Showing posts with label decision making. Show all posts
Showing posts with label decision making. Show all posts
Wednesday, August 14, 2013
Tuesday, August 6, 2013
Wednesday, July 3, 2013
Ethan Zuckerman has written about an important issue regarding our use of social media. The Harvard Gazette recently wrote about a talk that Zuckerman gave at Harvard's Berkman Center for Internet and Society. Berkman noted, "Human beings flock; we tend to seek out people like us." He argued that individuals tend to engage in a great deal of "flocking" behavior on social media platforms. They find and follow people who are very similar to them. He says, "We have a talent for finding people with the same socioeconomic background or racial background. But this tendency to flock may be keeping us from finding the information we need... My fear is that our tools are not promoting diversity." In short, we are not experiencing a wide range of perspectives on issues and topics. We are hearing from voices that are similar to ours. As a result, we are vulnerable to the confirmation bias, i.e. we are looking for information that confirms what we already believe. Cognitive diversity can be an important factor when making decisions, yet social media seems to discourage the nurturing of this key attribute. For more on Zuckerman's work, see this Ted Talk below:
Monday, June 10, 2013
Does a CEO bring in many new members on his or her top management team after taking charge at a company? Or, does the CEO have a number of key holdovers from a previous administration? Does this key factor in the composition of the top team make a difference? New research by Augustin Landier, Julien Sauvagnat, David Sraer, and David Thesmar (published in the Review of Finance) suggests that having more "independent" executives on the senior team can have positive effects on decision making and financial performance. The scholars define "independent" to mean executives not appointed by the current CEO.
The scholars collected data on over 1,800 American companies over a 17 year period. According to this article in Strategy and Business, here are their results: "Controlling for a variety of factors, they found that even the smallest uptick in the nonindependence of executives caused a decrease in the firm’s annual return on assets of between 0.5 and 0.8 percentage points."
What's going on here? They argue that CEOs tend to hire people who think like they do. Moreover, executives hired by the current CEO may feel more beholden to that leader. As a result, they may not be as willing to express dissenting opinions. On the contrary, an executive hired by a previous CEO may be more willing to push back on high-stakes, potentially risky decisions. The authors go on to argue that "independence" of senior executives may matter much more than the independence of board members, since the top team meets much more frequently and is much more directly responsible for strategic choices and performance at most large corporations.
Additional research by these scholars shows that firms with fewer independent executives on the top team also are more likely to make acquisitions that destroy shareholder value. Here is the key finding: "Although acquisitions, on average, led to decreases in shareholder value for the companies in the study, firms with fewer independent top subordinates fared much worse, losing about 45 percent four years after they made an acquisition, almost triple the 16 percent loss posted by firms with more of those executives."
The scholars collected data on over 1,800 American companies over a 17 year period. According to this article in Strategy and Business, here are their results: "Controlling for a variety of factors, they found that even the smallest uptick in the nonindependence of executives caused a decrease in the firm’s annual return on assets of between 0.5 and 0.8 percentage points."
What's going on here? They argue that CEOs tend to hire people who think like they do. Moreover, executives hired by the current CEO may feel more beholden to that leader. As a result, they may not be as willing to express dissenting opinions. On the contrary, an executive hired by a previous CEO may be more willing to push back on high-stakes, potentially risky decisions. The authors go on to argue that "independence" of senior executives may matter much more than the independence of board members, since the top team meets much more frequently and is much more directly responsible for strategic choices and performance at most large corporations.
Additional research by these scholars shows that firms with fewer independent executives on the top team also are more likely to make acquisitions that destroy shareholder value. Here is the key finding: "Although acquisitions, on average, led to decreases in shareholder value for the companies in the study, firms with fewer independent top subordinates fared much worse, losing about 45 percent four years after they made an acquisition, almost triple the 16 percent loss posted by firms with more of those executives."
Thursday, June 6, 2013
In this article by Drew Hansen as well as this one by Adam Lashinsky, we learn about an important facet of the decision-making process employed by Jeff Bezos and his top management team at Amazon. Here's an excerpt from the latter article:
Meetings of his "S-team" of senior executives begin with participants quietly absorbing the written word. Specifically, before any discussion begins, members of the team -- including Bezos -- consume six-page printed memos in total silence for as long as 30 minutes. (Yes, the e-ink purveyor prefers paper. Ironic, no?) They scribble notes in the margins while the authors of the memos wait for Bezos and his minions to finish reading.
