You can make a choice right now to read or not read this article. If you choose to read it, I will give you a fun little puzzle to work on at the end. If you do not read it, well, that is your choice.
Recently a manager I was working with needed to make a hiring decision. After meeting this one candidate, who appeared to have basic skills, the manager eagerly decided to extend an offer to the person because the candidate was very likeable and the candidate reminded the manager of herself. She was not going to give the decision much additional thought.
While the decision might turn out to be a good one, it is an example of a common decision that can go wrong – I know I have made this mistake before. Why does this happen?
Our organizations are filled with and surrounded by humans who are making thousands of decisions a day. Humans have different biases and motivations that impact each decision. The more leaders understand this, the better the organization’s outcomes.
The main theme of the May issue of Harvard Business Review was how to make better decisions. Most of the articles focused on how organizations can improve their internal decision-making systems. One article I found very insightful was Leaders as Decision Architects by John Beshears and Francesca Gino. Here are five points from the article that could help you think differently about how you can influence decision-making.
1 – Choice Architecture. Leaders not only make their own decisions, they influence how others make decisions or make “choices.” And how others make decisions and choices can determine whether or not your team or organization is successful. When a leader recognizes that a type of decision or choice is frequently required of people, like hiring decisions, then leaders can become “choice architects” and design decision processes that yield better results. (Read the article for an in-depth description of how to do this.)
2 – People Use Two Modes or Systems of Decision-Making. People make decisions in one of two ways: either quickly, using instincts and emotions independent of others, or more diligently using logic and input from others. They refer to quick decisions as System 1 and diligent decisions as System 2. While each of us has a natural preference for one of the two systems, most of us use System 1 and these decisions and choices are greatly influenced by personal motivation and bias.
3 – Personal Motivation Impacts Choices and Decisions. When people face a decision or choice each is affected by his/her own personal motivations. Not everyone feels the same way about the elements of a decision. One person might want to make a fast decision so they can get it off their task list while another person does not even think the decision is important and kicks the can down the road. Leaders can create systems that make decisions happen regardless of one’s motivation. One example given was the invention of automatic retirement plan enrollment for employees. This method, used by many organizations including my company, enrolls everyone unless they opt-out. Since many employees are not motivated to read and understand the paperwork necessary to set-up a retirement account, they just procrastinate and make no decision or choice. The opt-out method makes the choice for them and is a terrific example of what can happen when leaders execute “choice architecture” effectively.
4 – Common Biases Impact Decisions. I found Beshears and Gino’s description and analysis of common biases especially interesting and helpful. Since most managers make dozens of people-related decisions every week, I think biases and other motivations especially affect us. Managers decide who to hire, who to assign tasks to, who and how to coach, who to promote, who to discipline, and who to terminate. All of us have biases that impact how we think and behave and these can and do affect our decisions.
I have embedded and linked here the authors’ exhibit in which they list 12 common biases that affect business decisions. I am sure when you read down the list you will spot some that happen to you or that you have seen affect decisions by others.
When you think about influencing decisions, Beshears and Gino remind us that, “Research shows that people feel twice as bad about incurring a loss as they feel about receiving a gain of the same amount (a bias known as loss aversion) and that people pay extra attention to vivid information and overlook less flashy data (known as vividness bias).”
5 – Encourage People to Use System 2 for Important Decisions. Of course large organizations have many rules and processes for decision-making. But in small and mid-sized companies where decision-making is less structured, leaders should encourage people to use more thoughtful, System 2 – type thinking for important decisions. Because System 2 decisions are more complicated and require more thinking, leaders can influence successful thinking by working as choice architects. Here are a few simple suggestions you can implement that can help your team of decision-makers-
- Schedule Time to Make Better Decisions. People can improve decision-making and reduce the impact of using just instincts and emotions in System 1 if they have more time to make decisions. Thus they need to learn to schedule time to think and organize what additional inputs they need before rendering a decision.
- Develop Alternate Solutions. We are more likely to make better decisions when we have alternatives to evaluate and choose from. Alternatives can help remove some bias from the decision. We should ask, “What could I do?” rather than “What should I do?” Changing this one word opens us up to more alternatives.
- Leaders Can Give Out Reminders. Although most managers have been taught to “delegate, delegate, delegate,” the use of leader reminders to set expectations can improve decision outcomes. A reminder is a verbal or written communication from the leader to the team member or manager. The reminder might include the setting of deadlines for procrastinators or requesting a list of decision alternatives for the normally uncreative or hasty decision-maker.
A Closing Puzzle Reward from Beshears and Gino. A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?
Solution – The intuitive solution based on one’s quick visual processing is that the bat costs $1.00 and the ball costs 10 cents and this totals $1.10. This is a normal System 1 thinker’s solution and is incorrect. If you are a System 2 thinker and write down the math you will discover the correct solution is the bat costs $1.05 and the ball 5 cents.
A majority of people get the wrong solution and this really a simple problem. Imagine how many mistakes we make on bigger problems? Thank you for choosing to read this article. Perhaps you will make choice architecture a future topic of interest for you and your team.
