the end of this article.
Self-Handicapping in the Managerial Decision Making Process
All leaders make decisions – some involve complex analysis some are as simple as flipping a coin. Either way, there are many self-handicaps that can prevent leaders from solving problems to the best of their ability.
Some aspects of decision making that may be compromised by self-handicapping are:
1. Choosing the problem.
2. Defining the problem.
3. Putting together a decision team.
4. Gathering quality information in order to compare and choose between alternatives.
5. Finding and choosing excellent and/or unique solutions.
6. The entire process of implementing decisions.
7. Monitoring the results of decisions made.
A mistake in any of these areas can lead to poor decision making outcomes. Anyone can be an “expert” in these processes by simply logging into the internet and looking at all the “seven step models”, but understanding what leaders can do to handicap these processes is key to exceptional leadership.
What drives (Poor) Managerial Decision Making?
Decisions can be made based on emotions or without considering enough alternatives or information. Leaders can also make poor decisions as a result of tunnel vision, trying to satisfy everyone, or avoiding a decision because of fear of accountability.
Making decisions based on personal preferences instead of what is right for the institution and its mission can clearly have negative outcomes for all involved. A good decision will incorporate what an individual or a group knows, where they assess the probability of success for each available outcome, and it will stay within the frame of their attitude toward risk.
A bad decision is a decision that violates what the organization wants or can afford (Skinner 2009). Managers make hundreds of decisions and they often self-handicap themselves in the process (Decker & Mitchell 2016).
Decision making becomes difficult when:
– the real decision maker is hidden (not on the team) or there are multiple decision makers.
– objectives are not established and framing is not understood; no clear definition for success is established.
– a lack of data and/or alternatives are generated by a team or when the available options are not well analyzed.
– one becomes mired in too much data to make a decision; information is consuming too much attention.
– uncertainty and risk are misunderstood.
– relying too heavily on recent information or events.
– an individual or team becomes overconfident.
– It becomes unclear whether to make a decision or continue doing research.
Traditional Managerial Decision Making Processes
The traditional approach to decision making involves a leader analyzing a situation and proposing a solution based on his assumptions and past experience. Then a team performs the cost/benefit analysis, builds a business case, and presents that case to the decision maker, who then uses it to justify the decision he has already made (Skinner 2009). This is very common and you have probably seen it in operation.
When the team’s business case supports the solution proposed by the decision maker, this approach will hardwire the needs of the politically powerful. If case findings contradict or do not support the decision maker’s proposal, the consequence may be endless challenges or requests for more information in order to avoid a decision or any commitment. The entire process is in itself self-handicapping.
Why do Projects Fail so Often?
Failure to successfully implement change initiatives in organizations is widespread, commonplace, and costly (see Baunsgaard’s: Should Strong Leaders also Lead Organizational Change?). The above mentioned types of decision strategies might be why so many projects fail in business (Dean & Sharfman 1996). The average failure rate is 73% and has been reported as high as 93% (Decker, et. al. 2012). Projects are abandoned about 30% of the time and joint ventures are said to fail 61% of the time.
So much is known about how to use decision making to successfully choose a project with a high-expected economic return and how to apply change management processes to improve implementation. Why then do failures persist in such great numbers?
The answer is self-handicapping, and it all starts with poor decision analysis and decision making. Not understanding the process, not framing a problem well – resulting in the wrong problem being solved or the problem itself expanding, using problem solving to avoid accountability, or to avoid risk or uncertainty. These are all methods of self-handicapping. Your decisions can have a large impact – on you, your employees, your organization, and your career.
Bad Decision Making – Failing to Frame a Problem Correctly
Leaders are often self-handicapping when they fail to frame a problem correctly. Framing is how we structure a decision in our minds, so we can look for alternatives that solve the problem. Flawed framing can result from being unaware of what you don’t know, or not paying attention to what you do know.
We often want to rush through framing and jump right into finding solutions. This is like driving without checking a map or asking for directions first. Not considering the assumptions being made when framing is clearly self-handicapping and can cause leaders to dive into action without understanding the problem or the range of solutions. It is best to solve the right problem. Always remember that good analysis will never make up for a poor frame (Skinner, 2009).
