Making the Right Decision in Business
THUNDER BAY – BUSINESS – According to a report by The Economist Intelligence Unit, sponsored by Applied Predictive Technologies (APT), the study finds that senior managers are most likely to describe their decision-making style as “data-driven”. But it also reveals that the relationship between analysis and intuition in decision-making is complex, and that even people who think of themselves as data-driven decision-makers also place trust in their own intuition.
Based on a survey of senior managers and executives from around the world, as well as interviews with practitioners and experts, this report explores how business executives believe they make decisions and investigates whether their actions match that belief. In all, the research suggests that any organization seeking to improve its decision-making capabilities should consider the information on which managers base their decisions, but also the organizational context in which decisions are made.
When asked to characterize their individual decision-making style, 42% of respondents say they are data-driven (“I collect and analyze data as much as possible before making a decision”), more than any other option. A further 17% describe themselves as empirical (“Where possible, I develop hypotheses and perform tests before making a decision”). By contrast, only 10% see themselves as intuitive (“I primarily use my intuition in making decisions”), fewer than all other options, notes the report.
Which Of The Following Best Describes Your Personal Approach To Making Significant Management Decisions?
Empirical – Where possible, I develop hypotheses and perform tests before making a decision 17%
Data-Driven – I collect and analyse data as much as possible before making a decision 42%
Collaborative – I seek to collaborate on decisions as much possible 32%
Intuitive – I primarily use my intuition in making decisions 10%
Despite the apparent popularity of data-driven decision-making, intuition is valued highly. 73% say they trust their own intuition when it comes to decision-making. Even among the data-driven decision makers, 68% agree with that statement. And 68% “would be trusted to make a decision that was not supported by data” – in other words, their peers and superiors place trust in their intuition.
According to Gerard Hodgkinson, professor of strategic management and behavioral science at Warwick Business School, the valid contribution of intuition is often overlooked. “Skilled decision-makers are often reluctant to admit they use intuition, and don’t officially sanction it even though they use it.”
This view is corroborated by the finding that, although 88% say they can effectively predict the outcome of their decisions, only 50% think it is easy to find the information they need to make decisions. Furthermore, 94% say that they make an extra effort to ensure that the information they use for decision-making is trustworthy, says the report
When it comes to the balance of intuition and reason, the most revealing survey finding derives from the question: “When making a decision, if the available data contradicted your gut feeling, what would you do?” By far the most popular response, with 57% of the sample, is “Re-analyze the data”. This is followed by “Collect more data”, chosen by 30%.
When Making A Decision, If The Available Data Contradicted Your Gut Feeling, What Would You Do?
Take the course of action suggested by the data 10%
Collect more data 30%
Re-analyze the data 57%
Ignore the data 3%
There is a school of thought which proposes that groups of people are better at making decisions than individuals – the so-called “wisdom of crowds”. But senior managers are absolutely divided on the value of collaboration, says the report. When asked their view of the statement: “The more people involved in making a decision, the better it will be”, exactly as many agree as disagree (38% each, while 24% are neutral).
The survey also reveals that decision-making is not always as collaborative as it might be: over half of respondents (56%) say decision-makers at their organization will seek input from “a few” stakeholders before taking a decision. This compares with just 40% who say decision-makers will seek the views of a large number or the majority of stakeholders.
The issue is complicated by the fact that the aim of the decision-making process is not just to reach a final decision. Senior managers must also build support for their decisions among their colleagues. For this very reason, one respondent explains that:
“Most decisions require people to support and engage with their consequences… what’s important is that everyone feels part of the process… it’s no good the decision being right if no-one supports it… ”
He adds, however, that this does not mean that everybody involved in the decision-making process needs to be placated. “ everyone needs to be heard, but not necessarily agreed with… people feel comfortable that they’ve been heard and all the factors have been weighed… “
To What Extent Do You Agree With The Statement: “The More People Involved In Making A Decision, The Better It Will Be”?
Strongly agree 7%
Neither agree nor disagree 24%
Somewhat disagree 25%
Strongly disagree 13%
Gerry Grimstone, chairman Standard Life, concludes that involving multiple stakeholders in a given decision is a useful way to mitigate risk.
Professor Hodgkinson warns, however, that this dispersal of authority can lead to “group think”, or “collective bias”. Compared with individuals, he says, groups tend to polarize when faced with decisions, becoming either excessively risky or cautious. With groups there is a diffusion of responsibility, he says.
How Collaborative Is The Typical Decision-Making Process At Your Organization?
Decision-makers will seek input from the maximum number of stakeholders 9%
Decision-makers will seek input from a large number of stakeholders 31%
Decision-makers will seek input from a few Stakeholders 56%
Decision-makers will not seek input from stakeholders other than themselves 4%
The report concludes by noting key findings from the study:
Both analysis and intuition are valued highly by business executives. The majority of respondents describe their decision-making style as “data-driven”, but they also say that if data contradict their gut feeling, they will re-analyze these data. This reveals the important role of intuition in checking and contextualizing analysis
Taking decisions collaboratively builds consensus and reduces risk. Respondents are divided over whether making decisions collaboratively improves the outcome, but including multiple stakeholders in a decision is an important way to build support for that decision, and to ensure that any and all risks have been identified.
Holding leaders accountable would improve decision-making. A worrying proportion of survey respondents (19%) say that decision makers at their organization are not held accountable for their decisions at all. Meanwhile, nearly half believe that boosting accountability would help improve their organization’s ability to make decisions
Making better decisions improves organizational performance. The clear majority of survey respondents believe that improving decision-making would boost their organization’s financial performance. Happily, this is eminently achievable, as decision-making is “a teachable and learnable skill for which almost everyone has potential”
For additional information and the complete study in PDF file, please visit here.