A Framework for Sound and Timely Decision Making
What decision-making framework did you use for your last management decision? Did you write down the critical areas that would be impacted and consider alternatives? Or did you just go with your gut?
According to research from Accenture, 40% of business decisions are based on a gut feeling rather than a fact- and data-driven analysis. Even as business analytics and quantitative models become more readily available in organizations, a lot of decisions are made with the computing power of the human brain rather than technology. That’s not always a bad thing, but there is a better way.
“Gut-feeling” has limited capacity The human brain can only process about five to nine pieces of information at a time, and most people average out at seven. When making a decision, too much information can overwhelm the prefrontal cortex and interfere with your understanding of the issue. And that, in itself, is a problem.
Managers face a number of time-critical, complex decisions throughout the course of their day that require time and energy and deplete their decision-making ability. Without realizing it, that overwhelm can cause managers to become reckless in their decision making, act impulsively instead of thinking things through, or avoid making decisions entirely – all of which create bigger problems in the long run.
To keep this from happening, you need a process for making decisions. One I like to use is the OODA Loop.
The OODA Loop
The OODA Loop was developed by military strategist and U.S. Air Force Colonel John Boyd. While he originally applied the concept to combat operations, it’s now used by lawyers, police officers, doctors, politicians, athletes, coaches and businesspeople.
Let’s look at the four parts of the OODA Loop and how you can apply them in your firm.
In the observe step, the main focus is on gathering data to build a comprehensive picture of the situation.
Observing is about finding as much information as you can but suspending judgment about what it means – that comes in the next step. Just get as much information as you can. This requires being present and open minded.
The orientation step acknowledges that all information is not useful information. You need to separate that which is relevant to the situation from that which is not applicable. The ability to do this gives you an edge over the competition, even if you start out with less information and fewer resources.
In this step, it’s essential to recognize the barriers that might interfere with other parts of the process. Without an awareness of potential obstacles, your ultimate decision cannot be an entirely rational one.
Boyd believed that five barriers prevent people from looking at a problem in an unbiased manner: cultural traditions, genetic heritage, an individual’s ability to analyze and synthesize information, previous experience and an influx of new information. To overcome these barriers, he recommended a process of “destructive deduction” – taking note of incorrect assumptions and biases and replacing them with fundamental, versatile mental models.
Now that you’ve gathered information and oriented yourself, you can make an informed decision. The previous two steps should have generated several ideas, so now it’s up to you to choose the most appropriate option.
Remember, you are making a hypothesis – your best guess, given the available data.
Although the OODA Loop is a decision-making process, the ultimate goal is to act upon your rational decisions.
Take action and see how well your decision performs. Did you observe the right information? Did you use the best possible mental model? Were you swayed by biases and other barriers? If the outcome isn’t what you hoped it would be, cycle back to the first part of the loop and begin again.
This is where the loop is beneficial, even after a decision has been made. The more you use the OODA Loop, the better you’ll be able to identify the mental models that inform your worldview and prevent you from looking at a problem in an unbiased manner. Refining those models changes you for the better.
At first glance, it may seem complicated, but once you get the hang of it, the OODA Loop decision matrix can be extremely helpful. Spend some time going through the loop while doing important things in your life and in your work. It should serve to make your decisions much better, and your actions will follow suit.