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How to Make Great Leadership Decisions

How to Make Great Leadership Decisions

The normal state of your mind is that you have intuitive feelings and opinions about almost everything that comes your way.~ Daniel Kahneman, Nobel Prize laureate in economics

I recently spoke with the VP of Human Resources of a San Francisco Bay Area company regarding providing executive coaching and leadership development for the company CEO. She asked some very insightful questions to determine fit. She specifically wanted to know how I worked with different personality styles, and my methods for initiating changes in thinking and behavior that support resonant leadership.

The VP of HR and I spoke about my approach to coaching, and my belief that possessing a psychological understanding of human behavior based on the latest neuroscience research is an important competency for coaching executives. We also spoke of the need for her organization to create a sustainable culture where innovation flourishes.

The VP of HR is interested in partnering with me in helping company executives improve their emotional intelligence and decision-making skills. We further discussed how high performing company executives can benefit by working with a seasoned executive coach and leadership development expert.

Age is such a high price to pay for maturity. -- Tom Stoppard

Great Leadership Decisions

We are quick to pass judgment and make snap decisions. The smarter and more educated we are, the more overconfident we are about our conclusions.

Humanity doesn’t have a good track record for decision-making. Businesses are even more notorious for failed product launches, mergers and acquisitions.

Clearly, our brains are flawed when it comes to making sound choices. We are easily biased, prone to influence from emotions and at times irrational without conscious awareness.

Researchers have long studied failed business decisions to identify common stumbling blocks. Given that we’re more irrational than we’d like to believe, how can we improve the quality of our leadership decisions?

Decisions: Based on Analysis or Process?

Leaders often carefully analyze numbers to make important decisions:

  • Should we launch a new product or service?
  • Should we change our organizational structure?
  • Should we expand to a new country?
  • Should we acquire another firm?

They also consider intuitive decision processes:

  • Discussion of uncertainties
  • Inclusion of contrary perspectives
  • nterviewing a range of people with other ideas
  • Exploration of alternative ideas

Business professor Dan Lovallo and consultant Olivier Sibony tracked more than 2,200 business decisions over five years to determine how they were made: analysis or process (“The Case for Behavioral Strategy,” McKinsey Quarterly, March 2010).

After examining outcomes (revenues, profits and market share), they found that “process mattered more than analysis—by a factor of six.”

“Superb analysis is useless,” they concluded, “unless the decision process gives it a fair hearing.”

Yet, many business leaders are skeptical about the value of a decision process over hard-number analyses. The research is nonetheless clear: A better decision process substantially improves results and associated financial returns.

Avoiding Errors

Each of us can learn to recognize faulty thinking that contributes to decision errors:

  • Confirmation bias — A tendency to favor information that confirms our existing beliefs
  • The status-quo trap — An irrational preference for the current state of affairs. The current baseline serves as a reference point, and any deviation is perceived as a loss.
  • Loss aversion — A tendency to strongly prefer avoiding losses over acquiring gains. Some studies suggest losses are psychologically twice as powerful as gains.
  • Sunk-costs fallacy — When people make decisions about a current situation based on what they have already invested
  • Planning fallacy — Estimating and forecasting errors occur when an optimism bias influences decisions and forecasts in policy, planning and management. Leaders tend to underestimate costs and overestimate completion times.

Awareness of biases is necessary, but it won’t necessarily prevent problems. It’s hard to correct for errors with only simple awareness. Most of us over-rely on data to support our decisions, without realizing that we unconsciously select facts and figures that confirm our preexisting ideas and opinions.

One of the most popular decision-making processes is the pros-and-cons list, which requires us to weigh opposing points of views. It makes sense, and it’s easy to use. But over the last 40 years, psychology researchers have identified thinking biases that doom this decision-making model. There are more productive processes for making good decisions.

The WRAP Process

Professors Chip and Dan Heath propose the “WRAP Process” in Decisive: How to Make Better Choices in Life and Work (Random House Digital, Inc., 2013):

1.  W= Widen Your Options: When confronted with a decision, we have a tendency to define it within a narrow frame. Should we do this…or not? This way…or that way? Instead, we should substitute “and” for “or.” Narrow framing creates missed options and opportunities.

2.  R= Reality-Test Your Assumptions: When analyzing options, you gather information (both pro and con). But it’s hard to escape confirmation biases that unconsciously draw you to selecting self-serving information.

3.  A= Attain Distance before Deciding: You probably pride yourself on your ability to sift through data and be decisive, but no one is immune from emotional influences. Feelings can drive you to make wrong decisions unless you gain some distance.

4.  P= Prepare to Be Wrong: Once we make a decision, we look for confirming evidence that we’re right. Most of us are overconfident about how the future will unfold. But no one is immune from forecasting errors and the planning fallacy. We can help ensure success by preparing to be wrong.

Organizations can avoid decision errors by requiring leaders and managers to use checklists, while fostering a culture where people watch out for one another. Team members should be taught to guard against biases and develop a sophisticated awareness of decision-making obstacles.

Every organization is essentially a factory that manufactures judgments and decisions. It must therefore work to ensure the quality of its “products” at every developmental stage, to include:

  • Framing of the problem to be solved
  • Collection of relevant information
  • Consideration of alternative points of view
  • Reflection, forecasting and pre-mortem reviews

Leaders will make better choices when they trust the decision-making process and their critics to be informed and fair, and when their decision is judged by how it was made — not only by how it turned out.

Are you working in a company where executive coaches provide leadership development to grow emotionally intelligent leaders?Does your organization provide executive coaching for leaders? Sustainable leaders tap into their emotional intelligence and social intelligence skills to create a more compelling future.

One of the most powerful questions you can ask yourself is “Do our company leaders make great leadership decisions?” Emotionally intelligent and socially intelligent organizations provide executive coaching as part of their leadership development programs.

Working with a seasoned cognitive executive coach and leadership consultant trained in emotional intelligence and incorporating assessments such as the Bar-On EQ-I, CPI 260 and Denison Culture Survey can help innovative leaders make great leadership decisions for a sustainable future. You can become a resonant leader who models emotional intelligence and social intelligence, and who inspires people to become fully engaged with the vision, mission and strategy of your company.

Working Resources is a San Francisco Bay Area Executive Coaching Firm Helping  Companies Assess, Select, Coach and Retain Emotionally Intelligent Leaders; Talent Management; Leadership Development; Competency Modeling; Succession Management; and Leadership & Team Building Retreats

Dr. Maynard Brusman
Consulting Psychologist and Executive Coach

About Dr. Maynard Brusman

Dr. Maynard Brusman is a consulting psychologist, executive coach and trusted advisor to senior leadership teams. He is the president of Working Resources, a leadership consulting and executive coaching firm. We specialize in helping San Francisco Bay Area companies and law firms assess, select, coach, and retain emotionally intelligent leaders.  Maynard is a highly sought-after speaker and workshop leader. He facilitates leadership retreats in Northern California and Costa Rica. The Society for Advancement of Consulting (SAC) awarded Dr. Maynard Brusman "Board Approved" designations in the specialties of Executive Coaching and Leadership Development.

Dr. Maynard Brusman
Consulting Psychologist and Executive Coach
Trusted Advisor to Senior Leadership Teams

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