Getting decisions right is crucial; good decision making can make the difference between being one step ahead and being buried by competition. Just take Kodak as an example – they did not plummet to their downfall by missing the digital age. In fact, they invented the first digital camera. Rather their failure perhaps came from the instinctive decision to cling onto their core lucrative film business. Seemingly ‘rational’ judgments based purely on instincts or affirmed by biased data could lead to foolishness and precipitate large-scale stupidity unless the irrationality of such rationality and its impact and consequences are recognised and understood. This article looks at how we can get caught out by the hard wiring of our thinking and begins to explore the necessities for better decisions.

 

Intuitive Demands

When we first meet someone, we are very quick to form an impression. We intuitively think and make a judgment (without intending to), based purely on a small amount of information we have at that point in time. For example, let’s consider Anthony, the CEO of a potential new business acquisition. It may not be deliberate, but we will instantaneously decide that Anthony is a confident person from his body language and anticipate gravitas in the subsequent dialogue. In that split second, we may create a positive impression of him as potential business partner. We are not conscious of this ‘fast thinking’, but our minds were prepared to make this judgment instantly. This is because our brain is hard-wired to think fast and efficiently jump to conclusions to minimise wastage of cognitive effort.

 

“…leaders who only notice the strong signals about things going wrong will be surpassed by great leaders able to also pick up on the weak signals and act quickly based on intuitive feelings.”

 

When we do jump to the right conclusions, for example if Anthony does indeed prove to demonstrate boldness and tenacity necessary for a successful partnership, intuition can be an effective method for saving ourselves time and resource.

Moreover, considering the fast changing landscapes of the market that requires organisational agility and even faster decisions to keep up with competitors, it would almost seem there is a demand for such speedy intuitive sense making and deduction. In running the radar sweep that detects emerging trends and situations in the environment for corrective courses of action, leaders who only notice the strong signals about things going wrong will be surpassed by great leaders able to also pick up on the weak signals and act quickly based on intuitive feelings. Thus the more able leaders are in honing their instincts, the greater likelihood of continued organisational success. Steve Jobs, for example, advocated his use of intuition saying, “You have to trust that the dots will somehow connect in your future”. His approach arguably never did let him down and there is no doubt he was greatly admired by many and considered to be one of the most successful CEO’s in history.

It is therefore no surprise we are now seeing changes in the competencies of ‘talent’ required for success within our work with clients. Partnering with the board of a leading food and drink company recently to understand the future talent required for success, it was revealed adaptability, intuition and robustness in decision-making as amongst the perceived top key features necessary for the future. As one leader said, “We’re too driven by process and focused on making safe decisions – there’s less intuition involved”. In keeping up with the market, the development of agile organisations necessitates fast intuitive decision-making.

 

The Conflicting Perils

However, in his book, “Thinking, Fast and Slow”, Nobel Laureate Daniel Kahneman highlights the problematic nature of fast thinking by explaining that fast thinking, the first of two systems, is based on a simplistic model of the world that utilises irrational mental short cuts to make judgments. In Susan Carroll’s article, she talks about these short cuts as ‘heuristics’; rules of thumb that every one of us unintentionally use to reach solutions not guaranteed to be optimal. In effect, we are all primed to make biases and often can jump to irrational conclusions when we do follow our intuition. One feature of fast thinking, for example, is the halo effect whereby our judgment is influenced by a single trait or first impression. For example, on sensing Anthony has confidence, we may also decide that Anthony is fearless, influential and resilient. It may be true…. but it may not be! In reality, the judgment is the result of an illogical and irrational conclusion you have instinctively jumped to.

A lack of recognition that we are all victims of biases and irrational judgment could be a leader’s downfall. Unfortunately, added to this is the fact that while we display a lot of wisdom about the general dynamics of human nature, we have rather less self-enlightenment when it comes to predicting our own behaviour. Individuals have a tendency to think their own actions are more a product of their intentions and free will, and believe they are generally immune to the constraints that dictate other people’s actions in a phenomenon known as ‘misguided exceptionalism’. They exempt themselves from the psychological understanding they have about others, thinking that the rules that control others don’t apply to them. As a result, even the cleverest of leaders make foolish mistakes as intelligence is largely independent of rationality and does not make bright individuals more logical or immune to poor decisions. Take Steve Russell, former Chief Executive of Boots, for example, his decision to pursue a health care strategy to grow new care services such as dentistry despite the facts that managers did not have the skills and these markets offered little profit was partly the cause of his demise and early departure from the role. Further to this, the increased reliance on collective and interdependent decision-making means groups of individuals’ concurrent exemptions of themselves as victims of biases can contribute to very damaging large-scale stupidity. In fact, we have all observed this – just consider the impacts of the multitude of irrational decisions that led to the economic crash. So how can we overcome this?

