How Is A Leader Supposed To Make Decisions?

Why do we make decisions?

We make decisions throughout our day, most of which are straightforward and don’t require much thought. We call them auto-pilot decisions. However, in non-routine scenarios or under the pressure of time resources, it’s important to learn strategies for making positive decisions in tough situations.

When making every decision, we first form opinions about the gathered facts, then weigh the costs and benefits of our choices and finally choose actions via our mental processes which are influenced by our bias, reasons, emotions and memories. While we may not be able to guarantee the outcome of a decision before we make it, at least we know we have put a lot of careful thought into it.

Moving from bad decisions to great decisions

We make hundreds to thousands of decisions each day, some turn out to be great decisions, while the rest are not. The key to making good decisions is the ability to think critically to avoid common errors and biases. In other words, we need to look at all possible sources of information with an open mind to make sound decisions based on facts, rather than our gut feelings. Although some problems need to be addressed urgently, great decisions always attempt to fix the root cause, other than symptoms, or else the issue is likely to repeat itself.

In reality, if every decision has to go through a thought process, we probably won’t get much done in a day. In order to make decisions quickly and economically, our brains often rely on a number of cognitive shortcuts, also known as ‘heuristics’.

Heuristics are mental shortcuts that facilitate problem-solving and probability judgements with generalisation or rules-of-thumb strategies that reduce cognitive load. In many situations, they can be effective for making immediate judgements, yielding accurate predictions or resulting in good decision-making. Nevertheless, they usually cause fuzzy thinking and irrational decisions. Instead of basing it on logic, our behaviour results from a mental shortcut with no real rationale to support it.

Other reasons for bad decision-making include individual differences such as age and socioeconomic status or experiences people had made in the past or making multiple decisions at once, all can lead to poor decisions.  

So, how could we sharpen our decision-making skills?

• One of the strategies is to prioritise our important decisions. The keyword here is ‘important’, we need to accept that for some routine tasks such as breakfast or wearing clothes, we can auto-make decisions without putting much thought and effort, so saving our energy to make harder decisions.

• Be mindful of the decision-making process as it can be stressful, panic and fearful sometimes. It’s crucial to get enough sleep, so we can think with more clarity. Once a decision is made, follow-through is essential.

• Another way is to slow down the decision-making process to prevent impulsive choices. Gather as much information as possible and don’t allow other distractions to affect our decisions. When there is no ‘right’ answer to a complex problem, take a break and return later with a fresher mind.

A rational decision-making process model

Step 1: Recognise the problem/opportunity

At this step, identify the problem or opportunity based on facts and insights extracted from collected data. If it is the problem, try to find out the root cause with the Five Why (explained in the next part). Do not mistake symptoms for problems as symptoms are consequences and indications that problems exist.

Step 2: Define goals or solution criteria

We tend to skip this step and jump straight to solving problems without setting some goals when we deal with a problem as different goals will lead to different solutions. For example, a company’s problem is due to the delayed customer service. To solve this issue, the goals can be 1) Hiring additional staff to meet the increasing customer demand; 2) Reducing customer orders until we can find new staff to ensure service quality, 3) Automating some parts of manual personal services to speed up the serving time per customer.

Step 3: Explore possible strategies

At this stage, problem solvers are expected to generate a set of strategic approaches to tackle the identified problem. Brainstorming, fractioning a complex issue into smaller parts or keeping a creativity checklist could help uncover more possible and creative solutions.

Back to the example in step 2, if resources and capabilities are allowed, the company should target to achieve the three goals simultaneously to enhance customer service. Under each goal, there will be a list of strategic solutions that need to be completed. For instance, to recruit additional staff promptly, the company can look for 1 to 2 part-timers instead of 1 full-time employee to both save cost on unseasoned time with low sales and have an evolving cycle of staff support.

Step 4: Anticipate the potential results for each solution

Back in history, there were many decisions and solutions implemented that led to severe outcomes without testing or anticipating the possible outcomes. The question of who to talk with to help anticipate the effects of various ideas is also very important.

Step 5: Look back, evaluate and learn from the results

As the last step of the process, many people often miss out on the importance of results evaluation even if things turn out well. If the solution does not work, a feedback system and analysis are necessary to seek out why it was not successful, record and report any findings for future improvement.

The Five Whys

The Five Whys technique was developed in the 1930s by Sakichi Toyoda, the Japanese industrialist, inventor and founder of a global Toyota company. He proposed a team-driven process to interrogate the problem by asking ‘Why’ many times, usually 5 to find the root cause of an issue and prevent the same problem from happening again.

Here’s how the 5 Whys technique works:

1. Look at the problem

2. Offer one potential cause

3. Ask ‘Why?’ for that one cause

4. Repeat the cycle for another 4 times

An example is as follows:

References

Cherry, K 2023, ‘Why you make bad decisions: cognitive biases and decision-making errors’, Verywell Mind, available at <https://www.verywellmind.com/why-you-make-bad-decisions-2795489>.

HubSpot 2023, ‘Rational decision-making: what it is and how to use it’, HubSpot Blog, available at <https://blog.hubspot.com/marketing/rational-decision-making>.

iSixSigma n.d., 5 Whys: a problem-solving technique, iSixSigma, available at <https://www.isixsigma.com/dictionary/5-whys/>.

Mason, S 2022, ‘How to make great decisions quickly’, Harvard Business Review, available at <https://hbr.org/2022/03/how-to-make-great-decisions-quickly>.

Psychology Today n.d., ‘The art of decision-making’, Psychology Today, available at <https://www.psychologytoday.com/au/basics/decision-making#the-art-of-decision-making>.

ProjectManagement.com 2023, ‘6 steps for rational decision-making’, ProjectManagement.com Blog, available at <https://www.projectmanagement.com/blog-post/73036/6-steps-for-rational-decision-making#_=_>.

Range n.d., Decision-making models: frameworks for effective choices, Range, available at <https://www.range.co/blog/decision-making-models>.

ReachOut n.d., Decision-making 101: a guide to making better choices, available at <https://au.reachout.com/study-work-and-money/problem-solving/decision-making-101>.

The Decision Lab n.d., Heuristics: cognitive shortcuts in decision-making, The Decision Lab, available at <https://thedecisionlab.com/biases/heuristics>.