Amazon executives call these documents "narratives," and even Bezos realizes that for the uninitiated -- and fans of the PowerPoint presentation -- the process is a bit odd. "For new employees, it's a strange initial experience," he tells Fortune. "They're just not accustomed to sitting silently in a room and doing study hall with a bunch of executives." Bezos says the act of communal reading guarantees the group's undivided attention. Writing a memo is an even more important skill to master. "Full sentences are harder to write," he says. "They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking."
The use of narratives at Amazon reminds me of this article written many years ago in Harvard Business Review about strategic planning at 3M. The innovative industrial conglomerate had adopted the use of storytelling during its strategic planning. In the article, the authors explained that bullet points on Powerpoint slides have several deficiencies. Bullet point lists often prove rather generic, fail to clarify causal relationships, and leave crucial assumptions unstated. One manager quoted in the article explains, "If you read just bullet points, you may not get it, but if you read a narrative plan, you will. If there's a flaw in the logic, it glares right out at you. With bullets, you don't know if the insights is really there, or if the planner has merely given you a shopping list." Stories or narratives enable you to think more holistically, and they provide the basis for a more thoughtful dialogue and debate. Finally, stories prove much more compelling than lists. If we hope to persuade others that a strategy makes sense, a good story works much more effectively than a set of bullet points.
Tuesday, June 4, 2013
Leadership coach and blogger Julie Pierce has an interesting blog post on the question of how leaders should balance the desire to solicit input from their team with the desire to make the call based on their convictions? She offers three tips:
1. Be clear on who is making the final decision.
2. Be specific on what kind of input you need from the team.
3. Be selective with your “no”.
First, you need to be clear whether you are making this decision on your own vs. facilitating a highly collaborative process in search of consensus. Second, you need to be clear about the type of feedback and advice you want from your team. Do you want them to generate options, critique a proposal, explain potential obstacles during implementation, etc.? Finally, be judicious with your vetoes. Exercising veto power over the team if all members feel strongly something is never easy. If the stakes are small, consider acquiescing and holding onto that veto for a bigger issue.
Monday, June 3, 2013
Here's some great advice for leaders from Deborah Triant, CEO and President of Check Point Software Technologies. She tells Fast Company:
Making and implementing decisions boils down to a key ingredient: listening. I often wonder why schools emphasize debating. Why not have listening classes as well? Debating is easy; listening with an open mind is not. The worst thing that you as a leader can do in the decision-making process is to voice your opinion before anyone else can. No matter how open and honest your people are, stating your opinion first will short-change the discussion process and taint what you hear later. I've learned this the hard way.
I agree with Triant. In my work, I have argued that leaders who state their positions firmly at the outset of a decision-making process can affect their teams adversely in three different ways.
Making and implementing decisions boils down to a key ingredient: listening. I often wonder why schools emphasize debating. Why not have listening classes as well? Debating is easy; listening with an open mind is not. The worst thing that you as a leader can do in the decision-making process is to voice your opinion before anyone else can. No matter how open and honest your people are, stating your opinion first will short-change the discussion process and taint what you hear later. I've learned this the hard way.
I agree with Triant. In my work, I have argued that leaders who state their positions firmly at the outset of a decision-making process can affect their teams adversely in three different ways.
- Decision Framing Effect: You may trap your team into one way (your way) of thinking about a problem or issue.
- Conformity Effect: You may discourage those team members with a dissenting view from expressing their ideas, options, or feedback.
- Legitimacy Effect: You may create the impression that the decision has already been made, that the process of consultation is simply a facade since the choice is a fait accompli.
Friday, January 4, 2013
Shane Snow wrote a good column recently on the importance of asking good questions. He argues that asking good questions serves as a crucial leadership capability that people should develop. Snow makes some good recommendations, such as trying to not ask leading questions, reframing questions later in a conversation when you haven't received a complete response, and replaying what you have heard to insure that you have a solid understanding.
I would make a few additional points. A good leader also asks questions that explore a topic a bit deeper, even when they appear to have a consensus in a meeting. A good leader uses those questions to accomplish two things: 1. Test what-if scenarios, and 2. Test for understanding and alignment. With regard to the first point, leaders want to make sure that they uncover any hidden risks. They might ask: "What if some of our assumptions prove to be untrue?" "What if our competitor responds in an unexpected way?" With regard to the second point, a leader needs to make sure that a team is truly on the same page, and that everyone shares a solid understanding of a decision rationale, as well as each person's role and responsibilities during implementation. Asking good questions can help reveal whether people are truly on the same page before moving forward with execution of a plan of action.
