In order to make the best decisions, follow these decision-making process steps:
1) Identify need for decision
2) Get relevant info
3) Decide goals
4) Develop criteria
5) Generate a few viable options
6) Weigh options
7) Implement decision
8) Revise implementation and decision as needed
That’s the key take-away message of this episode of the Wise Decision Maker Guide, which describes the 8-Step Process for Making the Best Decisions.
Videocast: “8 Key Leadership Decision-Making Process Steps to Making the Best Decisions”
Podcast: “8 Key Leadership Decision-Making Process Steps to Making the Best Decisions”
Links mentioned in the episode
- The article that forms the basis for this episode is “8-Step Leadership Decision-Making Process for Making the Best Decisions”
- Get the book Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters
- You are welcome to register for the Wise Decision Maker Course and get a digital version of the Assessment on Dangerous Judgment Errors in the Workplace for free as part of the course
Below are the most important pieces of content from the Wise Decision Maker Show (to be read in the following order):
- How to Evaluate Unconscious Bias Caused by Cognitive Biases at Work
- Wise Decision Maker Movement Manifesto
- How to Make Decisions Quickly
- 8-Step Leadership Decision-Making Process for Making the Best Decisions
- 8 Key Steps for Effective Leadership Decision Making to Avoid Decision Disasters
- 8 Key Steps to Prevent Failure in Implementing Decisions or in Managing Projects and Processes
- 10 Steps for Strategic Planning to Defend Your Future
- 12 Mental Skills to Defeat Cognitive Biases
- Never Go With Your Gut: Video and Audio Book Trailer (Avoid Poor Decisions
Full Transcript of the Wise Decision Maker Show Episode “8 Key Leadership Decision-Making Process Steps to Making the Best Decisions”
Hello everyone and welcome to another episode of Wise Decision Maker. Today, we’ll talk about everyone’s favorite topic – process. Specifically, decision-making process for leaders, current and aspiring leaders. Now, don’t click away – process may not be your favorite topic, but it’s supremely important, really, really, really important. So you’ll want to pay attention to this video in particular. Clicking away would be a bad decision. So why did you want to click away, what’s up with the process, and why should we care about process? Well, because without process, you just have your gut intuitions, you just have your intuitive desires, you have your instincts. And, actually, our gut intuitions are pretty terrible decision makers according to the research on this topic. They bring ruin, devastation to really successful companies and very highly successful leaders. Unfortunately, fire-walking gurus and others will often tell you that you can just follow your gut in making decisions as a leader. Not a good idea, really really bad idea to follow your gut. If you listen to them, good decision making is something that’s almost magical, it’s either acquired by, well, hard earned experience or something you have a really long time, have thirty years or more, and then you’re going to be a good decision maker. Or, possessed by a few select geniuses, CEOs who deserve a top notch pay package. Not the case. Actually, decision making is something that can really be learned pretty easily, if you look at the most effective decision making strategies that are out there, and that’s something we’ll talk about today.
First, I want to clarify why our gut intuitions are such a bad decision making mechanism. It turns out that we are prone to numerous, numerous judgement errors. Scholars and behavioral economics and cognitive neuroscientists like myself have discovered over 100 judgement errors that are called cognitive biases that we tend to make because of how our brain is wired. Because of our evolutionary heritage and because of other aspects of how we were and how we currently are and how our brain has evolved and what’s going on there right now. So we make a lot of mistakes when we trust our gut, follow our gut. That’s not something we want to do. Fortunately, like I mentioned there’s a lot of research that shows exactly how to overcome these problems. And that’s a strategy, I’ll share about one strategy today for enabling you to protect yourself from making bad decisions in your professional life as leaders, and you can also apply this to your personal life. I know I do.
So first, I want to share about a decision-making process that I did not make. When I was a younger person, early on in my life, when I was just in my teens choosing a career, I was thinking about what careers should I go for, and I made a pretty serious mistake when I was at that stage of my life. Now understand that at that time, I really didn’t know about cognitive biases, mental blind spots, good decision making, so I didn’t have that going for me, I just had my gut intuitions, my gut reactions. And my gut reactions were listening to my parents. My parents, you know, there’s lots of good things they did, but there are some bad things that they did. And one of the bad things that they did was they strongly encouraged me to be a medical doctor. From really early on, when I was a kid, growing up, they said, “I should be a medical doctor – I should be a medical doctor – I should be a medical doctor” and you know, I came to believe them. You know, they’re my parents, they’re someone I trust, they’re experts on this “adulting” stuff. So, OK, I’ll be a medical doctor.
