In a world of increasing complexity and ambiguity it’s essential that leaders know how to make good decisions to ensure good organisational performance.
Making good decisions involves taking deliberate steps to avoid falling into the trap of default thinking. In my article in Investment Magazine I share some practices that should be adopted to ensure sound decision making. You can read the article here.
Leaders make many decisions each day, decisions that range from simple, such as what tie or dress to wear, to more strategic matters such as where to invest, what product to launch and how to address falling margins.
It’s comforting to think that our brain, with its vast capacity for processing streams of information, is infallible. The truth is it’s highly fallible and often fails when it’s most needed – such as during times of change and uncertainty when the need for good decision making is essential to good organisational outcomes.
But why should this be the case? Unfortunately, it’s because we base our decisions on hunches and gut reactions. We let past experience create assumptions about how things should be and therefore how we should respond today. The danger with this approach to decision making is that it can be filled with blind spots and bias.
Mental short cuts
The pre-frontal cortex, the part of the brain that’s involved in thinking, analysing and reasoning, tires easily.
Consequently, very cleverly, it has found a way of conserving energy – it takes short cuts. These mental short cuts are known as heuristics and the brain uses them to make big things and complex issues easier to manage and, ultimately, to remember.