I would make a few additional points. A good leader also asks questions that explore a topic a bit deeper, even when they appear to have a consensus in a meeting. A good leader uses those questions to accomplish two things: 1. Test what-if scenarios, and 2. Test for understanding and alignment. With regard to the first point, leaders want to make sure that they uncover any hidden risks. They might ask: "What if some of our assumptions prove to be untrue?" "What if our competitor responds in an unexpected way?" With regard to the second point, a leader needs to make sure that a team is truly on the same page, and that everyone shares a solid understanding of a decision rationale, as well as each person's role and responsibilities during implementation. Asking good questions can help reveal whether people are truly on the same page before moving forward with execution of a plan of action.
Friday, December 28, 2012
Wharton Professor Maurice Schweitzer, PhD student Alison Wood Brooks, and Harvard Business School professor Francesca Gino have examined the impact that anxiety has on a person's receptiveness to advice from others. The scholars explain that, ""In almost every domain, individuals discount the advice they receive. In contrast to this finding, we identify an important aspect of a decision-maker's internal state that causes individuals to be very receptive to advice: anxiety." Ok, now here comes the really bad news. Brooks explains that, "People in an anxious state were really bad at differentiating between good and bad advice."
Why might that be the case? They argue that people who exhibit high anxiety may be feeling a lack of confidence at that time. Therefore, they look to others to help them figure out what to do in a particular situation. The desire to resolve the anxiety may make it difficult for individuals to distinguish between helpful and harmful advice. Individuals may move hastily to resolve the anxiety by making a decision and moving forward, even if they are basing that decision on advice that may not be very good.
The scholars recommend that people step back and reflect a bit before making decisions in an anxious state. I think that I would go a bit further though. I would argue that we could all benefit by taking more care in discerning what advice to take, from whom, and in what situations. Getting advice from multiple parties, hopefully with diverse perspectives, can be very helpful. Building a trusting relationship with an "experienced confidante" can be beneficial as well. Thinking carefully about whether someone's expertise actually applies to your situation can be very important. We sometimes rely on others for advice because they are very smart and successful. However, that can get us in trouble if that person's experience is not very applicable to our situation.
Why might that be the case? They argue that people who exhibit high anxiety may be feeling a lack of confidence at that time. Therefore, they look to others to help them figure out what to do in a particular situation. The desire to resolve the anxiety may make it difficult for individuals to distinguish between helpful and harmful advice. Individuals may move hastily to resolve the anxiety by making a decision and moving forward, even if they are basing that decision on advice that may not be very good.
The scholars recommend that people step back and reflect a bit before making decisions in an anxious state. I think that I would go a bit further though. I would argue that we could all benefit by taking more care in discerning what advice to take, from whom, and in what situations. Getting advice from multiple parties, hopefully with diverse perspectives, can be very helpful. Building a trusting relationship with an "experienced confidante" can be beneficial as well. Thinking carefully about whether someone's expertise actually applies to your situation can be very important. We sometimes rely on others for advice because they are very smart and successful. However, that can get us in trouble if that person's experience is not very applicable to our situation.
Thursday, December 13, 2012
You have all heard the phrase, "rules are made to be broken." Of course, the phrase makes compliance professionals cringe! The bottom line, though, is that it is very difficult to count on rules and procedures alone to govern behavior. If we want to insure that people do the right thing, we need to inculcate a strong set of values throughout the organization. We need people to understand the criteria they ought to use to make key decisions. We need to establish a framework that guides decision making, because we will never anticipate all situations, and we can never design "perfect" rules.
Thursday, November 1, 2012
Several weeks ago, I spoke with a group of senior executives about the importance of cultivating a climate of candor within their senior management team. I argued that leaders need to encourage people to share bad news. Put simply, bad news is not like cream; it often does not rise to the top. Instead it remains quite hidden, often until problems mushroom and grow to a much riskier size and scope. One executive noted that encouraging people to share bad news doesn't simply help the leader understand the key risks for the business. Opening sharing among top team members also helps uncover creative solutions to tough problems. Why? The other top team members may never hear about a key problem in another division or functional area if that bad news is not shared openly. If they do hear about it, they may be able to offer some ideas as to how to fix the problems. Perhaps they have even experienced a similar problem in their own division. In that way, a candid discussion of bad news isn't just about keeping the chief executive aware of key risks; it also provides an opportunity to get these problems fixed more quickly.
Tuesday, October 9, 2012
Garold Stasser and his colleagues published a series of influential studies in the 1980s and 1990s regarding information sharing in groups. Stasser's research examined groups in which members possessed a mix of shared and unshared information. Shared information represented data which all members of the group possessed. Unshared information proved to be unique to a particular individual. Stasser created a series of experimental studies to examine how groups behaved in this type of shared/unshared information circumstance.
