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Managing Books

Four steps to making better decisions Add to ...

Decisive

By Chip Heath and Dan Heath

(Crown Business, 316 pages, $29.95)

You may have heard about the increasing number of organizations experimenting with doing a “premortem” – imagining that the decision the managers are about to take will turn into a fiasco and that, later, they will have to dissect the reasons for the dismal outcome.

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Such an exercise illuminates issues you might be ignoring or missing in your excitement with the prospective course of action. But a premortem is basically a negative outlook, only part of the picture.

So in their new book, Decisive, Chip Heath and Dan Heath ask you to imagine instead a “preparade” – a celebration of the fabulous success arising from your decision.

One challenge of preparing for success is ensuring you don’t face disastrous complications when you try to keep pace with your success. Minnetonka Corp., the maker of Softsoap, for example, was well-prepared for the blockbuster success of that product because the company had assured plentiful access to supplies of dispensers for the liquid soap.

Chip Heath is a professor of business at Stanford University and his brother, Dan, is a senior fellow at Duke University’s Center for the Advancement of Social Entrepreneurship. The two collaborated previously on two excellent books, Made to Stick and Switch. They have an ability to take the latest research, weave it together with entrancing stories, and present a simple framework to help you in your work.

They manage that again here, with some excellent tips for improving your decisions, and a neat four-stage conceptual formula:

1. Widen your options

A big problem in making decisions is “narrow framing,” leaping on the first decent idea that surfaces or viewing a problem in simple binary terms – yes or no. The authors point to a study by business professor Paul Nutt who, after analyzing 168 corporate decisions, found that in only 29 per cent of the cases was more than one option considered.

That tracked closely with a study by Carnegie Mellon professor Baruch Fischhoff, who found that, among teenagers, 30 per cent of the time the decision made (to go to a party, to break up with a boyfriend) was a simple yes-or-no, rather than considering other options. “Most organizations seem to be using the same decision process as hormone-crazed teenager,” the brothers say.

One antidote is to assume that none of your options would work and then, when those vanish, see what you can come up with. Also, set up several teams to consider several options at once.

2. Reality-test your options

A second villain of decision-making is the tendency to simply confirm your biases with your analysis, using self-serving information. To combat this, you must get outside your head and collect information you can trust. Here the brothers share a technique favoured by Roger Martin, dean of the University of Toronto’s Rotman School of Management: For each option, consider what would have to be true for it to be the right choice. This clarifies thinking, and separates people from their biases as they analyze factors more carefully.

3. Get some distance before you decide

A third factor in bad decision-making is when emotions lead us astray. The solution is to try to distance yourself from the decision. For example, the authors suggest that when you’re struggling with several appealing options, ask yourself what you would tell your best friend to do in the situation. The options will be the same, but your perspective may change dramatically.

The authors also share a technique from business writer Suzy Welch, dubbed 10/10/10: Consider how you might feel about the decision you are intending to take 10 minutes from now, 10 months from now, and 10 years from now.

4. Prepare to be wrong

Often we’re overconfident about how things will unfold, so we need to stretch our sense of what the future might bring. One recommendation is to “bookmark the future,” as an investment analyst does by imagining the best and worst possible outcomes from a monetary choice. The premortem and preparade are also useful strategies to prepare for an uncertain future.

Books about decision-making are common these days. But the Heath brothers have a winner with their outline of the four villains of decision-making and their many practical solutions, informed not only by behavioural economics studies but also examples of successful and unsuccessful decision makers.

POSTSCRIPT

Howell Malham Jr., co-founder of Insight Labs, which brings some of the world’s smartest people out of boardrooms to tackle the world’s toughest problems, provides an irreverent, illustrated guide to strategy in I Have a Strategy (No You Don’t) (Jossey Bass, 215 pages, $27.95).

If you’re daunted by the feeling you aren’t visionary enough to be a successful entrepreneur, consultants Brant Cooper and Patrick Vlaskovits share some techniques about customer insight and rapid experimentation in The Lean Entrepreneur (John Wiley, 256 pages, $37.95).

In The Bankers’ New Clothes (Princeton University Press, 398 pages, $30.50) Anat Admati, a professor at Stanford University, and Martin Hellwig, the first chairman of the Advisory Scientific Committee of the European Systemic Risk Board on banking, look at what’s wrong with banking and what to do about it.

Special to The Globe and Mail

Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter

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