“Solution Creep” – an Example of How to Self-Handicap the Framing Process
Have you ever been in a team meeting where “one thing led to another” and 45 minutes later you were on a completely different subject and developing a solution for something completely different from where you started? This is “solution creep” – when a problem starts small and then keeps expanding until it is too large for the team to manage.
The effect of this is a lack of focus on what is truly the important decision to make. Furthermore, some people’s framing is influenced by the past. If you won too many trophies as a kid, you may expect to be the winner every time you compete. This framework will make you feel like a loser when you come in second. If you were thinking about how great it would be to place second, then second is good, not bad.
A Problem Well-Framed is a Problem Half-Solved
There are many ways to self-handicap framing; just remember that a problem well framed is a problem half solved. Unless you have had training in decision analysis, you will probably benefit from seeking more information – we suggest MindTools, Skinner’s book (2009), and Tools for Decision Analysis.
Biases Influencing the Managerial Decision Making Process
Perceptual biases (the lens through which we filter our experiences and lose objectivity in evaluations of people and situations) also influence decision making.
Conformation bias nudges you to construct your framework to favor information that confirms your beliefs. Surrounding yourself with a decision making team that agrees with you all the time, or “yes-men,” can have this effect. If you don’t recruit people, who will catch your biases, you run the risk of being overconfident, narrow minded or short sighted in your decisions. We all have an “In” and an “Out” group; we are biased towards our “In” group – they get more of us.
When interviewing candidates, one candidate may look and act just like you do. You have the same experiences and the same attitudes. Maybe you even went to the same school. This candidate will produce a feeling of comfort and you are consequently more likely to select him/her over other potentially more qualified candidates.
By definition, when you bias your own decisions, you are ignoring or avoiding pieces of information – consciously or subconsciously (Wolf 2014). In order to minimize this problem, challenge co-workers to take opposing views or search for information to contest your bias (for example, in an interview). This “devil’s advocate” approach will help you to discover and acknowledge otherwise overlooked or devalued information.
Framing Shapes our ‘View’
It is important to understand that framing radically changes how we see risk – and this can be self-handicapping. Tversky & Kahneman (1981) showed that people value a gain they know is certain, more than a probable gain with an equal or greater expected value. The opposite is true for losses. People will devalue a certain loss more than a probable loss. Gains and losses are evaluated from a personal reference point and this point of view can be manipulated by how the problem is framed and presented.
Haphazard presentations of a frame or manipulated presentations are all effects of self-handicapping. This can for example result in “sunk-costs”, which refers to the problem of continuing to fund a failing project with no ROI (Return on Investment). People are generally reluctant to accept a sure loss, and are therefore, willing to make unsound bets in the hopes of breaking even. They will keep “throwing good money after bad” bets.
Making Smarter Decisions in the Managerial Decision Making Process
Using smaller, shorter frames results in finding solutions to problems faster. With this approach you can find a faster way to fail, recover, and try again. It also helps to eliminate self-deception in framing and problem solving. Creating “one pill” to cure all forms of cancer, is an example of a problem that is too large and requires too much time to solve.
One of the key factors in developing a mastery goal orientation is the careful selection of your decision frame – don’t let it select you. Generate alternative frames, evaluate them, and select the most appropriate one.
Feel free to reframe when you find yourself using an inadequate frame. One more time: increasing the number of alternatives generated or improving the quality of analysis will never make up for a poor frame.
Russo and Schoemaker (1989) propose several self-handicaps beyond framing:
- assuming that if a lot of smart people are involved in a team, good choices will automatically follow.
- not adequately examining the assumptions being made in the analysis process.
- believing you can keep all the information in your head rather than follow a systematic procedure to make a final choice.
- failing to interpret feedback correctly because you are protecting your ego.
- failing to keep systematic reference records or otherwise auditing your decision process.
Groupthink and its Influence on Decision Making
While groups are likely to outperform individuals, they are not superhuman. Conflict or other biases, such as groupthink (allowing a group’s internal unity and connectedness to dominate the decision-making process) can arise. Consequently, ideas that conflict with the group’s presumptions may be given less attention. When this happens, the group needs help to accomplish effective group decision making.
If you find yourself in a mismanaged decision-making group, try to communicate to the group or group leader – regardless of any pressure to the contrary – that you believe the frame may not be appropriate. We highly recommend Peter Scholtes et al.: The Team Handbook (2003) for further reading on team functioning and decision making.
