Publications - 31.05.2024 - 13:00 

The Decision Navigator: How to make “Super Decisions”

How do we make decisions in dynamic situations? Researchers at ETH Zurich and the University of St.Gallen have analyzed the neuronal processes involved in decision-making and designed an approach for better decisions.

Good decisions matter. Nevertheless, even the smartest executives often get it wrong. For instance, most automotive companies overlooked the demand for fully electric cars in the late 2000s and were reluctant to invest in the technology. Tesla, a newcomer in the industry, seized upon this opportunity and disrupted the market to become the world’s most valuable automotive company in 2020. 

According to a recent study, executives spend nearly 40 percent of their time making decisions. Not surprisingly, research suggests that decision-making is the skill most strongly associated with leadership effectiveness. However, making good decisions isn’t easy. Often, we must decide in dynamic situations, when relevant information is missing, time is scarce, and the environment is constantly changing. In a recently published book, the authors explore the neuroscience of decision-making. Experiments with executives in the lab and in field settings suggest that when making decisions our brain goes through three steps.

First, it simplifies the situation identifying few, many times just two options (either-or).  This "binary bias" is a neural processing mechanism inherent to the human brain. This simplification produces decisions that are often framed as exploit-explore dilemmas: should you stay at your current employer (exploit), or change jobs (explore)? 

Second, it makes assumptions and predictions about outcomes for each option we consider. For instance, when thinking about a job change, you may make predictions about the potential career acceleration that could come with it. 

Third, it applies seven heuristics, or mental shortcuts, to make decisions: 

  1. The more ambitious the objectives, the more explorative the chosen option. Say, that you always wanted to be the CEO and you are not likely to become one at your current organization, you are more inclined to change. 
  2. The more opportunities, the more explorative the chosen option. Say that you get a call from a headhunter offering you an interesting opportunity, you might be inclined to explore it.
  3. The more time available, the more explorative the chosen option. Say, you have plenty of time to explore the job market, talk to headhunters, check classifieds, then you might be more likely to explore. 
  4. You are more likely to choose the option that aligns with the expectations or behaviors of others. Social context and expectations matter. Say, all your colleagues have quit their jobs and accepted offers at other firms, you may be more inclined to consider quitting as well. 
  5. A chosen option is likely to be consistent with your personality and values. If you are a curious, open-minded person and inclined to taking risks, you are more likely to explore the job market, than if you are not.
  6. A chosen option is likely to be consistent with skills. Say, if you believe that you have a strong CV, you are more likely to choose the explore option. 
  7. A chosen option is likely to reflect cognitive performance. When you feel safe, relaxed, energized, and inspired you are more inclined to take risks and explore the job market. 

Brain scans suggest that these steps strongly activate the limbic system and the striatum, a part of the brain where experiences and cognitive habits are stored. The activities of these parts of the brain are in large part happening automatically and unconsciously. In other words, when facing challenges, our brain unconsciously leverages prior experiences and cognitive biases to frame the situation.

The Decision Navigator approach helps us make this process both conscious and explicit, producing more options, better assumptions, and ultimately better decisions. It is a six-step process:

  1. Identify the exploit-explore dilemma.
  2. Develop multiple options. When you think that you are confronted with an exploit-explore dilemma, you are in fact facing an unlimited number of options. You can stay at your employer, while attending evening classes to gain the credentials for other jobs. Or you could negotiate an 80 percent contract and pursue an entrepreneurial opportunity one day a week. There are many other possible combinations that create flexibility: you optimize what you are doing but add variability that might allow you to discover new opportunities. Research suggests that thinking of multiple options counteracts the brain’s natural tendency to use biases. 
  3. Identify the unconscious assumptions. “What do I assume are the objectives? Which opportunities do I assume exist? And so forth. The seven heuristics can serve as a checklist to help you identify and categorize these assumptions. Step 3 is a process of asking questions: "Why do I believe what I believe?” Asking questions makes unconscious assumptions explicit. Importantly, it changes the mental narrative from “I believe it is” to “my assumption is”. 
  4. Test critical hypotheses. Once the assumptions are explicit and conscious, they become hypotheses that can be tested.
  5. If necessary, pivot to new options. Hypotheses testing often leads to new insights and allows you to pivot to previously unknown and better options. Step 5 ensures that the decision-making approach is learning oriented. 
  6. Decide.

The Decision Navigator is a slow approach suited for important decisions in unfamiliar and uncertain situations. Developing more options, identifying, and testing assumptions, and incorporating new evidence to develop better options, improves the outcomes of decisions significantly. It is even more effective when used in teams, which tend to think of more options and to make better predictions than individuals. Importantly, it helps leaders create adaptive organizations where people see decisions as options and hypotheses. Decisions that do not produce the expected outcome are therefore not stigmatized, but rather seen as experiments, or as steps on a journey forward.

The book "Super Deciders", which describes the approach in detail, was recently published by Wiley.

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