 

Differentiating Rationalisation from Rationality

One solution often advocated for this problem is for us to pay attention and restrain ourselves to spend time on the second of the two mental processes Kahneman talks of, slow thinking. Slow thinking is the conscious and effortful construction of thoughts in an orderly series of steps. When thinking slowly, attention and memory are called upon for deliberate choices such that the governing impulses and associations of fast thinking are overruled. For example, if we were to slow down our thinking and properly consider all the available data when meeting Anthony, we would be more able to construct a thoughtful response as to whether the instinctive response we had to him was skilled or a heuristic biased response and prevent us from making potentially foolish thoughts overt. The power of information would give us the opportunity to recognise that in fact, Anthony’s behaviour that projects confidence is merely learnt and unreflective of his hesitancy and lack of decisiveness in decision making and his drive to follow through, which would undoubtedly prove fatal for delivering the expected benefits of the acquisition.

While the fast thinking system runs automatically though, the slow thinking system typically runs in a low-effort mode where only a fraction of its capacity is used – its main characteristic is in fact laziness; a reluctance to invest more effort than is absolutely necessary! Kahneman describes the two mental processes of slow and fast thinking as being analogous to agents of a newspaper room. In this newspaper room exists reporters who continuously write stories (fast thinking) and a badly worked editor who checks the stories being sent to the printer (slow thinking). The fast thinking reporters are constantly interpreting the world based on impressions, intuitions, intentions and feelings and sending stories to the printer while the slow thinking overworked editor mostly endorses the stories without really thinking about it, only occasionally stopping to make the effort to think more slowly and check whether they need modification. The problem is that the editor’s role as an endorser rather than enforcer thus on realising some stories should not have been endorsed, the slow thinking overworked editor rationalises to find reasons for why the story was endorsed.

Instead of examining the information and arguments, it searches for what is consistent with the existing beliefs. In this way, slow thinking can only counteract but not override the decisions that fast thinking has already arrived at based on the heuristics and short cuts, rationalising the decision already made rather than finding a truly rational alternative. In fact, the decision can be far from rational – what we are simply doing is using data to selectively reinforce our stories, the impressions, instincts and intuitive prejudices already sent to the printer by the editor. Thus while slowing down thinking can help to avoid the heuristic biases of fast thinking, slow thinking is only less prone and not free from error.

 

“A lack of recognition that we are all victims of biases and irrational judgment could be a leader’s downfall. Unfortunately, added to this is the fact that while we display a lot of wisdom about the general dynamics of human nature, we have rather less self-enlightenment when it comes to predicting our own behaviour.”

 

Moving Beyond Irrationality – how OE Cam Can Help

So on one hand, quick instinctive thinking not only saves time and effort but is demanded for the organisational agility needed to keep up with the speed of the market and with competitors. However such fast thinking can lead to costly mistakes because we are hard-wired to jump to conclusions.

On the other hand, while deliberation and slow thinking may prevent us jumping to biased conclusions, the rationalisations of the lazy inclination cannot amount to true rationality of quality decisions. With this conundrum, how can we manage our fast and slow thinking systems to ensure they work effectively for us rather than to our own detriment?

The first challenge is in recognising and applying the increasing amount of data available to us in this digital age (but which we are primed to ignore). This requires leadership qualities greater than that of traditional competencies. Humility, for example, a leadership trait considered a weakness by some, can help overcome foolishness of misguided exceptionalism. Humble leaders look within themselves to understand and acknowledge their imperfections, recognise their instincts are not always correct and ask for help when it is needed without allowing the power of their position to cloud truly rational judgment. Courage, another leadership trait not often tested for, can aid in the recognition and pursuit of the right intuitive instincts and those weak market signals on which efforts should be converged. Reflecting this, our recent work has therefore involved the development of leaders and of assessment methodologies for such leadership characteristics within top teams and leadership to support organisations in getting the right people for the future.

The second challenge is in recognising that both types of thinking have a place in our decision making and knowing which to apply when. This requires leaders to understand and work with their own natural thinking patterns – for them to be able to better hone their fast thinking instincts to recognise the right instincts and to harness slow thinking without its lazy inclination to rationalise rather than to be rational. Developing self awareness of decision making will help leaders to pay attention to data that is important so it is less likely these systems will make biased assumptions or jump to wrong conclusions and let them down. Building on this, OE Cam’s leadership development programmes help leaders to recognise the impact of their personality preferences and thinking styles on the decisions they make. Through coaching OE Cam helps leaders broaden their thinking to consider alternative perspectives and improve consultative and collaborative engagement to produce better quality decisions based on all the data available.

Continuing to trust intuition and simply slowing down thinking will produce hit and miss results and is undoubtedly a risk to take. Only by identifying and developing leaders with attuned consciousness and character strengths can businesses have greater confidence in making the right decisions for future market competitiveness.

stephanie.garforth@oecam.com