Why are business decisions so difficult? Because they’re made by people

Technology is increasing the pace of change – and the risk of disruption – across all business sectors.

Smart devices, internet of things applications and integrated supply chains mean decisions made by senior executives are more complex, and more subject to the law of unintended consequences, than ever before.

As if the stakes weren’t high enough, Irish business leaders also have to cope with a growing range of external uncertainties, from Brexit to tariffs and trade wars, and that’s on top of the daily round of internal decision-making that drives every business.

An ability to effectively navigate complex decisions is therefore one of the most valuable weapons in any senior leader’s arsenal. Navigating Complex Decisions is also the name of one of a number of new programmes being offered as part of the Irish Management Institute’s Executive Suite this autumn.

Each is designed to equip leaders to be future-fit and is led by internationally renowned thought leaders. This one is headed up by Dr Simon Haslam, a UK Consultant of the Year nominee and a visiting fellow at Durham Business School.

In advance of his arrival at the IMI, we caught up with Simon at his base in Glasgow to find out how Irish business leaders can become better at making all the right calls.

Why are business decisions so complex?

The further up you go in an organisation the bigger the problems you look to. The bigger the decision, the more complex it becomes, because of all the mess and noise that surrounds it, as well as the amount of factors that need to be embraced. 

The added complication is that you are looking at the future. We’ve a pretty good idea what 2018 looks like, but with decision making you’re dealing with all the uncertainties of the future, and making a call on it.

How much of any decision is informed by personality?

Decisions are made by people. People have different ways of processing information and are subject to natural inclinations. Knowing your default decision-making process is not a straightjacket, it is a liberating factor. It is about knowing that if this is my default, then I can look at this decision in another way.

Our subconscious does a lot of the heavy lifting in decision making, which is great in terms of getting us to work in the mornings without harming ourselves or others, but can be really helpful to investigate in business. It’s about lifting the lid on all the biases and nuances of how we make decisions.

Are some people simply better at it?

It’s risky to talk about certain types of personality being better suited to decision making than others. You can have what we might call a very confident decision maker but the flip side could be that they are overly strident. They might move to close a decision down too quickly, or might not take everyone along with them. There’s no best personality type or single approach.

What can cloud our judgement?

It could be a ‘confirmation bias’, where we seek out information that supports what we already believe. That makes it difficult to accept information that challenges our beliefs. 

It could be ‘unconscious bias’, where we are disposed - towards or against - perhaps senior people, or on the basis of gender, age, or disability. That stops us from trusting the information, rather than seeing it nuanced by the source it is coming from.

Research by Dr Pete Jones, a psychiatrist at Cambridge who studies bias, only ever found one person who was bias free. So we might think that we are objective and unbiased, but we shouldn’t delude ourselves.

Entrepreneurs often talk about relying on gut instinct. Are they wrong?

Years ago, when I first started consulting, I met a business advisor who when anyone mentioned ‘gut instinct’, would give them two aspirin to settle it. I thought that was great. Now I feel he was incredibly wrong.

What the entrepreneur does is assimilate information from a whole range of sources and comes up with a decision.

A lot of entrepreneurs have this great ability to see pictures which others need frameworks to get to. Although it happens at speed for them, there is still a gestation period between having their ‘eureka moment’ and acting on it. That gives them time to tease it out, a period of reflection. As their business scales, however, they will need to bring people with them, rather than have people feel decisions are being foisted on them.

Is making the right decision not enough?

The ability to influence is important. A decision is useless unless you can bring others along. The role of leaders is not to just build followers but to create leadership in others too. That can mean leading from the back, telling others you are going to back off and not impose your ego on the decision.

Is the way organisations make decisions changing?

There’s a generational shift. If you are in the middle of an organisation you are likely to look up to leaders on the basis that they are paid the big money so it’s their call. There is the expectation that leaders lead. But if you look at the population coming through, the standard of education has never been higher and people are coming into the workplace with expectations in terms of how they are treated that are different to previous generations.

If more people want more say, what are the risks?

Decision making becomes more complex, especially in an age of Glassdoor and Twitter, so it’s about helping people to learn not to stick their oar in where it doesn’t add value to do so. If we are in a senior leadership role and we can’t recruit and retain talent, we are going to be in trouble.

Shouldn’t more data mean better decisions?

We got very excited about the process capability of computers and data and probably took our eye off the ball a bit in terms of the fact that you still need to ask it the right questions. 

It’s why the language is changing now, companies aren’t talking about big data but smart data. And we still rely on people to ask the right questions. Similarly, we don’t yet know how artificial intelligence is going to impact decision making in the future, but we had better stay close to it.

What role does corporate culture play?

If you look at the financial crash, we can see how few people understood the derivatives instruments and credit swaps process but would admit ignorance.

We built this incredible financial edifice with very few people who actually understood it. Right through the ecosystem, very few asked themselves, do I really understand this? Culture takes you a long way towards good decision making. It can be an enabler or a restrictor.

We talk now about organisations having a learning culture, that is, you can make a mistake, but learn from it. It’s fail fast, but fail forward.

Should we really be making two decisions at a time?

Delivering the current business model is Horizon One. What you want is the organisation to be sharply focused and running incredibly efficiently, generating value from any changes in the most appropriate way.

But the other side of that is recognising that the way we do Horizon One will change, so what’s the future? We need a second horizon. It’s how IBM moved from being a really competent designer and manufacturer of laptops to being a software consultant. You need to manage H1 at scale, and at the same time, you need to be working on H2.

What about our natural tendency to preserve the status quo?

Risk aversion should be appropriate to the sector you are in, though of course that’s difficult to call in the moment. Research shows that, as leaders, we are less likely to speculate when we are in positions of strength. The flip side is that we are less risk averse when we are up against it ‑ we tend to gamble our way out of trouble. It’s why you want non-executive directors on your board, who are a little bit away from the chief executive, to be challengers of the status quo.

How do you stop endless decisions causing burnout?

It’s the degree to which our personality or disposition is aligned with what the organisation wants to do. What we’ve learned is that where an individual feels at home in an organisation, where there is a ‘values congruency’, we draw reserves of energy from that context.

If you feel like you are doing the right stuff, you can work 80 hours a week and not feel it. If you don’t, you can get stress and burn out in a 30-hour week.

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Navigating Complex Decisions is one of three new programmes in the Irish Management Institute’s Executive Series. Launching this autumn, each is designed to equip leaders to be future-fit and is led by internationally renowned thought leaders such as Dr Simon Haslam, a UK Consultant of the Year nominee and a visiting fellow at Durham Business School.

For more, see imi.ie.