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Why Do We Make Such Lousy Decisions?

By James Gelatt

There are at least four books published with the title, What Were They Thinking? These books address some classically bad decisions -- everything from

  • “The 100 dumbest events in television history” (having Roseanne Barr sing the National Anthem) to …

  • Crisis communication -- the good, the bad, and the clueless (the Catholic Church’s pedophilia scandal, or: Denial won’t get rid of the skeletons in your closet), and …

  • Unconventional wisdom about management (argues that most managers fail because they diligently follow common management practices that are sometimes “flawed to the core”), and finally …

  • Marketing blunders (years ago, Target announced that the Salvation Army was no longer welcomed to ring their bells outside of any Target store. Sensing that shoppers were furious, Wal-Mart announced it would match customer donations at its stores, dollar for dollar).

The history of American companies is replete with examples of dumb management decisions. Did you know Henry Ford convinced the Navy that he could build and supply submarines? Ignoring the advice of naval experts, Ford developed his own submarine. It leaked – not a good thing for a car, much less a submarine.

Nonprofits are no less dumb. I once worked with a board that decided to accept a restricted gift of a quarter of a million dollars, the interest on which would go towards an annual scholarship for a student in communication disorders. So far, so good.

But the donor wanted the scholarship to be limited to students who were physically disabled. You could count on the thumbs of one hand the number of students in the communications disorders programs 1) who had a solid grade point average, 2) demonstrated financial need, and 3) were physically disabled. The board’s decision making was clouded by its eagerness to accept a major donation.

Decision-making is one of the key things managers do -- or ought to do. But we tend to think decision-making is a logical, rational process, when in fact, it is often quite the opposite.

Look in any management textbook and you’ll find a description of “Rational Decision Making.” It is comprised of three sequential steps: 1) Identify and define the problem; 2) Generate alternative solutions to the problem; 3) Select the best solution and implement it. There are several problems with this classic approach:

  • It treats decision-making and problem solving as if they were the same. I would argue they’re not the same. Problem solving starts when we perceive that something has gone wrong, whereas decision-making can – and should be – proactive.

  • The model assumes that decision-making is “rational.” In fact, what we know about decision-making is that it is “bounded” (a term coined by Herbert Simon) by insufficient information, emotion, office politics, personal agendas, and limited time.

What we know about decision-making is that it is subject to bias, an example of which is “anchoring.” Anchoring is the inclination to rely too heavily on a single trait or piece of information when making decisions. In effect, we get “hung up” on one thing – a person’s appearance, a color, our perception that one gender is more “emotional” than another.

We do this all the time in politics: If the information is coming from (you pick – a Democrat or Republican) it is thus, again (pick one – believable or politically motivated).

We also tend to make choices that let us avoid uncertainty. Our plans often fail because of tunneling - we neglect the sources of uncertainty outside the plan itself. We tend to view the world from within our model. It is risky – and mentally straining -- to think too widely.

As a result, we tend to stay within unspoken boundaries, going with what we know and avoiding what we don’t. The result is that we convince ourselves that we understand, even if that means making the decision first and then gathering “facts” to support the decision.

We also tend to want to avoid making hard decisions. I worked as a consultant with a nonprofit whose board met several times a year for at least three full days (!) at a time. The board liked to think it was a deliberative body. In fact, it was a decision avoiding body.

The board spent inordinate amounts of time on trivia – whether the staff travel per diem should be raised a few dollars – and very little time on real issues, such as the fact that the nonprofit was in serious financial difficulty and had a CEO that was keeping that news from board members.

It’s not hard to avoid making a decision, but just in case, here are some ways to do so:

  • Get involved in lots of details

  • Say we need more data

  • Setting a date by which “we'll make a decision” -- and then delay the date

  • Denying that there ever was a problem

  • Occupy ourselves with other tasks

  • Refer the work to a task force

  • Ignore the matter completely.

  • Assuming that we’re not decision-making averse, it is time to appreciate that in reality, many sound decisions are made based on partial information, emotion, and a necessity to move ahead.

Instinct, intuition, "gut" feelings are not only part of the decision-making process, they may be key tools in today's tornadic environment. "On the fly" decisions are here to stay. Indeed, they probably have been with us for some time.

In theory, managers plan, organize, direct and control. In practice, much of the work of managers is real time, impromptu, spontaneous, and harried.

In his book entitled Blink, Malcolm Gladwell has this to say about trusting our intuition – about what we degrade as “snap judgments:”

We believe that we are always better off gathering as much information as possible and spending as much time as possible in deliberation. We really only trust conscious decision-making. But there are moments, particularly in times of stress, when haste does not make waste, when our snap judgments and first impressions can offer a much better means of making sense of the world. (pp 13-14).

You know what Gladwell is saying. Sometimes we just know something doesn’t feel right. Or the reverse – when we just know that we “get it.” As a consultant, I’ve done numerous feasibility studies and organizational audits. Almost every time, after only a few interviews, I could sense a pattern. Invariably, I used the remaining interviews to dig deeper, test hypotheses, posit possible solutions. Blink.

There is no one right way to make a decision. It's situational. Some decisions require a group -- when, for example, "buy in" is essential. Other decisions are simply a waste of a group's time if they can be readily made by one person. At the same time, even in an organization where change is a constant, it is possible -- and indeed desirable -- to be prepared. It's what's sometimes called "anticipatory management."

Although there is no one right way to make a decision, there are some principles that we can apply. One is to avoid mistaking things we do for things we should be doing. Einstein said it best: "The significant problems we face cannot be solved at the same level of thinking we were at when we created them." We also need to make decisions with an eye to where they will take us.

In Peter Drucker's words: "Strategic planning does not deal with future decisions. It deals with the futurity of present decisions." In other words, we need to ask: How will decisions we make today affect, even determine, what we will be tomorrow?

James Gelatt is the author of Managing Nonprofits in the 21st Century and general editor of Aspen's Fund Raising Series for the 21st Century. He is the president of Prentice Associates, a management consulting company specializing in associations and other national nonprofits, and a past-president of the Greater Washington, D.C. chapter of the National Society of Association Executives.

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