So all throughout high school and college I was learning how to be a medical doctor, I was taking classes on it. Oh gosh, I remember an internship, volunteer internship I did at a hospital once – there were several internships at hospitals – but there was one particular one where I did an internship in the ER and looking at all of these things that people are rushed into the ER. The worst thing, the thing I really remember right now, was that they were trying to save someone who had, a major accident occurred and they were trying to save someone and they actually, like, in front of me – I wasn’t quite in front, I was in the back of the room – what they did essentially is cut this guy’s chest open and apply electrodes to his heart to try to shock his heart back to life. And they didn’t succeed, unfortunately this person died in front of me on the operating table, and then they asked me to hold this guy’s chest together while the doctor was sewing it back together.
So that was pretty disturbing as part of my experience. But you know what? That was not the thing that put me off being a medical doctor. I can tolerate that. I can be like, okay this is just a human being, this is who we are – whatever – you know, just biological machines, in a way, right? I’m not talking about the spiritual stuff but that’s kind of how I was thinking about it. But what really put me off being a medical doctor was when I actually started learning about cognitive biases and good decisions around that time in my last year of college. I started exploring these topics because I was always interested in how groups made their decisions and how people made their decisions, and so I studied this through a historical lens. I used to be really fascinated with history, how groups made decisions in history, how people made decisions in history. Only mid, late in my college years did I start to get into the psychology of this and realized that a lot of the stuff in history really needs a psychological approach to truly understand how people make decisions because there is so much research that has come out very recently about that decision making that is not included in history, the study of history.
So anyway, to make the longer story short, I was sitting down – I was thinking about why did I actually want to be a medical doctor? And I have to say that I realized that I didn’t really want to be a medical doctor. My parents wanted me to be a medical doctor and lots of my friends, you know, I had a very close friend at that time who was going to be a medical doctor, and we were kind of bonding around that. He wanted me to be a medical doctor, many others wanted me to be a medical doctor, but I just wasn’t resonating with that. It just wasn’t something calling me to do that, it’s not something I was passionate about. I realized I was just doing it because my parents wanted me to do it and because it was just going to be a high-status, high paying job which of course is why they wanted me to do it. And I fell into a cognitive bias called “illusion of truth.”
Now, the illusion of truth refers to the fact that when something is repeated often enough, we come to believe it is true. We come to internalize it. That’s how advertisements are so effective, whether they’re for campaigns, commercials, to get you to buy stuff, or for political campaigns or for anything else.
So, the illusion of truth – big problem! And I came to believe what my parents were telling me about being a medical doctor. So, you know, I trusted them, I came to believe that, and that was a big problem. I took a lot of expenses. I spent thousands of hours trying to be a medical doctor, taking classes, learning these topics, doing internships, all that stuff. That was time that I pretty much wasted, since I decided not to go into medical school and be a medical doctor, and that was a serious, serious mistake that I made. Spending so much time, wasting so much of my life, learning stuff, focusing on stuff, doing stuff, that I could have much more effectively channeled into my real passion which was, at that time, I decided to go and study decision making by groups and individuals in historical and contemporary settings. So that’s what was fascinating for me and that’s what I decided to study. And that’s how I came to be doing what I’m doing right now with you watching me in this video, on this episode, checking out this episode.
So then, as you can imagine, my parents weren’t very thrilled with this turn of events, and we had a number of conflicts, a number of fights. That was my first real big break with my parents, and you know, they’re still kind of upset with my choice of career. Now, the consulting, speaking, coaching, writing, it’s a boom and bust sort of business, you have a lot of clients, everything goes well, and then suddenly you have no clients and you need to work on getting clients.
