How to improve the process of decision-making – the two fundaments
Rational decision-making is not a gift, with which someone is born or few people have, it’s more of an art, which can be learned – a process that requires weighing the information and risk on one hand and the emotions of the other hand. Because, if you can’t make decisions based on your choices, the circumstances will make them for you.
Whether you are a company director, a manager of a team or even a non-management employee, the fundaments for making a decision are always a useful information, which you should have and use, if you want to make the right choices.
Here is what you need to have in mind if you want to improve the process of decision-making:
Rearrange the frame
We’ve all heard about the popular phrase “to think outside the box”. Many people know what it means, some can figure it out, but the popular definition is that thinking outside the box means finding an alternative solution to a particular case, which often doesn’t rely on logic and there is no evident information on its success. This is somewhat of a true statement, but here are some questions – what’s the box and why should we not think inside of it?
To illustrate, we will give an example from a study that focuses on framing the decisions and psychology of choices – it shows how our mind creates frames (a box) around a problem and this determines the choices we make.
The participants in the case study face the following hypothetical problem – a deadly virus threatens to kill 600 people. Two programs are created to fight the virus. The participants should choose one of them. In the brackets is the percentage of the participants that chose the program:
- if you choose program A, 200 people will be saved (72%);
- if you choose program B, there are 30% chance you will save 600 people and 70% chance you won’t save anyone (28%);
Here, the choice is dictated mainly by the presence of risk – the majority chooses the secure option, saving 200 people, while the statistically improbable option, where there is a big chance no one is saved, is neglected.
Then, there is a second question:
- if you choose program A, 400 people will die (22%);
- if you choose program B, there are 30% chance no one will die and 70% chance 600 people will die (78%);
This is the explanation of the results – it all comes from the frame connected to the risk taking we create – the sure death of 400 people is not more acceptable than 70% chance of everyone dying. There is a psychological template – people are more inclined to make choices that include some type of gain, but a choice that involves a loss is perceived as a risky and is rejected.
The truth is – both questions are the same, it’s just that one of them involves gain (saving 200 people), while the other involves loss (400 people die). But human nature doesn’t treat gain and loss equally – the possibility of loss is more powerful than the possibility of gain. Also, the human nature creates frames around the problem (gain-loss), which restrict our choices.
When we say that people should think “outside the box”, we actually tell them to rearrange their frames and create space for more choices and not just the one that we’ve already made on a subconscious level.
Watch out for comparisons
No matter how much we tell others and ourselves to not do it, we are helpless when it comes to comparing stuff. The need to compare is primal and is a prerequisite for the quality we seek.
People, by default, don’t know they want something, right until they see it in a context. We don’t know what type of car we want, until we see the champion winning a race in a specific automobile. We don’t know what type of headphones we want, until we hear the ones that sound better than the previous model. We don’t even know how we want to live and what we want to become until we see someone which lifestyle we like. It’s all related and we have a need to compare things.
To show you the power of comparison, we will give you an example from a case study made in MIT. The students are presented with a few choices for subscribing to a magazine – with a print and online version (the results are in the brackets, yes):
- Subscription for the online version – $59 (16%);
- Subscription for the print version – $125 (0%);
- Subscription for both versions – $125 (84%);
It is not unusual that no one chose to subscribe for the print version only – you get double the value for the same price if you subscribe for both versions. But, of course, there is a second question, but this time the only print subscription is eliminated. Here are the results:
- Subscription for the online version – $59 (68%);
- Subscription for both versions – $125 (32%);
This shows that comparison is the window we watch the world from, so we do it all the time. But the next thing is even more interesting – we not only compare everything, but we also focus on things that are easy to compare, and avoid things that we find difficult to compare.
The challenge is to be aware of all this, and to know we always compare things and people. But we should make such comparisons that help us find the specific information we need to make the right decision.
Companies can have a bigger effectiveness by looking at the process of decision making as a team effort, where there are different points of view. These fundaments can be very useful if added to the process of making a decision, but don’t forget that you can always call for backup – in the form of a professional company, which can teach you the process of decision-making. Because right decisions are the foundations of your business.
Take a look at our services and contact us if you think our big experience and tested methods can help you expand your business and reach more customers.