Advances in the field of behavioral economics ought to make us at least aware of what goes into making good decisions, if not make us better decision-makers. The McKinsey Quarterly is featuring an interview with two people who are putting some important lessons about decision-making out into the world: McKinsey's own Olivier Sibony , and Chip Heath --co-author, with his brother Dan, of Made to Stick and Switch . The interview centers on the Heaths' latest book, Decisive , and Sibony's research on effective decision making among global business leaders. Here is an excerpt: The Quarterly: Is the right approach to suggest a couple of simple things senior executives can do or to recommend that they take a step back and look at a whole checklist or framework to create a healthier process? Chip Heath: I’m a fan of frameworks, but you don’t have to be 100 percent there to improve dramatically. One legitimate criticism of the decision-making field is that we have this overwhelming zoo of biases. In our most recent book, Decisive, we therefore came up with 4 intervention points in the decision process. Others propose 40 intervention points. Nobody will be successful intervening at 40 decision points. Olivier Sibony: We too have looked at this zoo of biases and tried to sort out what really matters to executives. When people ask me what will make a difference as they build decision processes, I emphasize three things. First, recognize that very few decisions are one of a kind. You are not the first person to decide on an acquisition. Lots of M&A happened before, and you can learn many things from that experience. Second, recognize uncertainty—have alternatives, prepare to be wrong, and have a range of outcomes where the worst case is real and not “best case minus 5 percent,” which is very common. Creating a setting where it’s OK to admit uncertainty is very difficult. But if you achieve that, you can make headway. Third, create a debate where people speak up. It’s the most obvious but also the most difficult. If you’re the decision maker, when you get to the debate you’ve already got an idea of where you want it to lead. And if you’re an experienced executive, you’ve already influenced your people, consciously or unconsciously. A good intervention point, for instance, is to ask subordinates if anyone disagreed with them about a recommendation they bring to you. If everybody agreed, that’s a sign that there may have been “groupthink.”3 Chip Heath: All of the things you’ve highlighted are things we grappled with in designing the WRAP process we propose in our book (see sidebar, “Four principles for making better decisions”). A Wider set of options means you’re going to have more debate. By Reality-testing assumptions, you look at the reference class of events. If you make a decision about restaurants, you read reviews because that’s your reference class. Yet if you’re making a merger decision, you won’t look at the reference class of companies in similar situations. Why do this research for a $200 dinner but not a $200 million acquisition? Then there is the process of actually making a decision. It’s now slightly more complicated because instead of one option you’ve got two, and you’ve done some due diligence on both. When you find yourself agonizing about a choice, it’s important to step back and Attain some distance. Finally, you should be Preparing to be wrong at the end of the process—that’s about hard-to-acknowledge uncertainty. Read the full interview here .
Filed under: mckinsey quarterly, global business, leadership, decision-making, strategic management, McKinsey & Company, decision effectiveness, effective leadership, Chip Heath, Dan Heath, Olivier Sibony