Decision Management

Decision Evaluation for Business Analysts

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Synopsis

This article summarises and extends some evaluation criteria and rules of thumb into better decision making that was published in the Harvard Business Review May 2015. The article was a four part series on decision making that included content around two decision making modes, associated biases and experience. This article is a more concise package and focuses on the later mode of decision making and enforcing an evaluation criterion that can be used by both individuals and groups to make better decisions.

Introduction

The HBR articles present two modes of making decisions; intuitive sub consciousness decisions which are the consolidation of life experience, better known as intuition. (Type I). There is also consciousness decision making where known information, logic and deduction is used in the decision making process. (Type II).

Both methods of decision making have their advantages and disadvantages and should really be used in concert to provide effective and efficient decision making across the spectrum circumstances.

Decision Making: Type I: “Decisions without thinking”

Type I decision making is basically “automatic” meaning that it is done without conscious intervention and can therefore be executed much more quickly and instinctively. It is also much broader in scope in terms of information input and processing. For example, take the amount of information that is taken into consideration when people enter into new environments; the degree of awareness and spatial recognition to objects and structures in close proximity is done “automatically” without one consciously making judgement of what’s around us. We simply know how and where to walk. These advantages are exactly the disadvantages as well since one has absolutely no control on what information is being drawn upon, and how the decision is being made, and specifically what factors are being critiqued. (We are unware and have no control of this.) 

Humans are predisposed to act intuitively and make decisions sub consciously; we need to do this for our survival. All the vital functions of the body are controlled the brain or the nervous system (Which is an extension of our brain). Our breathing, heartbeat, metabolic rate; basically everything our body is controlled by ourselves yet we are not aware of such activities. This modus operandi extends too many higher level functions. For example one might put on an extra piece of clothing because it is cold. This act is driven by your body sensing that it is at a lower than optimal temperature and triggering the “I’m cold” sensation that drives a whole host of processes that lead to you reaching for the sweater, without actually thinking about the sweater before you actually move your body.

This type of decision making is often made for less complex, individual decisions that can be made with smaller magnitude or impact on the environment and others. Often things occur in our daily lives where we do not consciously think about the options and the consequences to those options, but rather we just act because it suits an existing and often repeated thought and behaviour.

In terms of making Type I decisions on a daily basis at work and in life, it’s important to recognise that most decisions made are actually sub-consciousness decisions that we are not actually thinking about the consequences. To acknowledge that most of our day in governed by instinctual decision making is a good starting point, and hopefully will bring more awareness of Type I decision making is occurring  to enable a short circuit or momentary check that can interrupt behaviour to consider some checks and balances to control better decisions when needed.

The main point here is that we can only improve our decision making if we are aware of it. This initial acknowledgement hopefully will give rise to some awareness that can allow for more Type II decision making to occur.

Decision Making: Type II

Type II decision making actually involves one to consider the decision consciously, information that leads up to the decision, and hopefully the process of making the decision. One encounters a problem, realises a solution is required, seeks out information forms a judgement and makes a decision. This decision making can only be conducted for specific decisions that involve specialist information. For example, determining how to invest 2 Million dollars to best maximise returns can only be done to specialised and controlled effort, research, collaboration, most probably with peers in open forums. Such decisions are also subject to post mortems where the rationale is evaluated, usually when the outcomes are not optimal. Type II decisions allow for specific scenarios to be evaluated and modelled, specific information considered and a controlled execution of the actual process itself. (Consider the approval process for a request for IT access). This allows for a decision making process and evaluation to be designed to allow more control and precision to allow the correct decision is made.

Despite Type II being a rational and objective approach to decisions making, all kinds of environmental factors influence our ability to think objectively. One could argue that objectivity itself is an oxymoron since human beings have only subjective experiences, that are subject to the variability of the environment, people, emotions and biases which frame this Type II decision making more as a subjective pseudo-science. Due to the invariant nature of the environment and its influence on the decision maker, we as decision makers require a host of measures to ensure that we are objective and as unbiased as possible to seek better outcomes through sound decision making.

This gives rise to the following evaluation criteria. It defines a set of rules or criteria that can be used by an individual or group to provide structural rigour to this subjective process to make it as objective as possible.