For instance, in one study, he created a murder mystery with a series of clues. If people put the clues together successfully, they could identify the culprit and exonerate the other suspects. Stasser compared how individuals and groups performed when trying to solve this murder mystery. He found that individuals actually outperformed groups. Stasser argued that groups struggled because members tended to not share, discuss, and integrate privately held information effectively.
For instance, in one study, he created a murder mystery with a series of clues. If people put the clues together successfully, they could identify the culprit and exonerate the other suspects. Stasser compared how individuals and groups performed when trying to solve this murder mystery. He found that individuals actually outperformed groups. Stasser argued that groups struggled because members tended to not share, discuss, and integrate privately held information effectively.
Recently, Brian Waddell, Sukki Yoon, and I conducted a new study using Stasser's murder mystery. Our research will soon appear in the academic journal, Management Decision. Our control groups worked on the same mystery using the same instructions provided by Stasser. In our experimental condition, we assigned one member to play the role of devil's advocate. We asked that person to question assumptions, probe lines of thinking, and encourage people to think differently. We compared the results of the two types of groups. We found that groups with a devil's advocate performed much more effectively than the control groups. Here is a chart summarizing our results:
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B. Waddell, M. Roberto, and S. Yoon, (Forthcoming). "Uncovering Hidden Profiles: Advocacy in Team Decision Making." Management Decision. |
Monday, September 24, 2012
David Rand, Joshua Greene, and Martin Nowak have conducted a series of interesting new experiments that show a correlation between decision speed and selfless behavior. The experiments involved "the sort of games that economists have used for years. They have to decide how to divvy, steal, invest or monopolize a pot of money, sometimes with the option to reward or punish other players." The scholars found that individuals behaved more cooperatively/selflessly when they made their choices faster. The individuals who took to deliberate tended to be a bit more self-interested. This article in Discover magazine explains a bit more about the studies:
From these results, it’s tempting to conclude that cooperation is somehow “innate” or “hardwired” and that selfishness is somehow imposed upon these predispositions. But Rand points out that our intuitions are also shaped by our daily lives. In so many of our choices, cooperation is the sensible call; if we cheat, we may be punished, lose our reputation, or deny ourselves the future goodwill of those we wrong. So, when volunteers take part in the experiments, “their automatic first response is to be cooperative,” Rand writes. “It then requires reflection to overcome this cooperative impulse and instead adapt to the unusual situation created in these experiments, in which cooperation is not advantageous.” He found two lines of support for this idea when he surveyed his volunteers: The link between fast-thinking and charity only held for people who said that their daily lives were mostly filled with cooperative interactions; and it only held for those who hadn’t taken part in similar experimental games before. “This shows how it’s difficult to consider experimental play in isolation from things outside the lab or as completely determined by the game’s monetary payoffs, as a lot of economists do,” says Ann Dreber Almenberg from the Stockholm School of Economics, and one of Rand’s former colleagues.
I wonder how these findings translate to the realm of organizational life. Do managers in different business units have a natural tendency to be cooperative if they choose quickly, but perhaps behave a bit more selfishly when they ponder the incentives and payoffs embedded in the firm's compensation and promotion system? How might we encourage people to focus a bit less on detailed deliberations regarding the direct compensation effects of their actions, so as to hopefully elicit higher levels of cooperation across silos?
From these results, it’s tempting to conclude that cooperation is somehow “innate” or “hardwired” and that selfishness is somehow imposed upon these predispositions. But Rand points out that our intuitions are also shaped by our daily lives. In so many of our choices, cooperation is the sensible call; if we cheat, we may be punished, lose our reputation, or deny ourselves the future goodwill of those we wrong. So, when volunteers take part in the experiments, “their automatic first response is to be cooperative,” Rand writes. “It then requires reflection to overcome this cooperative impulse and instead adapt to the unusual situation created in these experiments, in which cooperation is not advantageous.” He found two lines of support for this idea when he surveyed his volunteers: The link between fast-thinking and charity only held for people who said that their daily lives were mostly filled with cooperative interactions; and it only held for those who hadn’t taken part in similar experimental games before. “This shows how it’s difficult to consider experimental play in isolation from things outside the lab or as completely determined by the game’s monetary payoffs, as a lot of economists do,” says Ann Dreber Almenberg from the Stockholm School of Economics, and one of Rand’s former colleagues.
I wonder how these findings translate to the realm of organizational life. Do managers in different business units have a natural tendency to be cooperative if they choose quickly, but perhaps behave a bit more selfishly when they ponder the incentives and payoffs embedded in the firm's compensation and promotion system? How might we encourage people to focus a bit less on detailed deliberations regarding the direct compensation effects of their actions, so as to hopefully elicit higher levels of cooperation across silos?
