All 4 entries tagged Decisions
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May 01, 2011
I came across some literature earlier, where the author argued that there should be separation between the decision-making process, and the outcome of the decision, when it comes to rewarding decision makers for their work. I think that this makes sense in principle, as his argument for this was that there are many other factors that can affect an outcome, which are far beyond the decision maker's control.
This got me thinking about investment banking, and the high-profile that bankers' bonuses have received in the last few years especially. Bankers seem to receive a bonus regardless of how their decisions have played out. But is this because their decision processes are being measured and rewarded, and these are generally robust and deserving, or is it only due to the culture of greed and not linked to them having a good process? I don't know much about the activities of investment bankers to be honest.
Perhaps there is a case that there should be a transition to this system, if it is not being practiced. I think the public who have been forced to bail-out banks around the world would appreciate this, knowing that at least the practices of the bankers were worth rewarding. I appreciate that investment banking is fast-moving, and the methods we have learnt about might not always be appropriate for that, but it might be a good step to restoring public confidence in them.
April 13, 2011
Yesterday's session made me feel a little uneasy about being a leader in the future. We all saw some of the terrible things that happened when people are not properly aware of their surroundings, and the bad decisions or poor judgement that this can result in. Obviously, these people are responsible for their own actions. However, we also discussed that leaders hold a great level of responsibility for the working environment they create. If the team fails from a business perspective, that is likely to be down to them to some degree. But, imagine if you were a leader, and someone working for you died on the job. How terrible would you feel? How scary a thought is that. That makes me question whether I want the responsibility of leadership. I know it's an extreme case, but we saw over and over again that these things can happen. What are your thoughts on this? I'm really curious.
Also, we spoke about the errors people can make, relating to: information gathering, interpretation, and anticipation. I wanted to apply this to myself, and decided to analyse why I am so often late by just a few minutes. There are probably a lot of reasons, and this is likely just a simplification, using this model, but I figure it's worth a shot! Is it about gathering of information? No, I don't think so - I'm quite organised, and I pretty much always know what time I am meant to be somewhere, or what time the train leaves, etc. Is it about interpretation? Well, no I don't think so, I always think about what I have to do, how it all fits together, what time I have to leave in order to be somewhere, etc. I think my problem is anticipation - not just for this, but for a lot of errors I make, I tend to be an optimist, and rarely think about the worse case scenario. This results in leaving things to the last minute, assuming things will take the minimum amount of time that they could, not being able to think ahead about sources of so-called 'randomness' in my day, like stopping to talk to someone on the street, or getting an important email, or the air in my bike wheels being low and requiring pumping, etc.
So why am I unable to learn this? To understand the upper and lower limits properly, rather than just assuming the lower limits will apply to me. I think it comes down to poor judgement, and there are perhaps a lot of different internal biases I can use to explain. For example, the representativeness heuristic - I don't seem to understand the underlying statistics, and always assume that lower limits apply to me. This could be due to overconfidence bias. I also seem to have a short memory when it comes to being late - I think that I'll learn, it won't happen again, and I make the same old estimates about how long things take. This is anchoring at play. And why don't I ever learn? Perhaps it is the curse of knowledge - maybe I tend to think looking back that it was a simple certain reason, that I won't make the mistake again, and that I don't need to change approach. Hopefully, developing this thought on the blog will help...
Linking back to leaders and situational awareness - I think that bias can play a part in all three types of error. I have only shown the ones that apply to me, and for anticipation at that.
March 18, 2011
In one of the lectures last week, Jeff touched on the point that one of the key steps of the decision-making process was exploring and developing the options or alternatives available, through various means. Doing so tends to result in having more choice obviously, but it's also likely that you might spot a more out-of-the-box solution than otherwise that challenges what is expected. If I'm honest, the creative solutions that our team came up with were not the result of a particular brainstorming session, or any special technique. They spontaneously arose during the natural course of our collective approach. Perhaps we had an element of luck in this, but I think that the really open nature of our working environment helped this.
I think that this is a really important lesson to take-away. Always take the time to think what else you could do, before you take a decision. This is especially important if you're not particularly happy with any of your present options! Real progress only ever occurs by step change, when someone like Gandhi brings to the fore the ideas of total non-violence, or Steve Jobs introduces the Ipod, or Ipad for that matter. You can bet that they were not happy with the status quo!
It's obviously a difficult thing to do in practice - there is not always time to generate alternatives or to challenge the assumptions of a given situation. But, you can be sure that if you have done so, your eventual decision is likely to be more robust, because you know a lot more about what else you (or others competing with you) might have done. It's quite similar in that sense to having more information when making any decision. Sure, you might become paralysed, waiting to act until you are sure, but the very fact that you have considered what is relevant means that your informed decision is one you can have confidence in.
We gave our decision-making presentations today; wow that was a long, tough session to endure! I’m not sure anyone was able to sustain their focus through the whole thing, especially due to how tired we all were. Still, in the moments that I wasn’t completely vacant (some might say that these are rare, or non-existent even! ;-)), I did get to note some interesting comparisons between the approaches of other groups and our own.
Something that surprised me though was the lack of research that some groups put into their marketing strategy and budgeting. I don’t know whether anybody was already quite familiar with the industry and so didn’t need to do much research, but I am pretty sure that the task specifically asked for it. How can you expect to make a robust decision without having the requisite knowledge to base it on (I’m sure you can hear the undertones of Deming in what I am saying hehe!)?
I was really proud of the fact that my group did spend quite a lot of time on this. After initially struggling, and trying to base the decisions on our own biases (e.g. “we all do our shopping on the internet, so fishermen will too”, or, “I always take in adverts that I hear on the radio”) the availability heuristic in particular was clearly present for all to see. When we could find no academic work related to what we were looking for, we simply decided to ask those who might know! This entailed looking for companies producing fishing boats in the UK, and effectively calling them up and speaking to their leaders or marketing departments in order to ascertain the information about the best and most effective marketing methods. From this, we learned that TV and radio were virtually useless (we had previously assumed fishermen listened to the radio all day, and that it would be an effective route), but also, most importantly, that internet and advertising in fishing magazines was good. However, the best find for us, which wasn’t one of the options given originally, was that boat shows were the most effective route for selling boats. For example, the Southampton boat show is the biggest in the UK, runs for 10 days each year, and brings in around 120,000 people each year, with average incomes above £95,000 and around 80% of visitors making a purchase from exhibitors of the show. What a fantastic way to target customers who have disposable income and want to buy from you! And we would never have known without picking up the phone and speaking to professional boat salesmen. Doing so informed our decision no-end, leading to confidence that if we had to implement our plan for the different methods, we are relatively sure we would have been successful. Good theory (or knowledge or experience) should be the backbone of decision-making.