Individual and Group Decisions

There are many decisions that the individual makes day by day, hour by hour, minute by minute, that range in terms of their complexity, scope and impact. The role of specific individual making the decisions also influences the associated consequences. A CEO makes different decisions than somebody on a help desk, despite the different roles and levels of responsibility they both make decisions.  

Decisions can be made on an individual basis where the scope of the issue and authority to make the decisions lie within the individual. The evaluation criteria is used as an individual’s reference or checklist.

Sometimes numerous people are involved in the decision making process with a series, such as an approval process. Again, each decision maker needs to refer to the evaluation criteria as a checklist.

Decision making can also be made in a collaborative forum where a facilitator provides the context and frames the discussion, then floats each evaluation criteria, engaging the group in a systematic basis to ensure a balanced involvement from the forum.

Evaluation Criteria

The decision maker should institutionalise these evaluation criteria to challenge individual or group judgements. Considering these criterion should validate assumptions, predispositions and the completeness of information available. This evaluation criteria is not exhaustive and should not necessarily be used in order.

Overvaluing your own experience

When evaluating a decision it’s important to recognise that the decisions outcome depends on the information used to make that decision. This information is assumed to be known by the individual, but often requires further information and a slight redefinition of the scope of the issue by collaborating with others. One should reflect that, you do not know what others know, and that the focus should be on others knowledge and viewpoints rather than your own, to test and broaden your perspective. Often having this broader perspective will influence your decision outcome. Your own experience is very important, but so is other people’s experience. Hence valuing your experience should be balanced in line with your stakeholders.

Excessive Optimism, Confidence and Egocentrism

People have excessive optimism and confidence when their beliefs and viewpoints are reinforced by past outcomes that align to their predispositions. This is important since it provides a probable guide and a reference in moving forward to make decisions in the future.  It’s important to understand that this is only a reference which is probable; rather than being certain. As such it represents an assumption that should be challenged to ensure validity.

Egocentrism is a dynamic that plays out in collaborative forums. A good consultant is a good listener and observes group dynamics for participants that dominate. This can often expose those who are better suited to speaking rather than listening. People that are dominant need to be managed through business soft skills to enable everybody to provide adequate input. People who are less dominant need to be given the platform to expresses themselves and provide input where required.

Aversion and Risk

Aversion can be a tendency when operating in environments with a high level of risk. Risk promotes a kind of conservatism and reluctance, which gives rise to decisions being differed or skewed towards an outcome that may not be optimal. Aversion is not courageous and usually represents the path of least resistance. (e.g. The default option of every business case is ‘Do nothing’.) Averting action to address issues can build pressure in organisations since problems are actually being buffered, and not actually being dealt with in due course. Problems not addressed seldom resolve themselves and ‘go away’ rather that escalate, building pressure and actually become worse.

It is important to know your stakeholders, business drivers and motivations to understand the environment and context around the issue. One can then make a risk assessment and profile stakeholders to categorise risk and determine the risk impact and likelihood of occurrence.

Climates of risk promote a culture of aversion since there is little security against perverse implications and impacts to business units and individuals when decisions are made. Contingency plans can provide some reassurance and greater certainty against perverse outcomes and can provide greater confidence to decision makers to make tough decisions to act.

Challenging Bias and Assumptions

All past experiences of success and failure provide the lens to which we perceive the world. These past experiences basically provide a float of knowledge to which we base our assumptions. Because these experiences are coloured by the actual events and our reaction to them, they often provide a suitable guide for future assumptions since future events may be similar. It’s important to note that future events will not be identical, therefore our assumptions will not be identically accurate as they were in the past. This is important since it proves conclusively that assumptions cannot be 100% valid, and therefore need to be challenged.

For example, stereo types have they place since they basically represent a generalisation, which are have their utility in social contexts. They are however not completely true and hence should be challenged in the appropriate situation. (It’s also important to note that often stereo types have their place and are often ‘good enough’.)

Challenging biases often can be achieved by simply asking the question why. When an assertion is made by a stakeholder, a consultant may pursue a line of questioning that exposes the rationale behind the point of view. Understanding the stakeholders own experiences and knowledge will highlight the underlying reason to the viewpoint.

