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Decisive

McKinsey and The Decision Villains

Just roll the dice.

Just roll the dice.

In their book, Decisive, the Heath brothers write that there are four major villains of decision making.

Narrow framing – we miss alternatives and options because we frame the possibilities narrowly. We don’t see the big picture.

Confirmation bias – we collect and attend to self-serving information that reinforces what we already believe. Conversely, we tend to ignore (or never see) information that contradicts our preconceived notions.

Short-term emotion – we get wrapped up in the dynamics of the moment and make premature commitments.

Overconfidence – we think we have more control over the future than we really do.

A recent article in the McKinsey Quarterly notes that many “bad choices” in business result not just from bad luck but also from “cognitive and behavioral biases”. The authors argue that executives fall prey to their own biases and may not recognize when “debiasing” techniques need to be applied. In other words, executives (just like the rest of us) make faulty assumptions without realizing it.

Though the McKinsey researchers don’t reference the Heath brothers’ book, they focus on two of the four villains: the confirmation bias and overconfidence. They estimate that these two villains are involved in roughly 75 percent of corporate decisions.

The authors quickly summarize a few of the debiasing techniques – premortems, devil’s advocates, scenario planning, war games etc. – and suggest that these are quite appropriate for the big decisions of the corporate world. But what about everyday, bread-and-butter decisions? For these, the authors suggest a quick checklist approach is more appropriate.

The authors provide two checklists, one for each bias. The checklist for confirmation bias asks questions like (slightly modified here):

Have the decision-makers assembled a diverse team?

Have they discussed their proposal with someone who would certainly disagree with it?

Have they considered at least one plausible alternative?

The checklist for overconfidence includes questions like these:

What are the decision’s two most important side effects that might negatively affect its outcome? (This question is asked at three levels of abstraction: 1) inside the company; 2) inside the company’s industry; 3) in the macro-environment).

Answering these questions leads to a matrix that suggests the appropriate course of action. There are four possible outcomes:

Decide – “the process that led to [the] decision appears to have included safeguards against both confirmation bias and overconfidence.”

Reach out – the process has been tested for downside risk but may still be based on overly narrow assumptions. To use the Heath brothers’ terminology, the decision makers should widen their options with techniques like the vanishing option test.

Stress test – the decision process probably overcomes the confirmation bias but may depend on overconfident assumptions. Decision makers need to challenge these assumptions using techniques like premortems and devil’s advocates.

Reconsider – the decision process is open to both the conformation bias and overconfidence. Time to re-boot the process.

The McKinsey article covers much of the same territory covered by the Heath brothers. Still, it provides a handy checklist for recognizing biases and assumptions that often go unnoticed. It helps us bring subconscious biases to conscious attention. In Daniel Kahneman’s terminology, it moves the decision from System 1 to System 2. Now let’s ask the McKinsey researchers to do the same for the two remaining villains: narrow framing and short-term emotion.

Brian Williams and Core Priorities

Values clarification.

Values clarification.

In their book Decisive, Chip and Dan Heath write about the need to honor our core priorities when making decisions. They write that “An agonizing decision … is often a sign of a conflict among ‘core priorities’ … [T]hese are priorities that transcend the week or the quarter … [including] long-term goals and aspirations.”

To illustrate their point, the Heath brothers tell the story of Interplast*, the non-profit organization that recruits volunteer surgeons to repair cleft lips throughout the world. Interplast had some ”thorny issues” that caused contentious arguments and internal turmoil.

One seemingly minor issue was whether surgeons could take their families with them as they traveled to remote locations. The argument in favor: The surgeons were volunteering their time and vacations. It seems only fair to allow them to take their families. The argument against: The families distract the surgeon from their work and make it more difficult to train local doctors.

The argument was intense and divisive. Finally, one board member said to another, “You know, the difference between you and me is you believe the customer is the volunteer surgeon and I believe the customer is the patient.”

That simple statement led Interplast to re-examine and clarify its core priorities. Ultimately, Interplast’s executives resolved that the patient is indeed the center of their universe. Once that was clarified, the decision was no longer agonizing – surgeons should not take their families along.

I thought of Interplast as I read the coverage of Brian Williams’ situation at NBC. In much the same way as Interplast, NBC had to clarify its core priorities. The basic question is whom does NBC serve? Is it more loyal to Brian Williams or to its viewing audience?

In normal times, NBC doesn’t have to answer this question. It can support and promote its anchor while also serving its audience. In a crisis, however, NBC is forced to choose. It’s the moment of truth. Does the company support the man in whom it has invested so much? Or does it protect its credibility with the audience?

Ultimately, NBC sought to protect its credibility. I was struck by what Lester Holt said on his first evening on the air: “Now if I may on a personal note say it is an enormously difficult story to report. Brian is a member of our family, but so are you, our viewers and we will work every night to be worthy of your trust.”

Holt’s statement suggests to me that NBC’s core priority is credibility with the audience. I certainly respect that. It also struck me as being very similar to the question Interplast asked itself.

