Not a Member? Get access to HR news and resources that you can trust.
Here is how HR can help prevent the missteps that could cost your company big in court.
Is your employee handbook ready for the changing world of work? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Get the HR education you need without travel expenses or time out of the office.
Expand your influence and learn how to become an effective leader -- Join us in Phoenix, AZ, October 2-4, 2017.
Common obstacles to making good business decisions—and how to get past them.
Business leaders are tasked with making hard decisions—choices that shape the future of their organizations. Yet often the decision-making process they use is given little thought.
“The world has changed in ways that make decision-making more important than it used to be”—and more difficult, says
Maurice Schweitzer, a professor at the Wharton School at the University of Pennsylvania.
Indeed, due to technological advances, the availability of “big data” and globalization trends, business leaders have access to more information than ever before, and they must make complex choices quickly and frequently.
While most people assume they can make good decisions if they only think hard enough about a problem, researchers have found that isn’t true.
“Our decision-making abilities are limited,” says Schweitzer, who directs an executive workshop on strategic decision-making. “The environment matters. The choices that we get matter.”
Some of the obstacles to sound decision-making include:
Overconfidence. People want their leaders to be confident. And executives might truly feel confident in their decision-making abilities. But studies have shown that the confidence is often unjustified. “The problem is that when people succeed, they’re more likely to attribute their success to their own ingenuity and efforts than they really should,” Schweitzer says. They believe they know more than they do, so they don’t consider all the options.
Analysis paralysis. When people are uncertain about what the future holds, they often want to postpone a decision until they have more information. But they may never have all the information they want—or, by the time they do, it’s too late.
Emotions. People’s emotions can affect their decision-making ability—for good or bad. Anxiety can lead to bad decisions because people want to exit an uncomfortable situation as quickly as possible. Research shows that when an individual in a calm state is given bad advice, he or she will recognize it as poor counsel. But a person who is anxious will more readily accept bad advice. “We become less critical,” Schweitzer says.
Conformity. Group decisions can turn out badly because leaders don’t get the information they need. “Often that information can actually be found within the firm. But employees and colleagues do not tell leaders what they know because they think it’s prudent to be quiet,” says
Cass R. Sunstein, a professor at Harvard Law School and co-author of Wiser: Getting Beyond Groupthink to Make Groups Smarter (Harvard Business Review Press, 2014).
A Better Process
Good decision-makers ask questions that help them validate the information they rely on to make decisions. They “tend to vet successfully what information they pay attention to and what information to discard or discount,” says
Francis Flynn, organizational behavior professor at Stanford Graduate School of Business and co-director of the school’s executive development program.
People who make good decisions often develop a checklist or process to aid them.
“Sometimes, by formalizing that process, we promote a conversation around something that really should be a conversation rather than a coronation of an idea,” says Schweitzer, who is co-author of
Friend and Foe: When to Cooperate, When to Compete, and How to Succeed at Both (Crown Business, 2015).
Tactics that Schweitzer and Sunstein suggest that leaders use to draw out other views include:
Once the information is gathered, leaders learn to navigate uncertainty by building flexibility into their decisions and by developing contingency plans, Schweitzer says.
“We aren’t sure how things are going to work out, but we need to make the best decisions that we can, given what we know now,” he says.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
New Pro Member Special
SHRM’s HR Vendor Directory contains over 3,200 companies