And whenever things aren’t going well, my parents are still telling me like, “oh, are you sure don’t want to go to medical school, you’ll always have a job then. And we can even pay you for the medical school, whatever it is, you know, hundreds of thousands of dollars.” No thank you, I appreciate it … you know, medical school, I was looking at the statistics on being a medical doctor. And it turns out that medical doctors are super stressed and not very happy people. Medical doctors actually have the highest suicide rate of any profession in the U.S. That’s another good reason I didn’t want to be a medical doctor. Sorry to any medical doctors who are checking out this episode but it is true… look at the statistics.
Anyway, so that’s one type of mistake that I made in my life by not following good process, and there’s many many others mistakes that many people that are much more prominent than me make. So think about Carlos Ghosn. He served as the Chairman and CEO of Renault, Chairman of AvtoVAZ, Chairman of Mitsubishi, and CEO and Chairman of Nissan, and later of the combined Nissan – Renault – Mitsubishi alliance. He served as a Chairman and CEO of that. Hugely prominent, I think in 2005 he was ranked as the 3rd most prominent business person in the world. So, super, super, super important, powerful person. And, he was arrested in Japan in November 2018 on charges of underreporting earnings and misusing company funds. And that information that the Japanese authorities used to arrest him, that information came out from the Nissan leadership, from the Nissan leadership team who were working under Carlos Ghosn, they were working under him, and that information came out from there. Yeah…he really misread that situation, it’s pretty clear to me if you look at the evidence that this was a result of political maneuverings within Nissan, that he was about to fire the current Nissan CEO and the Nissan CEO went behind his back, got this information, sent it to the investigators, and the investigators arrested him. So that’s what it looks like most likely happened. And Carlos Ghosn, no matter how prominent he was, he really made a bad decision by misreading the politics at Nissan. Not a good idea, you know, maybe he shouldn’t have tried that political maneuvering but we’re not going to go into that in depth. But that’s an example of a really really bad decision by a really really prominent person.
So, maybe you know someone to whom that sort of thing occurred where political maneuverings where this person wasn’t able to read the social context of a business situation correctly, and got screwed as a result. I know I have a number of clients who suffered those sorts of things in the past and I worked with them to help them reduce those sorts of problems but I mean, that still happens. And yeah, that’s not great, that’s a big problem. Now it doesn’t only happen to people, to individuals, to business leaders at all sorts of levels, low level and aspiring leaders, current leaders in smaller companies, mid-size companies, large companies, huge companies, Fortune 500 companies like Nissan and so on. It happens to companies themselves, companies themselves as a whole group make really bad decisions that lead to terrible, terrible outcomes.
So there was a study of the companies with assets of over $500 million that went bankrupt in the U.S. between 1981 and 2007. And there were 423 companies like that. Well the studies showed that in 46% of the cases, 46% of these companies, the bankruptcy could be attributed solely to bad decision making by the leadership. In other words, these bad strategic decisions, just about the bad decisions, not even about the implementation of the decisions, it wasn’t about logistics, it wasn’t about external events. 46% of the cases, it was bad, strategic, high-level decisions by the leaders that resulted in the bankruptcy. And that the bankruptcy could have been completely avoided if these decisions had been different. In many of the remaining cases, the bankruptcy may well have been avoided so we can’t have a guarantee on those. But in many of the remaining 54% remaining cases, bankruptcy likely could have been avoided if the leadership had taken different strategic, more effective strategic judgements. Yeah, so that’s a big deal, these were companies with over $500 million of assets, assets that went into bankruptcy. Now, think about what happens on a smaller level. According to statistics by the Small Business Administration in the U.S., about half of all small businesses close their doors within 5 years of opening. A lot of that comes from bad strategic decision making by their leadership. So you see it happens at the lowest levels of smaller businesses, it happens at the highest levels of huge companies, very common with decision makers.
So I want to talk right now about a strategy, a much more effective decision making process than going with your gut that you can use to make wise decisions. And I developed this technique based on research in cognitive neuroscience and behavioral economics about how you can fight cognitive biases effectively in making significant decisions. I call it Making the Best Decisions technique and I battle tested it with my consulting and coaching clients so worked with them, testing this technique until developing it into perfection and that’s why I’m sharing it with you now, both because I think it’s pretty done by now, it’s been battle-tested, it’s really great, and if you can’t afford to hire me you can still get the benefits of my expertise by simply applying this technique. So, don’t need to hire me, don’t need to hire anyone else. Just apply this technique.