For example, a person makes the assertion that Melbourne is an unsafe city to live in. Probing questions reveal that this person was robbed. This experience provides grounds for their assertion that Melbourne is unsafe. As a result, the person assumes that all of Melbourne is unsafe and chooses not to travel on trains and trams after 9pm. The assumption is that because the person was robbed in the past, the person generalises that safety in Melbourne is poor and the city is generally unsafe. As a result the person’s future decisions to travel at night are impacted. Are these valid decision? Does the decision reflect reality? Does this rationale need to be challenged and a more appropriate view need to be instilled?

Confirmation Bias and Seeking Confounding Evidence

Psychology dictates that we seek evidence that supports and reinforces our underlying beliefs, and ignoring and discounting things which challenge or contradict what we think as true. This is generally acceptable since we assume what we believe is to be good and reasonable, but sometimes this is not the case and we need to revaluate our beliefs and assumptions.  Sometimes we find ourselves grasping at straws to support an outdated and archaic way of thinking.

Racism is a good example of this. In developed societies the idea of discriminating against a particular race for preferential treatment and human rights was once the norm. Now we realise that people of different races are the same because we are all human beings, therefore we are the same and deserve the same preferences and opportunities. Somebody of the older generation that perhaps fort in past world wars with outdated views of people of particular races either goes against the grain and grasps at straws from the past, reinforcing their believes or let’s go and adopts the norms of today.

Despite ones best intentions, if a particular viewpoint is held with confidence, it is a good exercise to attempt to confound this by seeking evidence that is in contradiction. One can either focus on the confounding evidence and use that as a base for analysis tracing back to the view with rationale, or adopt a contradictory view and attempt to find evidence that supports it. Modelling through scenarios can be useful to determine different views and situations that arise that are not already catered for. It may also be that the original view is basically correct, but simply not completely exhaustive and there are other points that need to be integrated. (The correct definition or stand point of the issue needs to have its scope broadened.)

Anchoring

The resistance to change will vary from individual to individual, department to department, and indeed culture to culture depending on what the point of contention in. Anchoring and the associated resistance to change is directly proportional to the fear and implications of the change will bring to the individual or institution. The greater the implications the more robust and extreme the associated conviction to hold on or be defensive to any perceived offences to change the situation.

Luckily fears are mostly irrational and can therefore be dissolved through the right action, coaching and persuasion in both what could be described as the whip and the carrot, to use the analogy of a donkey. Anchoring can best be overcome through the right pushing and pulling mechanisms, as well as the identification through root cause analysis of the exact cause to the resistance.

Through building relationships of rapport and trust, stakeholders will increasingly divulge information and their beliefs that will allow the identification of the underlying cause. Once understood, one can provide incentives to promote the desired attitude through attraction, as well as provide disincentives that make the status-quo less attractive and ultimately undesirable. If the right alternatives are provided and the latter is exposed to be something negative, immoral, inappropriate, inefficient, incorrect, wasteful, or just not as optimal as the alternatives then the original anchoring will cease to exist.

Maintaining the Status Quo

Maintaining the Status Quo and anchoring are associated. Anchoring is really the degree of resistance that the Status Quo is clung onto. People are comfortable with the status quo and generally uncomfortable with change. This is because change, from the standpoint of the status quo is unknown. If one were to redefine the definition of change into a journey of learning and acceptance then the actual change is never really unknown; rather it is a positive, measured, controlled transition that can even be fun. Since this approach is a known quantity, stakeholders are less resistant because they can see the light at the end of the tunnel before they even enter. Again, positive communication around incentives providing better options is another attractor to overcome resistance. The other consideration is the status quo is only optimal for a period of time, this implies that the status quo has an expiry, and that change is actually inevitable. People resisting change will often see the advantages to the status quo. The disadvantages should also be broad into focus, together with the attractors for change.

Take an Outside Perspective

All stakeholders see the world differently to a degree. Difference in view, viewpoint and concerns vary from individual to individual. Differences can also be brought about between teams, departments, silos, companies, external partners, suppliers and vendors.

An outside perspective is required when the decision impacts other people or institutions. As classic example is an organisation making decisions through the customer’s eyes. How would the customer perceive this decision? One needs to consider concerns from all viewpoints to understand the advantages and disadvantages from all perspectives to enable a more balanced and holistic perspective.

