All decision makers experience situations where they would have preferred more time to analyze and think through decisions that need to be made. Gathering and processing information that strengthens the decision-making basis increases the likelihood of making a good decision. However, the problem is that the longer you spend thinking and pondering, the greater the risk of running out of time or becoming a bottleneck for the organization.
When it comes down to it, a decision with improvement potential that has been taken and carried out on time will always be better than a perfect decision that was taken too late. However, one must be careful not to pull the trigger too quickly, as there is a big difference between a decision with improvement potential and a bad decision with catastrophic consequences for the company.
Make decisions with your heart and you may end up with heart disease
In the book Thinking Fast & Slow, Nobel laureate Daniel Kahneman shares findings from a lifetime of research on decision-making and behavioral psychology to map out how the brain works. If you are not familiar with the content, the basic premise of the book is that your brain operates with two systems:
- System 1, which is fast, intuitive and emotional.
- System 2, which is slow, rational and logical.
What may surprise many is that we live under the assumption that it is System 2 (our thinking and rational mindset) that is in control, and that we always think things through, go about things systematically, and make well thought out choices. However, research shows that we mostly live our lives in the intuitive, automatic System 1. This “autopilot” in our brain aims to avoid unnecessary effort, and has developed a large network of “mental shortcuts” to process all the impressions and information we are bombarded with.
Among these shortcuts, we find an inner narrator, who creates simple, tidy and coherent stories to give us much-needed meaning and understanding of events that happen or have happened in a very chaotic and complex world. When we create a good story, we believe in it and update our worldview accordingly.
The trap we can all too easily fall into when creating stories to make the world more understandable is that we can become victims of a cognitive illusion that makes us believe we have deep insight, good overview and full understanding of things that we have not really delved into enough.
This is due to a tendency to treat limited information as all there is to know. With the small amount of information, we can easily create a coherent story that confirms our assumptions, but which may not be entirely accurate.
This is due to a tendency to treat limited information as all there is to know. With the small amount of information we have available, we create the best possible story that guides how we see the world. It is actually easier to put together a story when you know little and there are fewer pieces to put together. All of this means that, according to Kahneman, we have “an almost unlimited ability to ignore our own ignorance.”
I feel, therefore I act
In 1982, a man who has since become known as Elliot came into the office of neurologist Antonio Damasios. Elliot had had a brain tumor removed. His cognitive skills had been tested and his intelligence was the same as before. But for some reason he could no longer make decisions.
Even trivial things like where to park his car or what to eat for lunch he thought through again and again without coming to a result.
It was all very mysterious. But after testing and investigating Elliot’s reaction to emotional stimuli, Damasio discovered that Elliot had lost the ability to feel. The results of Damasio’s work with Elliot provide solid arguments for the fact that emotions play an important role when we make decisions.
The reason it took Elliot several hours to decide on something as simple as what radio station to listen to was quite simply that he could not use his feelings. In other words, he could not feel which decision he should take.
So even though it would be theoretically possible to map out situations and issues 100%, with all the benefits and drawbacks considered and all the imaginable and unimaginable consequences clear, it is ultimately emotions that guide us to make the decision that feels best.
The need for speed in the decision-making basis
Both Kahneman’s findings about our inherent weaknesses in treating limited information as all there is to know, and Damasio’s work that tells us that it is ultimately feelings that get things done, underscore the dilemma that decision makers face.
Nevertheless, one cannot avoid the fact that of all factors that can affect the outcome of a decision, there is only one thing we can influence positively or negatively. It is the information that forms the basis and quality of the decisions we make.
The key therefore lies in making the collection of data and information faster, so that we can buy time to work on the decision-making basis and increase the quality of the decisions we have to make. Digitization has contributed to a significant improvement in efficiency in the collection and processing of data, and this has made it possible to make better and faster decisions.
This has given us great opportunities in business management to make better financial decisions. But many are unfortunately lagging behind in this area. In a survey recently conducted by Profitbase, it was revealed that 60% of the companies surveyed only use Excel for budget and forecasting work.
Excel is phenomenal, but like all tools, there are tasks it is well suited for – and tasks it is less suitable for. Business management and financial planning is not an area where spreadsheets are the best tool. When both the amount of data and the number of people involved increase, the company ends up spending more time preparing spreadsheets than conducting analyses and acting on opportunities and threats.