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May 26
2010

Gut Job

Posted by yoonsie in Strategic Management CentreMckinsey QuarterlyJo Whiteheaddecision makingAndrew Campbell

yoonsie

In an earlier post I shared some wisdom from scholars Gary Klein of MacroCognition and Princeton's Daniel Kahneman, who were interviewed in the McKinsey Quarterly. Both agree that intuition in decision making is overrated. Kahneman went as far as to tell the Quarterly, "My advice would be to try to postpone intuition as much as possible."

 

Yet not to trust your gut isn't the answer either. In fact, it's impossible, according to Andrew Campbell and Jo Whitehead, directors of the Strategic Management Centre in London, because we can't escape its influence no matter how consciously we try to abide by reason and objective analysis. Our gut feelings inform every aspect of decision making including the way we view a situation, how much time we spend on the decision, which information we gather and weigh, and even the options we deem worth consideration.

 

While there's no way around eliminating gut instincts completely, we can manage them. In "How to test your decision-making instincts" in the McKinsey Quarterly authors Campbell and Whitehead offer the following four tests that systematically determine whether gut feelings are biasing decision making.

 

The familiarity test. Have you often been in this or a similar situation before? Campbell and Whitehead use chess players to illustrate this: some can determine a good move in seconds because they've been in similar or identical spots before. The subconscious relies on pattern recognition, the authors note, and therefore the more appropriate memories you have to draw from, the more likely you are to make a well-grounded decision. Of course, your reasoning is only as good as the quality of your past experiences. "'Appropriate' is the key word here," they caution. To judge whether your memories are "appropriate," Campbell and Whitehead recommend assessing the unknowns in the decision you face. Are the experiences you've had relevant to this situation? Or is there some significant difference in the current situation to which your experience doesn't apply?

 

The feedback test. Did we get reliable feedback in similar situations in the past? The reason this is so important goes back to neuroscience. According to Campbell and Whitehead, after we make a decision, our brains "tag" it with a positive emotion: we believe we made a good decision. This of course is the opposite of rational and objective. Feedback therefore is critical; reliable feedback is imperative. Beware in particular of "yes-men" types of feedback. Look at Lindsay Lohan: what kind, if any, feedback would you guess she ever gets?

 

The measured-emotions test. Again, this scrutinizes the quality of past experiences. Emotions are attached to all memories, but some are highly charged or even traumatic. If the decision you face evokes memories like this, say the authors, "[they] can unbalance our judgment."

 

The independence test. Are you likely to be influenced in any way by personal interests? This might seem an obvious consideration. Like all the responsibilities of leadership, however, it requires you to be honest with yourself. The authors invoke a saying: "turkeys will not vote for Christmas." (It must be an English thing.)

 

It occurs to me that while Campbell and Whitehead refer to these as "four tests," it's really one four-part test. As they explain, you should rethink your decision-making process "if a situation fails even one of these four tests."

 

The most important takeaway here is that the test only assesses whether bias is at play in decision making. It is not a formula for making good decisions. "If we are to make better decisions," the authors conclude, "we need to be thoughtful...about why our gut instincts let us down [and] know when to rely on [them] and when to safeguard against them."

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written by Jerry Kopecky, May 27, 2010
This is a good review of thought processes which affect decision making. I would like to carry this further by linking this into the current "trend" in IT today - Business Intelligence. One can extrapolate the four tests make to similar interpretations for data coming into the enterprise.

What makes me worry is what happens when the decision made is wrong.
Rob Vargas
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written by Rob Vargas, May 28, 2010
Numbers are easy. Cold, distant, isolationist, really. When you stick to numbers, you can leave people out of the picture. I think where I'm going is best illustrated by the recent US TV show about CEO's and executives going undercover at the ground level of their company, and what they run into.

Numbers don't get bored. They don't feel locked down. In other words, no one has found a good set of numbers to quantitatively measure human interaction. I mean, ground-level employees are let go all the time for anything less than the max score, and yet there is no question that those scores are frequently based on overall company impressions as much so as on the individual employee.

The posting seems to *just* touch on this, but doesn't address it, when it speaks of "relevant" and "appropriate" feedback. I just don't have a whole lot of confidence that those terms are being well-defined.

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