Proceeding with an outside perspective is ultimately a learning experience that is best approached with understanding and empathy.

Escalation Commitment

People will be less accepting of change if there is risk or ambiguity around there commitment associated with the decision, especially over the longer term. The implications of investment decisions often have short, medium and longer term impacts that need to be clearly understood and be made as transparently as possible. If the future situation is volatile and has an impact on the commitment associated with the decisions made today, then stakeholders will be less likely to buy into the commitment, since it will become greater over time. Often it is not the escalation but rather the ambiguity which leaves the door option to escalation; the uncertainty is the perceived risk and is unlikely to be entertained. If the escalation is certain, or at least likely, then there needs to be some modelling, information, or range of potential outcomes so stakeholders to quantity the escalation and make the necessary planning decisions to accommodate.

Timeframe of Decision Impact: Operational, tactical or strategic

If the scope of the decision being made can be designed to address the short immediate impact, medium term or longer term strategic direction, then this should be considered as further options. Often this happens where only the immediate concerns are required to be addressed.

For example, if a customer calls customer service and complains of poor service and threatens the business to escalate the complaint to the ombudsmen than it would be of high priority to call the customer back, listen, apologise, build rapport, reassure and improve the customers emotional and rational outlook on the situation. The longer term objective would be to analyse the specifics of the complaint and design a better product or service offering that pleasantly surprises and delights the customers, rather than offending the customer. (E.g. Inappropriate use of language in a marketing campaign.)

For every issue perform root cause analysis and formulate a plan that address the immediate, medium term and longer term measures to counter and resolve the issue.

Consider Objectives

Considering objectives is about framing the decision within the context of the goals are that pertain to the problem. Ask the question, “What are we trying to achieve by making this decision?” Using the call centre example, if the objective is improving the customer experience, we could make decisions around the quality of information provided to the call centre staff that make better customer outcomes, rather than make decisions about calling back as many customers as possible within the shift. This implies that considering the end objective guides the decision making process to better outcomes from problem conception through to solution realisation. This can be illustrated as a spectrum from problem to the solution; what lies in-between is the unknown.

Provide Range of Estimates

Sometime a single option or a discrete and precise value is not satisfactory. Often decisions are made on information and values that have been estimated, and are therefore not precise. The reality cannot be known therefore as a trade off a good approach is to encapsulate the actual reality within a range. For example, we cannot exactly predict future sales but we can estimate this based on market conditions and historical data. Sometimes allowing some variance through scenarios of “best case” and “worst case” are good approaches since it is highly unlikely or certain that the actual sales will be greater than the worst case option. Providing a range of estimates allows for probable outcomes to be assessed with more clarity. High, medium and low is another estimate.

Vanishing Options

Just when you have thought of everything and all your options are on the table, an interesting thought experiment would be to discount all your options you have considered, just pretend they don’t exist, or are impossible and contemplate what else you would do in this situation. This experiment might force you into different frame of mind and challenge your assumptions. A good example of this is risk management. After risks as categorised, assessed for impact and likelihood resources are directed for the prioritised contingency measures. If this risk eventuates, then mange the risk through this contingency measure. But what if conditions in the system where present where the defined contingency is not available? Then what could be done? How many levels of contingency do we engineer?

For example, if fire fighters turn up to a building and there water pump fails, and the auxiliary also fails, how do they put out the fire? (They always dispatch the fire engines in pairs at least.)

Recondition and Reduction of Randomness and Luck

Sometimes outcomes are due to random events. Mathematically the random factor of the decision is the portion of the probability that cannot be managed. (Almost all decisions involve some uncertainty since their outcome is in the future.) This is often evident when the results are surprises or unexpected. Usually when this occurs it is merely a case of insufficient information known when the decision making process is occurring. Sometimes factors are missed and not considered skewing the prediction.  Good surprises are tolerated but should still be investigated since they are basically not understood, and could lead to poor future outcomes. Bad surprises are obviously not welcomed and are almost always investigated.

Thinking Twice

Sounds like an obvious one, but it is worth doing. Sometimes ones emotional state is compromised by lack of sleep, or any other reason that can skew ones perspective.