Friday, September 14, 2012
Thursday, January 19, 2012
Many people have embraced a terrific HBR article written a few years ago - "Who has the D? How clear decision roles enhance organizational performance". I think the article is excellent. It provides practical advice for enhancing the efficiency and effectiveness of decision-making processes. As they argue, it's so important to figure out who has the decision rights/authority before getting too deep into deliberations on a complex issue. I do think a word of caution is in order though. If we are too quick to frame a crucial meeting(s) as a decision moments, we risk having advocacy crowd out all inquiry. In other words, people may focus so much on winning the argument that the group as a whole stops learning about the problem, or about each other's perspectives and knowledge. Jumping too quickly into decision mode sometimes means that teams frame decisions as go/no go situations, rather than creating and considering multiple options. We sometimes have to remind a team that they may need to do some more collective and collaborative inquiry into the nature of the problem before shifting into individual advocacy mode. I'm not arguing for a go-slow approach. I'm simply recommending that groups remember that focusing too quickly on the "d" can lead to entrenched and polarized camps locked in a dysfunctional conversation without having shared ad integrated all the data and knowledge required to make a sound choice.
Thursday, August 25, 2011
Knowledge@Wharton has profiled a new paper, "Complicating Choice," by Wharton marketing professor Rom Schrift and co-authors Oded Netzer and Ran Kivetz of Columbia University. They find that consumers tend to feel that a certain amount of effort should be associated with making a buying decision. The notion comes from people's belief that hard work pays off, and that a lack of appropriate effort will lead to a bad outcome. If a decision appears "too easy" to us, we sometimes come to the conclusion that the seemingly obvious choice is "too good to be true." As a result, we over-complicate the decision. We make it more complex in order to make ourselves feel as though we have exerted appropriate effort. Of course, such over-complication may lead us to choose a less desirable option or to waste time and energy. We may end up moving far too late and missing a golden opportunity.
The scholars discovered three ways in which consumers over-complicate easy decisions. First, they "make the unimportant important." In other words, they end up deliberating about an attribute that they didn't even care about at the initial stages of the decision process. Second, they make two alternatives appear more equal than they actually were. Third, people actually alter their preferences about specific attributes of one of the the options in order to make their decision harder.
The scholars discovered three ways in which consumers over-complicate easy decisions. First, they "make the unimportant important." In other words, they end up deliberating about an attribute that they didn't even care about at the initial stages of the decision process. Second, they make two alternatives appear more equal than they actually were. Third, people actually alter their preferences about specific attributes of one of the the options in order to make their decision harder.
Wednesday, June 15, 2011
Today the New York Times profiles a provocative new stream of research, with important implications for those interested in how we can improve our decision-making as leaders. In the article, :Patricia Cohen examines the work of Hugo Mercier and other cognitive scientists. Cohen explains that many philosophers and scientists have argued over the centuries that humans developed their ability to reason so that they could search for "truth." Cognitive biases, such as the confirmation bias, get in the way of the search for truth. They have always been viewed as flaws to be corrected. However, this new stream of research suggests that perhaps humans developed their thinking and analytical skills simply because they wanted to, and needed to, win arguments to survive and thrive in the world. Traps such as the confirmation bias aren't really traps according to this view; presenting only the data that confirms your existing view of the world can be one strategy for winning an argument, for instance. Cohen writes,
"According to this view, bias, lack of logic and other supposed flaws that pollute the stream of reason are instead social adaptations that enable one group to persuade (and defeat) another. Certitude works, however sharply it may depart from the truth... What is revolutionary about argumentative theory is that it presumes that since reason has a different purpose — to win over an opposing group — flawed reasoning is an adaptation in itself, useful for bolstering debating skills."
I must say that I'm always intrigued by these sorts of evolutionary arguments, though often I find the evidence underwhelming. In my view, I'm not sure why it must be either/or in this case. Why couldn't evolutionary adaptation have led humans to develop reasoning skills for both the search for truth and the winning of important debates?
"According to this view, bias, lack of logic and other supposed flaws that pollute the stream of reason are instead social adaptations that enable one group to persuade (and defeat) another. Certitude works, however sharply it may depart from the truth... What is revolutionary about argumentative theory is that it presumes that since reason has a different purpose — to win over an opposing group — flawed reasoning is an adaptation in itself, useful for bolstering debating skills."
I must say that I'm always intrigued by these sorts of evolutionary arguments, though often I find the evidence underwhelming. In my view, I'm not sure why it must be either/or in this case. Why couldn't evolutionary adaptation have led humans to develop reasoning skills for both the search for truth and the winning of important debates?
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