Decision Challenges

Choices are not always optimal

Many organizations and individuals feel that they have been making the right decisions. And to a large extent this perception is correct. Why else are many companies successful? Why else have we achieved that a substantial part of the world population lives in reasonable prosperity? At the same time we would all agree that the glass is partly empty. If we look around us we still see poverty. We see undesirable trends and developments. We see a lot of companies and governments struggle. This is especially so, for example, in periods of financial instability or disastrous global development such as a pandemic. We then see many examples of inadequate decision making.

Yet, making decisions is something all of us do, every day. We gather information, consider different options, ask ourselves which aspect should weigh highest, and bite the bullet. Often this is done naturally, without a lot of deliberate consideration. And often that works out fine. It is like running. All of us can run as a trivial skill. However, to run properly and to conduct running as a sport, one can learn techniques to run faster, longer and without injuries.

Making decisions can be perfected

Choices are often impaired by cognitive biases

So what makes decision making under uncertainty so challenging? For a start, we all have our so called cognitive biases. This also applies to senior government officials and CEOs. As humans we have a tendency to fall back to a ‘this is how it is’ mentality. This can be laziness, but it is also due to the fact that it is not easy to revisit mental models. We thus run the risk of taking too narrow a view. We may not consider all issues that could play a role. This does not mean that at every point along the way everything is up for discussion all the time, but at the right occasions a diverging but structured thinking mode involving diverse perspectives helps. We call this framing.

Another key issue with decision making is uncertainty. Choices become a lot easier if we would, for example, precisely know the future costs, revenues, events, economic developments, regulatory and political issues, and many other elements of uncertainty. Since we do not have that privilege, there is always the risk that the outcome may not be as anticipated. It is therefore essential to obtain sufficient clarity on the degree and nature of the uncertainty before a decision is made.

The most challenging phenomenon in decision making is uncertainty

(Ron Howard)


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