Did you know teenagers outperform corporations in decision-making?  A study found that 30% of teenagers consider more than one option, while only 29% of corporations considered more than one option when making decisions.  Which of the two statements below applies to teenagers and which applies to corporations?

  • Less than 30% of decisions were effective
  • 83% of decisions lost money

They both sound like my teenagers, but both apply to corporations!

Decisions--man with lots of doors to chose from

Where’s my teenager when I need her?

To start making corporate decisions better than a teenager, first understand how we think we make decisions…

How We Think We Make Decisions:

  1. Encounter a Choice
  2. Analyze all options
  3. Make a choice that best satisfies requirements
  4. Live with it

 Reality:

  1. Encounter a Choice
  2. Analyze options, but only those you can think of.  That’s called Narrow Framing
  3. Gather data to support your Preferred Option (not intentional, but subconsciously we all do this)
  4. Make a Short-term Emotional decision
  5. Be Overconfident about how the future will unfold and stick with a bad choice way too long!

The Four Villains of Decision Making

You can improve your decision-making process by recognizing the Four Villains of Decision Making outlined below:

  • Narrow Framing – Limiting the options we are willing to consider
  • Confirmation Bias – Only consider supportive information for a decision we already made
  • Short Term Emotion – “I want it now,” and candy bars in the checkout line
  • Overconfidence on how the future will unfold
    • Multiple publishers rejected J. K. Rowling’s first Harry Potter book before Bloomsbury Publishing decided to publish it.  J. K. Rowling’s website (http://www.jkrowling.com) gives credit to an editor’s eight-year-old daughter.

Use a Decision Matrix

 A decision matrix can help you make very good fact-based decisions (fact-based decisions are paramount in Lean Six Sigma).  On a sheet of paper, create a list of what your decision MUST HAVE to satisfy the decision requirement.  These are deal breakers – if you do not satisfy the MUST HAVE requirements, you will make a bad decision.  Next, list out the things that could sway your decision once you meet all the MUST HAVE decision requirements.  In a group setting, brainstorming and Pareto Voting insures all parties impacted by the decision have input on potential MUST HAVE items and a voice in the final list.

I will use buying a truck as an example.  In the table below, the bold font down the left side indicates MUST HAVE qualities.  The normal font indicates nice to have qualities.  Across the top are the various options (trucks) considered.  In the example below, only one option satisfied all MUST HAVE criteria.  In this decision matrix, the MUST HAVE items are subjective and must be determined prior to beginning the search to prevent confirmation bias.  If you replace Good MPG with Price, then there is a different outcome; If Good MPG were not a MUST HAVE item, there is another different outcome.

2009 F 150 2008 C 1500 2009 C 1500 2010 F 150 2012 F 150
4×4 x x x x x
Good MPG NO NO NO NO x
Big bed NO x x xx x
Large cab x x x xx x
Automatic Trans x x x x x
Price OK LOW LOW OK HI
Damage none extensive none none none
Mileage 95K 160K 76K 92K 31K

If you have multiple options that meet all the MUST HAVE criteria, you would start a new sheet.  On the new sheet, you would assign a score to various aspects of the criteria to help you make the best decision.  In the example below, I scored the big bed and large cab lower than MPG, price, and mileage.  Your decision matrix would look different based on your preferences.

Point value 2009 F 150 2012 C 1500 2010 F 150 2012 F 150
4×4 – x x x x
Good MPG 0-20 7 16 7 18
Big bed 0-15 4 4 12 12
Large cab 0-15 10 15 15 10
Automatic Trans – x x x x
Price 0-20 17 4 18 9
Mileage 0-20 5 18 5 15
TOTAL 43 59 57 64

You are right; I narrow framed the options by only using full size trucks made by American owned manufacturers for this example.  Confirmation bias may exist by looking for a V-6 or small V8 motor knowing that Ford offered both, but I was certain of GM.

Use Trust Factors

The decision matrix process builds in several trust factors.  Using trust factors in the decision-making process speeds implementation of the final decision.  Trust factors include:

  • Acknowledging suitability of other options (all options/opinions respected)
  • Major Element (MUST HAVE) Acceptance (consensus builds acceptance)
  • Procedural Justice (team members feel their input was valuable even if it did not make the final cut)

Now you have new information on decision-making, and a Lean Six Sigma tool to make fact-based decisions.  Go forth and make better decisions than a teenager!

Additional Reading

Jeff Hopkins

SigmaMed Solutions

jeff@sigmamed-it.com

307-256-8814