It’s an eight-step process that you can use for any significant decisions. What do I mean by significant decisions? These are decisions that you can clearly imagine having a substantial impact on your bottom line. These aren’t “make or break” decisions. This isn’t about the company or about the career decisions. But they’re pretty, pretty significant. They can be such decisions like hiring a new employee – a significant decision – choosing a new supplier for an important part, those are company decisions. Deciding for you, for your career, to take the leap of a significant new project, or to acquire a specialization in a specific aspect of your field. So, professional development. So those are all the kinds of decisions that I’m talking about, and it’s pretty important to get these decisions right, like I said, they won’t make or break your career, they won’t make or break your organization, if you get one of them wrong. However, if you get several of them wrong in a row, or if you get several of them wrong in one area, that’s when they can bring you to ruin.
So for example, if you hire a bunch of poor employees, or if you get a bunch of suppliers who are bad in supplying your critical components, those could bring you to ruin if they are really bad decisions. So you don’t want to do that, and even if you get one of them wrong, it can still hurt you a lot. You want to prevent that. So you want to use this technique, Making the Best Decisions technique, this 8-step technique for whenever you want to get a significant decision right, and it takes about 30 to 90 minutes to apply, depending on how you do the various steps of it and what you find during the various steps of it. So I want you to block out, the first time you’re using it, block out at least 90 minutes to go through it completely. Because the first time you use it, it will take you more time. Then as you use it more, it will take you less and less time and of course each decision will be slightly different depending on the information that you find.
So what is the first step of this 8-step technique? First, you need to identify that a decision needs to be made. In some cases, it’s pretty clear, you know you want to hire a new employee. In some cases, it’s not going to be very clear, such as with Carlos Ghosn. It wasn’t clear to him that he should re-read his interpretation of Nissan internal politics. And that’s often the case when decisions are most complex, when they have – identifying that a decision needs to be made is most complex – when it has to do with people. People – I have to say – people decisions are really, really, really tough, and because they involve personalities, they involve complex dynamics, and it can be really tough to understand and realise that a decision has to be made. So, these are people decisions, but also sometimes you don’t see shifts in the market that you really should, because you’re not looking for them. You’re not trying to take the first step of this technique, and you should constantly be considering whether a decision needs to be made by scanning your environment, especially people and the external situation, the market and seeing whether a decision needs to be made.
So that’s the first step. The best decision makers, again, as part of this step, they take the initiative in evaluating whether a decision needs to be made. They don’t let their gut reactions cloud their decision making capacity on whether a decision needs to be made, especially when a decision needs to be made about people and when you might want to think about ending your relationship with someone. That’s a tough one. So that’s a really important one to notice in advance that you probably should make that decision.
So going on to Step 2, you gather relevant information from a wide variety of perspectives, informed perspectives of course about this topic. So you want to make sure to especially gather information from perspectives that don’t intuitively fit your own because you’ll run into what’s called the confirmation bias. That’s one of the over 100 cognitive biases from which we can suffer as human beings, where we tend to just go with – where we tend to look for information that confirms our current beliefs and ignore any information that we get that doesn’t confirm our beliefs. That’s why you want to deliberately, to counteract this bias, this gut reaction, you want to deliberately look for information that goes against yours current beliefs and search for it from people who have perspectives that you know are different from your own. So I tend to be super optimistic about the future – just my personality – that’s one of my cognitive biases, optimism bias. So I tend to gather information especially from the people who suffer from the opposite bias, the pessimism bias. So that’s how I use this step of this technique, Step 2, and that’s how you want to think about using this step, go to people who will help you recognize your potential mental blind spots on this question and sources of information on this question.