Evaluation Frames and Courses of Action
When evaluating alternative courses of action, only doable alternatives are to be considered. Moreover, only the differences between alternatives that are relevant are to be discussed and evaluated. Since the results of alternatives used in the past are known, evaluate merely the future.
You also want to avoid spending time on variations of one alternative (variations on a theme); they just add to the analysis and are unnecessary.
When evaluating alternatives you are always dealing with uncertainty, ambiguity, and risk, as well as determining when to stop gathering information. Nearly all important decisions we make involve uncertainty which is a lack of a clear understanding of the future – something that is unknown or not perfectly known. Ambiguity is a lack of clarity about goals and outcomes that impact the value and choice between alternatives.
Risk is the severity of the consequences of a decision. Uncertainty in problem solving means you are risking value – you do not know the future and cannot say what will add value in the future. While ambiguity means you are risking time – indecisiveness and avoiding accountability are both a waste of valuable time (see also article #3 about The Problem of Accountability).
Uncertainty includes: the likelihood that a project will make money, the length of time before there will be a return on investment, and questions of what is the real value of the deal/project. Uncertainty is measured in the evaluation of alternatives when asking experts to state their level of confidence (“I am 80% sure it will happen;” “I am 20% sure it will happen”).
This is done in the weather forecast every evening. When rain is forecast at 50% or greater, you may decide to carry an umbrella. At 100%, you may choose to stay home. Ambiguity can be resolved before a decision has to be made, whereas uncertainty and risk must be estimated – they can only be resolved over time and after the decision is made.
Ambiguities include: the criteria used to evaluate alternatives, which outcomes will determine the success of the project/strategy, which experts to use and what to ask, and who should be involved in the decision making and implementation.
Dealing with Uncertainty and Ambiguity in the Managerial Decision Making Process
Most traditional decision making processes are not equipped to adequately deal with ambiguity and uncertainty (we suggest Skinner, 2009, for a solution). What is even worse is to fall into the habit of dealing with neither. Where uncertainty leads to intuitive “gut feel” decisions by leaders, ambiguity often leads to one person making a power play or the team deciding to “just do it” to move things along.
Being in a state of uncertainty and ambiguity simultaneously can lead to analysis paralysis where no decision is made (Skinner, 2009). Many leaders tend to ignore uncertainty rather than deal with it; much less use it to their advantage. Every analysis made requires us to make some assumptions about the risks involved. The key is whether you are making explicit assumptions using probability or making uninformed guesses.
How much Knowledge is Enough?
Once the alternatives have been generated and evaluated for uncertainty and risk, the next step is to analyze the value of the new information. One can calculate the value or lack of value of new information (see Skinner, 2009). When a group is involved in making a decision there is a diffusion of accountability – no one wants to stand up and say, “let’s decide.” It is self-handicapping to have too much data or take too long in deciding; there is a point when collecting more data adds no new knowledge – meanwhile, back on the job, people are waiting for you to make a decision.
Relying on Memory or Systematic Procedures for Great Managerial Decision Making
Managers are often good at fooling themselves about feedback and fail to interpret the evidence for what it really says. Believing they can keep all the information straight in their heads rather than following a systematic or statistical procedure when comparing alternatives will always lead to trouble.
Relying on experience alone rather than expert opinion can cause poor analysis. Lack of tools to analyze alternatives can never be used as an excuse for poor analysis in these times of the Internet. MindTools alone (2014), for instance, lists and describes at least 40 different tools.
“Pleasing the Boss” in the Managerial Decision Making Proces can be Fatal
Frequently leaders want to “please the boss” and make decisions that will look good to him/her. As a result, they may bias the generation of alternatives, evaluation, and the final decision. Managers may go along with their bosses because they don’t want to be labeled a “non-team player.” This can lead to making the wrong decision.
Sometimes managers are self-centered and make decisions for themselves over the organization. Self-centered management can rob an institution of its goals and finances so that eventually competitors overtake it. If you find that you have to talk yourself into something, examine the situation more closely to determine whether you are making the right/ethical decision.
Seeing through the lens of Experience and Functions
Some leaders can think only through the lens of their background. For example, when a problem is worked on by production and finance specialists, people problems are placed lower on the agenda than when Human Relations are involved. Accordingly, most of their solutions are production processes/tools or financial remedies. As a result, in the implementation process, “people problems” will be the probable causes of failure (because they were not adequately reviewed, nor were contingencies developed in the decision making phase). Analyze your team to determine which viewpoint is missing.