Responding to difficult emails is a classic example. When a difficult emotionally charged email is received and read it is interesting to write the response immediately upon reading. Save the email as a draft and take a coffee break. Upon returning read your response. You will almost certainly change your original response in some way making it more conservative. This demonstrates how emotions affect your decision making.

Another example is thinking twice about something prior to presenting this to your team or in a forum.  Think twice and instead of thinking about your perspective, think about your stakeholders, their opinions and backgrounds; how would they interpret the messages? Also consider the tone and degree of your language. Any expressions or assertions that impose a qualitative or quantitative measure to something, consider making your statements more conservative. For example, “Marketing lack the technical capability to consume information from the content management system” would better be expressed as “Marketing are challenged by the level of technicality in the content management system”.

Information Test; you only know what you know

This is an obvious statement but something always worth considering, especially walking into a new engagement, organisation, problem, meeting, or any situation where you are thinking about something. The best way to counter this issue is to collaborate with others. Other people know what you don’t and equally, they don’t know what you know. After everything is said and done within a forum, meeting or collaboration with stakeholders it’s good to ask the question, “Is there any other information that you wish to share at this stage?”

This is sometimes important, especially in politically charged environments since this information leakage tendency that often happens over time sometimes has direct implications for the scope of the engagement, impacting of deliverables, time frames and sponsor expectations. It is a good idea to keep a record of this, often providing a simple meeting minutes in chronological order defining what was disclosed.

Generally speaking there is also a scope to consider with any decision. Considering other information challenges this scope to determine if there are other documents, people and observations that need to be made to satisfy the needs of the decision.

Lessons Learnt, Retrospectives and Past Failures

It’s important to manage the process leading up to the decision, since this should ensure greater control and predictability in outcomes and less risk. This can only be validated once the outcome is evaluated, in its own right but together with the process that lead to the outcome. Good decisions are decisions that lead to good outcomes, and that have been in line with information, process and expectations. Bad decisions are those that have bad outcomes, despite all good intentions. Good and bad aside, any outcome that is not expected should be investigated to analyse the cause so that measures can be taken to improve future decisions. If the result is better than expected the business can celebrate a win and then investigate, learning perhaps more than they already know. If it’s a bad outcome, then you can only gain from the loss if you pursue the investigation to its conclusion.

Conclusion

There any many things to consider when making decisions that allow you to challenge both individual and group decisions, from the very simple through to complex business cases involving scenarios and modelling. The first rule of thumb is to consciously think, and not default to Type I decision making since it does not allow for group critique, or even individual critique since it is impulsive, reactive and unchallenged. Human beings can’t help being judgemental, this assertion is to be aware of this process so it can be evaluated with these simple rules of thumb.

Using intuition and the “gut feeling” is fine since we automatically go this way. What’s important is to recognise this and re-evaluate, challenging our decision making to ensure that the right information, people and process is utilised to make the best decisions possible.

This evaluation criteria simply provides some rules of thumb that people and organisations can use to reduce risk and improve business outcomes through better decision making.

Author: Matt Fishbeck, Sr. Business Analyst

Matt Fishbeck, Sr. Business AnalystMatt is a senior business analyst with 5+ years experience in transport, telecommunications, utilities, technology and automotive industries working with stakeholders to meet the objectives of organisations. Matt is competent across the spectrum of competencies and possesses sound alignment to IIBA best practice. He has engaged stakeholders in large transformation projects to facilitate change by delivering value through best practice. He provides thought leadership through research and development, academia and knowledge of open standards.

Matt has extensive technical knowledge and is passionate about technology, business, business analysis and business architecture. He takes a dynamic high energy approach to delivery and providing exceptional value to clients through consulting. Matt leverage’s the creative process to innovate and deliver solutions to business. He has worked internationally in organisations in Melbourne, Germany and the UK. 

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elizabethnharris posted on Friday, August 21, 2015 6:18 AM
Thank you,Matt Fishbeck, for this article. It's a great help for my company http://www.essaypenguins.com/blog/definition-essay-topics. Because I'll use all aforementioned information for developing my business. Hope, I'll make some changes in the way my company develops.
pomifritz posted on Saturday, August 22, 2015 4:10 AM
Thanks for your feedback. It's good to know that someone is actually applying the theory; that's the whole point!
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