So, Step 3: Once you gather relevant information, you want to evaluate what was the data you got, you want to evaluate the goals that you want to reach. What are the actual goals that you want to reach as part of your decisions? What future do you want to achieve? Paint a clear vision of this future. So you want to have a very clear goal that you are going for, you know, you don’t want to say, “I want to hire a good employee”. Let’s say you’re making a hiring decision. That’s super vague and fuzzy. What do you want this employee to be like, what do you want this employee to do, what do you want this employee to achieve for you? What are your goals for this hire? So that’s what you want to highlight and make clear for yourself. Now, as part of this, I want to underscore that it’s really important to understand whether you’re dealing with a one-time decision, just to address a specific need, or whether you’re facing a systematic problem, a systematic issue. Where, your decision – then, a part of your goal should be to cure not simply the symptom of the problem, but to address the underlying problem as well. So you want to make sure to cure the underlying problem. If, let’s say, you are making decisions about changing your reporting structure, let’s say you’re finding that information that is important, let’s say negative information isn’t getting to you in a timely manner or isn’t getting to you at all. You want to – one of the things you can do is change the reporting structure, say, make sure to get this kind of information to me, let’s say, you didn’t get information about customer complaints, and you want to make sure, OK, I really want information about customer complaints. But that’s likely indicative of an underlying problem in your organization where people tend to fall into the “mum” effect. The “mum” effect is one of the cognitive biases where we tend not to convey negative information up the food chain and that usually happens because of the culture of the organization. So you want to look at the underlying culture and fix the underlying culture as part of this process. So, that’s Step 3.
Step 4: you choose decision making criteria that you will use to weigh the various options. Don’t look at the options yet, as much as you can help it, sometimes we have to have the options as we start the decision making process, but ideally, you would want to not consider the options as of yet, you want to look at the criteria. What criteria will you use to choose the options? What criteria will you use to choose what kind of information gets to you? You probably want to have the criteria of especially highlighting negative information, conveying this information in a specific format that will be applicable to you, maybe deciding which other people need information. When you’re hiring an employee, you want to look at this person’s skills, this person’s experience, this person’s fit in the organization, their personality, how well they align with the underlying values and the underlying culture that your organization has, of course their salary requirements, so all of these things, look at the criteria you will use to make the choice.
Now the reason that you don’t want to look at the options is that our intuitions will tend to bias the kind of criteria we choose based on the person we’re thinking about. Because as part of choosing the criteria, you’ll want to weigh the criteria. So let’s say you want to decide fit into your culture, you want to say, let’s say on a scale of 1 to 10 where 1 is least important, 10 is most important, you’ll want to say it’s an 8. For example, and let’s say you are really a company that’s well off, and you say the salary requirements are a 5, and so on. And you look at someone’s skills and skills are super important, this is a really important job to fill well, so you’re going to make it a 10, for example. Then, what you want to do is you don’t want to let your thoughts about your friend Bob who you think would be a great fit for this position to influence your hiring criteria. To influence the criteria that you created, unless you’re specifically making this position for your friend Bob, in which case this decision making process doesn’t apply. But if you really want to actually make that best hire and you don’t have your friend Bob in mind as someone who you want to create the position for, that’s what you would do.
So next, the 5th. Here’s where you generate your options. So if you want to think about what kind of reporting you want to get, you generate the options for the kind of reporting. If you want to think about the employees you want to get, here is where you send out the application and you get the employees and so on. And if you want to think about what kind of suppliers you want to get, then you send out a bid for proposals. So that’s the vendors. And we frequently fall into the trap of (I fall into this) – I was thinking about a publicist for my book the other day and I really didn’t search enough – I generated three options as my first thing I was looking for. And that wasn’t nearly enough as I discovered when I was going through those three options. Ugh – I really should have done a better job of generating options, so I had to go back to that step and re-generate options, I eventually generated about 10 acceptable options. But what you want to do is generate at least 5 acceptable options, 5 options which you’d be really happy – not happy, but satisfied, let’s say it that way, if those were some of the options chosen. And remember, this is a brainstorming step, so don’t really judge the options except say that they are acceptable. You want to also not judge the options if they seem outlandish or politically problematic, because in my experience doing consulting and coaching, some of the best options come from things that seem unacceptable at first. And then you integrate parts of them into the final decision.
