The Decision Making Process In Management

Certainty In Decision-Making

In a book I read recently about how we make decisions, a section of the book struck me as something that we could all benefit from – as managers, and in our lives. The focus of this particular chapter was certainty and how it affects our decision making process.

It feels good to be certain. Confidence is comforting. The desire to always be right is a dangerous side effect of having so many competing brain regions inside one’s head. While neural pluralism is a crucial virtue – the human mind can analyze any problem from a variety of different angles – it also makes us insecure.

This is why being sure of something is such a relief. Certainty imposes consensus on this inner cacophony. It lets you pretend that your entire brain agrees with your behavior. And being certain means that you aren’t worried about being wrong.

This is even a problem for what are supposed to be experts. Consider political pundits. Even though pundits are trained professionals, presumably able to evaluate the evidence and base their opinions on the cold, hard facts – that’s why people listen to them – they still succumb to this cognitive error.

A group of 284 people who made their living “commenting or offering advice on political and economic trends” were asked to make predictions about future events. About upcoming elections. About apartheid in South Africa. About foreign relations. About the dot-com bubble bursting. In each case the pundits were asked to rate the probability of several possible outcomes.

After tallying the data, the predictive failures of the pundits was obvious. Although they were paid for their keen insights into world affairs, they tended to perform worse than random chance. They were right less than 33 percent of the time. A dart-throwing chimp could have beaten the experts.

And the most well-known pundits tended to perform worse than the any of them, constantly churning out overblown and over confident forecasts. Why? Because the more eminent the “expert”, the more certain they were of their own abilities. They imposed a top-down solution on their decision-making processes.

When pundits (or managers) are so certain of their beliefs, they ignore the brain areas that contradicted their ideologies. This suggests that one of the best ways to distinguish genuine from phony expertise is to look at how a person responds to dissonant data. Does he or she reject the data out of hand? Perform elaborate mental gymnastics to avoid admitting error? Everyone makes mistakes (I even made one once!) – the object is to learn from these mistakes.

As the researcher writes, “The dominant danger remains hubris, the vice of closed-mindedness, of dismissing dissonant possibilities too quickly.” Even though practically all of the professionals in the study claimed that they were dispassionately analyzing the evidence – everybody wanted to be rational – many of them were actually indulging in some conveniently cultivated ignorance.

Instead of encouraging the arguments in their heads, the pundits settled on answers and then came up with reasons to justify those answers. Their decision making process was biased. Management decisions can suffer from the same fate. The role of statistics in business decision making ought to help to curb our biases.

How certain are you in your beliefs?

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