Finally, Appreciative Inquiry (MindTools 2, 2014) forces you to look at a problem based on what’s ‘going right,’ rather than what’s ‘going wrong.’ Most of us approach an issue as a “problem,” focus on the things that aren’t working, and generate alternatives to fix it. Appreciative Inquiry shifts us to a positive perspective, from which we look at the things that are working, and build on them. Sometimes, a negative view is handicapping.
Appreciate what you don’t Know in the Managerial Decision Making Process
What we don’t know may be as important as what we do know. To think or pretend you know something when you do not is self-handicapping and may go undiscussed. When a young manager speaks about a subject he knows little about, few will jump in and correct him. Another example is when leaders associate with people that have the same backgrounds and make the same assumptions without exploring the consequences of the assumptions made in framing or analysis.
Attend to those who are not biased by your own framing for decision making.
Finally, the implementation team’s voice has to be heard on specific issues. The implementation team can provide valuable information as to expected time to completion, confirmation of financial costs, potential failure factors, alternatives to project structuring, and resistance.
Keep forcing yourself to ask a series of ‘what if’ questions that make you think about new possibilities. Keep questioning yourself and your organization. Look at the opinions on the periphery of your team – that is where the dissenting views are – you may have to force yourself to do this. Business is in a constant state of change and the change that is counter to what is comfortable is often ignored. Reading about “disruptive innovation” at the Christensen Institute will be helpful.
“Gut” vs Analytics in Decision Making
Managerial decision making and problem solving are complex processes with opportunity to self-handicap aplenty. There is always a war going on in every business leader about using “gut” vs analytics in decision making.
Successful use of one’s gut cannot be replicated and, is therefore, valuable. It may also be more creative. So, decision making is both an art and a science.
Decisions need to be correct, timely, incorporate employee buy-in, and help the organization achieve its goals. This is the burden all managers and leaders bear in their positions. It behooves us all to eliminate every handicap we create for ourselves, because there are so many in these complex processes.
Some baby steps one can start with are:
- Frame a problem three different ways and ask yourself what are the differences.
- Determine whether you are risk averse.
The Key Behaviors to use in framing are:
- Choose a problem.
- Rephrase the problem. Reword it several times in different ways – take single words and substitute variations.
- Increase your awareness of the problem by looking at it from different perspectives:
- consider the ethical or legal concerns.
- how would we have framed this x weeks ago?
- if we were unwilling to take a risk how would we define the problem?
- if money were no object, how would we define the problem?
- invert the situation and see how you feel about it.
- Rewrite it from different stakeholders’ perspectives – finance, production, human resources. How would our employees or a client frame this?
- List and challenge any assumptions. Test each assumption for validity.
- Ask how much the problem changed as you adjusted your frame.
You can determine your level of risk seeking/aversion by taking the test at http://www.humanmetrics.com/rot/rotqd.asp or http://testyourself.psychtests.com/testid/2122. (The latter will take longer and you only get the snapshot without paying a small fee for the complete report.)
Dean, JW & Sharfman, MP. (1996). Does Decision Process Matter? A Study of Strategic Decision-Making Effectiveness. The Academy of Management Journal, Vol. 39, No. 2 (Apr., 1996), pp. 368-396.
Decker, P.J., Durand, R., Mayfield, C.O., McCormick, C., Skinner, D., & Perdue, G. (2012). Predicting implementation failures in organization change. Journal of Organizational Culture, Communications and Conflict, 16 (2), 39-60.
MindTools (2014), downloaded 10-23-14.
MindTools 2 (2014), downloaded 10-23-14.
Russo, JE and Schoemaker, PLH (1989). Decision Traps. Simon & Schuster, New York.
Scholtes, et. al. (2003). The Team Handbook, Joiner Associates.
Skinner, DC. Introduction to Decision Analysis (2009, 3rd Ed). Probabilistic Publishing.
Tversky, A & Kahneman, D. (1981). The Framing of Decisions and the Psychology of Choice. Science, New Series, Vol. 211, No. 4481. (Jan. 30, 1981), pp. 453-458.
Wolf, R (2014), downloaded 10-23-14.