So, and then you go to Step 6. This is where you use the criteria that were weighted already, you weighed the criteria, you know how important they are meaning, so you understand how important they are, you use them to choose the options. So look at the options, choose them using the criteria, be aware of going with your initial preferences, again, you know, if you are thinking, “I really click with this person really well at the interview.” And, that’s something, some people are really good at interviews, so they might be good at talking with you, but that doesn’t mean that they’ll be good at the job themselves. So you want to make sure to go against your intuitions a little bit here and use specific numerical steps to weigh the options. So separate them from your opinion. Now if you get stuck here, I have a technique that you can use called “Avoiding Disastrous Decisions” which is all about Step 6, which is all about this step, it goes into it in much more depth. It’s very important to use this technique on complex options, whenever you’re – so that’s one. Another one is on critical decisions, not simply important ones, but critical, let’s say you’re hiring the CEO for your company, so that’s going to be a critical decision. If you are choosing to enter a business partnership with someone that is going to be really a critical supplier for you, let’s say a supplier of more than 30% of your parts, or someone who is a critical client, so someone who is going to be giving you more than 30% of your revenue, or if you’re going on the merger and acquisition path, this is really important. So you want to avoid a disastrous decision and this is a technique you can use, there is a blog linked in the show notes today. So that’s where you can learn about that, I won’t go into more depth here.
Then finally you go to Step 7, you implement the decision that you chose. Before and during the process of implementation, you want to make sure to consider how your decision can go wrong and guard against these failures, that’s going to be really important for you. And also, you want to make sure to think about how can this decision go most right, how can it be the best and most awesome decision implementation process that you can create. And, move toward those, integrate those into your solution. You want to ensure clear accountability and communication about the enactment of this decision so you want to know who is doing what and how. So make sure there is clear next steps. Now for projects and critical processes, if this is a decision where the implementation is a serious project in itself, whether it’s complex, long-term, major, something like that, I strongly encourage you to use my failure-proofing technique, that’s all about Step 7. So this goes in depth into Step 7, how you can protect your decision implementation process from failure and maximize success, that’s what that technique is about. It’s going to be linked in the show notes as well so you can check that out.
Now finally, Step 8. It’s the last step, I promise you. You evaluate the implementation process. “How’s it going?” “what’s going on?” “are you happy with it?” And then you revise it as needed to meet your goals. You revise the implementation to make sure that you’re actually accomplishing what you set out to do in Step 3 which is the goals that you want. Is the employee doing what you thought the employee’s doing? Is the supplier doing really well? Is the new reporting structure doing what you wanted it to do? Now something that I want to highlight here, a number of people ask me this, it that you’ll often find yourself going back and forth between the steps. Let me be super clear, that’s not a problem. So it’s very natural to jump back and forth between the steps as you do them because sometimes later onward in the steps, you’ll discover new information that’s really quite relevant for the earlier stage of the steps. For example, say you are at the option generating stage, and you discover important new information about how the current options you have are just not meeting your goals that you outlined in Step 3. So then you go from Step 5 back to Step 3 and say OK, let me revise the goals to make sure that I can achieve my goals, that I can have the right goals given the limited amount of options I have available. So that’s an example.
Alright, so I want you to check out the blog for this technique for this 8-step decision making process technique that is really important and critical for you to get your decisions right, substantial, substantial, moderately important decisions right. It’s linked in the show notes, and it has a lot of links out to other both fundamental principles behind this technique, and also all the other techniques that I mentioned as well as much other information that you’re going to find really helpful to implement this technique effectively. My goal, always, is to provide you with excellent, excellent value that you can apply immediately once you get back to the office, to avoid cognitive biases and solve them and defeat them and make the wisest decisions possible that will help you protect your bottom line and maximize your success. I hope this episode has proven itself to help you do so and I want to hear back from you. Do you think it will help you achieve these goals that I set out for every episode? What you do think of this 8-step technique – making the best decisions? Where might this information be useful for you in your own work? I want you to click “Like” if you liked this episode, and subscribe to avoid missing Wise Decision Maker content. Make sure to follow me on social media, to not only get this Wise Decision Maker, the content of this show, but also to get a lot of other information, I curate information from other folks – not only my own information – on good decision making and avoiding dangerous judgement errors. Now, much more about avoiding dangerous judgement errors and making the best possible decisions is in my book, “Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters.” Now the best free resource I can offer you is to sign up for my Wise Decision Maker course, it’s going to be linked in the show notes, and of course the information about the book will be linked in the show notes as well. I will see you on the next episode of Wise Decision Maker and I wish for you to have the wisest decisions, my friends. Thank you.