Clarifying your core priorities is never a simple task. Indeed, it may take a crisis to force the issue. But once you complete the task, everything else is simpler. As my father used to say: Decisions are easy when values are clear.

Here are links to two articles from the New York Times that report on how NBC executives reached their decisions regarding Brian Williams. (Click here and here)

*Interplast has been renamed ReSurge International. Its website is here.

Deciding Decisively

I want more options.

I want more options.

Last week. I wrote about Chip Heath’s presentation skills. Today, let’s talk about his cognitive skills. Chip, with his brother Dan, has written three books: Switch, Made to Stick, and Decisive.

I’ve written about Decisive before and I expect to write about it again. Today, I’ll give an overview of the four major parts of the Decisive paradigm. I hope this will be useful in itself and it should also serve to introduce future articles that delve more deeply into each of the four elements.

Heath suggests that the path to better decision making is summarized in a simple acronym: WRAP. Here’s a thumbnail description of each.

Widen Your Options – too often, our decisions come in the form of “whether or not”. For instance: “We need to decide whether or not we’re going to acquire Company Z.” Much better to say, “What’s the best way to invest our capital to increase our market share?” Heath reports on one study that suggests that multiple-choice decisions are six times more likely to result in good decisions than are whether-or-not decisions. (This is very similar to Paul Nutt’s concept of premature commitment or to a doctor’s narrow framing based on your medical record.)

Reality-test Your Assumptions – I’ve written about confirmation bias before; Heath says that it’s much more pervasive in business than we might realize. The boss wants to do something, so all of us underlings look for evidence that she’s right. Moral: don’t surround yourself with yes-people. Before making a big decision, hold a trial with two well-prepared groups arguing the pros and cons. Also, remember the base rates. If nine out of ten start-ups fail, there’s a 90% chance that your start-up will fail. Really, there is – you can learn more here.

Attain Distance Before Deciding – My Mom used to say, “It’s easier to avoid temptation than to resist it.” In essence, that’s Heath’s advice, too. Making a big decision stirs up emotions ranging from fear to greed and most everything in between. So, get some distance. Time can be a form of distance; putting off a decision may help you think more clearly. (But not always). You can also ask yourself a simple question: “If my best friend asked for my advice in a similar situation, what would I say?”

Prepare to Be Wrong – when I climbed in the Andes, my buddies and I would often create a go/no go decision like this: “If we don’t reach such-and-such point by such-and-such time, we need to abandon the climb and return to camp.” Heath calls these tripwires. They’re agreed upon milestones or events that will jolt us out of autopilot. Without tripwires, we may just go merrily on our way, assuming that our original decision was correct. Tripwires help us focus on unfolding events and take corrective action.

Is that all there is to decision making? Not at all, Heath tells some great stories along the way and I’ll write about them in the future. For today, however, that about WRAPs it up.

Presenting Decisively

chip heathThe other day, Suellen and I saw Chip Heath give a presentation on the key messages of his new book, Decisive. Heath is on tour to promote the book and Denver was a well-promoted stop along the way.

I’ve written about the book in recent weeks and plan to write more in the near future. It’s a simple, clear synopsis of recent research on decision-making.

Today, however, I want to focus on Heath’s presentation style – he reminded me of many lessons I’ve learned in public speaking. Here’s a summary.

Establish rapport and credibility – a large audience turned up in Denver and Heath commented on it immediately, saying, “It’s clear that the people of Denver are intellectually curious. In fact, I’d say that they’re four times more curious than people in Austin and eight times more than people in Los Angeles.” It was funny but it was also a nice compliment. We loved him right away. Best of all, it wasn’t canned.

Slides as hooks not as script – Heath used a lot of slides. He advanced to new slides regularly; no slide stayed up for more than a minute or two. Each time he advanced, the audience “refreshed”. Most of his slides had fewer than ten words on them. Many had only an image. Heath told the story; the slides illustrated it. The text on the slides helped you remember the key points; they didn’t steal Heath’s thunder.

Tell a story, not an abstraction – Heath told a lot of good stories about decisions gone right and gone wrong. They were stories about flesh-and-blood people whose experiences illustrated key ideas about decision making. Every now and then, he would state an abstraction to summarize a point.  He never said, “the moral of the story is…” but he could have.

Humor — he wasn’t rolling-in-the-aisle funny, but he had a dry, wry sense of humor that helped hold our attention. We paid attention partially because we didn’t want to miss a laugh line.

Parallel construction – Heath’s book has four major messages – the WRAP process. Heath covered all four and each section was structured in exactly the same way. We always knew exactly where we were in the narrative. We never got lost.

Finish early – Heath finished about ten minutes ahead of schedule (at least, ahead of the schedule that I had in mind). Giving 500 busy people ten minutes of their life back is a nice contribution to our mental welfare. We appreciated it.

Practice, practice, practice – it was clear that Heath was a polished presenter and that he had given this presentation before. That didn’t make it boring. Rather, we concluded that he respected us enough to make good use of our time. If he respects us, we can respect him.

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