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Strategic Decision Making Traps

By Anthony Cerminaro

"There are a series of traps that people fall into [in making decisions], that lead to incorrect judgements being reached, whatever the quality of the preceding analysis. The incidence of this is high. The cost, given that these are strategic decisions, is commensurately large...

"Pragmatism leads to at least two biases that impact strategic decision making.

1. Fact-based bias... we like to make decisions based on facts,[but]... To make strategic decisions, we need to be guided by a 'theory' that allows us to act before all the facts are in... a causal theory about the future - 'if we do this, then the following will happen' - lies at the heart of strategic decision making. We cannot wait for all the facts.

2. 'Cut-through' bias... The second consequence of a pragmatic mindset is that it drives people to 'cut-through' and jump to a decision, by making a call. It is the other side of the fact-based bias. We wait for the facts, get impatient and cut-through...Unless it is done with great skill, it can lead to wrong decisions.

"Following are the traps that people fall into.

Trap one - over-simplification

Trap two - embedded assumptions...Many decisions are based on embedded assumptions that are not discussed, assumptions that often turn out to be wrong.

Trap three - incomplete criteria... Many important decisions are made without an explicit, agreed set of criteria... Strategic decisions will have multiple options, to be tested against multiple criteria... multiple weightings and multiple time periods. The human brain cannot reliably cope with such levels of complexity.

In these circumstances, a formal, explicit process will yield a surer judgement...

To avoid these traps, make the decision process visible. Work hard to consider the whole problem at the same time. This provides a great incentive to expedite the process. Identify important embedded assumptions. And spend real time talking through the decision criteria, weightings and scoring. This way, the decision process will do justice to the hard work done in fact gathering and analysis. Better decisions are the expected result."

Read more in this article from CEO Forum Group

Full post as published by Bizz Bang Buzz Blawg on January 05, 2010 (boomark / email).