May 25, 2011

Apples or Oranges

There are lots of biases that can get in the way of sound decision-making.

An very good article in Harvard Business Review (June 2011) called "Before You Make That Big Decision" identifies a dozen of these biases that can throw leaders off course.

What I liked about this article is how it organized the subject into a schema for interrogating an issue to get to better decision-making.

Here are some of the major biases that leaders need to be aware of and inquire about when they are presented with an investment proposal:

1) Motivation Errors--do the people presenting a proposal have a self-interest in the outcome?

2) Groupthink--are dissenting opinions being actively solicited and fairly evaluated?

3) Salient Analogies--are analogies and examples being used really comparable?

4) Confirmation Bias--has other viable alternatives been duly considered?

5) Availability Bias--has all relevant information been considered?

6) Anchoring Bias--can the numbers be substantiated (i.e. where did they come from)?

7) Halo Effect--is success from one area automatically being translated to another?

8) Planning Fallacy--is the business case overly optimistic?

9) Disaster Neglect--is the worst-case scenario imagined really the worst?

10) Loss Aversion--is the team being overly cautious, conservative, and unimaginative?

11) Affect Heuristic--are we exaggerating or emphasizing the benefits and minimizing the risks?

12) Sunk-Cost Fallacy--are we basing future decision-making on past costs that have already been incurred and cannot be recovered?

To counter these biases, here are my top 10 questions for getting past the b.s. (applying enterprise architecture and governance):

1) What is the business requirement--justification--and use cases for the proposal being presented?

2) How does the proposal align to the strategic plan and enterprise architecture?

3) What is return on investment and what is the basis for the projections?

4) What alternatives were considered and what are the pros and cons of each?

5) What are the best practices and fundamental research in this area?

6) What are the critical success factors?

7) What are the primary risks and planned mitigations for each?

8) What assumptions have been made?

9) What dissenting opinions were there?

10) Who else has been successful implementing this type of investment and what were the lessons learned?

While no one can remove every personal or organizational bias that exists from the decision-making equation, it is critical for leaders to do get beyond the superficial to the "meat and potatoes" of the issues.

This can be accomplished by leaders interrogating the issues themselves and as well as by establishing appropriate functional governance boards with diverse personnel to fully vet the issues, solve problems, and move the organizations toward a decision and execution.
Whether the decision is apples or oranges, the wise leader gets beyond the peel.


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