Should you trust your gut or your data? Bestselling authors Dan and Chip Heath say, neither. Here's what really goes into making sound decisions.
Chip, left, and Dan Heath uncover the truth about why people make poor decisions.
Behavioral economists have been prolific of late with wisdom about why people make poor decisions. What people really need are guidelines for making good decisions. That's the message of Chip and Dan Heath, the best-selling brothers who previously decoded the art of making ideas stick and the science of helping organizations change.
At a presentation before an audience of Inc. 500|5000 CEOs the brothers previewed their latest book, Decisive: How to Make Better Choices in Life and Work, to be published in March. They urged attendees not only to get in touch with their inner Solomons, but also to create cultures and processes that enable smart decision-making organization wide.
Poll any group and they'll brag about how well they make decisions. Then look at the investments they've made, the losers they date, and the size of their waistlines. "Our decisions are wrong more often than they have to be," said Chip Heath.
Trust your gut is not a great solution, Jack Welch notwithstanding. In business, analytics rule. But consider the following stats: Eighty percent of mergers and acquisitions, among the most analyzed type of business decisions, don't add value or actually destroy it. More than half of new employees leave before their first year is out. Perhaps most damning, 60% of managers say their organizations make as many bad decisions as good ones.
Part of the problem is that people are "wired not to be stumped," said Chip. "We're incredibly good at taking fragments of information and mining them for meaning. "That's the "spotlight effect:" drawing conclusions from whatever facts are illuminated rather than looking at the problem from other angles.
So how to do better? The Heaths suggested four tactics:
1. Widen your options.
Chip described a Carnegie Mellon study of 168 business decisions and found that in only 29% did the decision maker consider more than one option. He advised that before leaders make decisions they "fall in love twice," they should broaden the options. Weighing two wonderful choices, they are less likely to rationalize away all the flaws in their first beloved idea.
Another tactic is the "vanishing options test." "Imagine a genie makes your top option vanish," he said. "What else can you do? Even one more option greatly improves your chance of success."
2. Add distance before you decide.
Too often, people focus on the more emotionally resonant short-term results when making decisions, Chip said. Instead, he said, "make the long term speak as loudly as the short term." He advised trying Suzy Welch's "10-10-10" rule: Consider the implications of your choice 10 minutes, 10 months, and 10 years down the road. Another good test is to imagine what your best friend would advise you to do.
3. Prepare to be wrong.
Dan Heath identified overconfidence as a prime cause of bad decision-making. Experts, in particular, he said tend to underestimate the wide spectrum of possibilities for how the future may unfold. Don't omit the worst-case scenarios.
4. Set tripwires.
Wise decision-makers set alarms that go off when critical factors change, Dan said. As a result, they are never blindsided. He gave the example of Van Halen lead David Lee Roth, famous for his insistence on having M&Ms provided backstage with all the brown candies removed. Roth wasn't being a prima donna, Dan said. In fact, the M&M stipulation was buried in the band's thick contract full of details created to ensure safe performances. If Van Halen saw brown M&Ms in their bowl, they knew to be extra careful in case something more critical had not been overlooked.
In summation, the brothers urged attendees to devise and formalize their own decision-making practices. "Processes are six times more important than analysis in making good decision," Dan said.
LEIGH BUCHANAN is an editor at large for Inc. magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture. @LeighEBuchanan