The most crucial decision is how to make it.
The superpower of continuously making sensible decisions that positively impact outcomes while remaining true to our values, mission, and vision is more art than science. Every day, chief impact officers and leaders are inundated with decisions, big and small. Understanding how people arrive at their choices is an area of cognitive psychology that has received attention and is rich in value when consulting to companies and executives on impact decisions. Theories have been generated to explain how people make decisions, and what types of factors influence decision making in the present and future. In addition, heuristics have been researched to understand the decision-making process.
A popular and effective decision-making method generated by Toyota manufacturing many years ago and utilized extensively even today is “Ask Why 5 Times” to reach the root cause.
Five whys (or 5 whys) is an iterative interrogative technique used to explore the cause-and-effect relationships underlying a particular problem. The primary goal of the technique is to determine the root cause of a defect or problem by repeating the question “Why?”. Each answer forms the basis of the next question. The “five” in the name derives from an anecdotal observation on the number of iterations needed to resolve the problem.
Not all problems have a single root cause. If one wishes to uncover multiple root causes, the method must be repeated asking a different sequence of questions each time.
The method provides no hard and fast rules about what lines of questions to explore, or how long to continue the search for additional root causes. Thus, even when the method is closely followed, the outcome still depends upon the knowledge and persistence of the people involved.
An example of a problem is: The vehicle will not start.
- Why? – The battery is dead. (First why)
- Why? – The alternator is not functioning. (Second why)
- Why? – The alternator belt has broken. (Third why)
- Why? – The alternator belt was well beyond its useful service life and not replaced. (Fourth why)
- Why? – The vehicle was not maintained according to the recommended service schedule. (Fifth why, a root cause)
The questioning for this example could be taken further to a sixth, seventh, or higher level, but five iterations of asking why is generally sufficient to get to a root cause. The key is to encourage the trouble-shooter to avoid assumptions and logic traps and instead trace the chain of causality in direct increments from the effect through any layers of abstraction to a root cause that still has some connection to the original problem. Note that, in this example, the fifth “why” suggests a broken process or an alterable behavior, which is indicative of reaching the root-cause level.
The last answer points to a process. This is one of the most important aspects in the “five why’s” approach – the real root cause should point toward a process that is not working well or does not exist. Untrained facilitators will often observe that answers seem to point towards classical answers such as not enough time, not enough investments, or not enough resources. These answers may be true, but they are out of our control. Therefore, instead of asking the question why?, ask why did the process fail?
Several factors influence decision making. These factors, including past experience (Juliusson, Karlsson, & Gӓrling, 2005), cognitive biases (Stanovich & West, 2008), age and individual differences (Bruin, Parker, & Fischoff, 2007), belief in personal relevance (Acevedo, & Krueger, 2004), and an escalation of commitment, influence what choices people make. Understanding the factors that influence decision making process is important to understanding what decisions are made. That is, the factors that influence the process may impact the outcomes.
Heuristics serve as a framework in which satisfactory decisions are made quickly and with ease (Shah & Oppenheimer, 2008). Many types of heuristics have been developed to explain the decision-making process; essentially, individuals work to reduce the effort they need to expend in making decisions and heuristics offer individuals a general guide to follow, thereby reducing the effort they must disburse. Together, heuristics and factors influencing decision making are a significant aspect of critical thinking (West, Toplak, & Stanovich, 2008). There is some indication that this can be taught, which benefits those learning how to make appropriate and the best decisions in various situations and environments. (Nokes &Hacker, 2007).
People make decisions about many things. They make political decisions; personal decisions, including medical choices, romantic decisions, and career decisions; and financial decisions, which may also include some of the other kinds of decisions and judgments. Quite often, the decision-making process is fairly specific to the decision being made. Some choices are simple and seem straight forward, while others are complex and require a multi-step approach to making the decisions.
The context of types of decisions people make, factors that influence decision making, several heuristics commonly researched and utilized in the process of decision making. Exploring what happens after the decision is made, as well as how present decisions impact future behavior and decision making. Implications for future research and practical application of teaching decision making skills in corporate cultures and C-suites is important for consistent impactful decision making.
Factors that Influence Decision Making
There are several important factors that influence decision making. Significant factors include past experiences, a variety of cognitive biases, an escalation of commitment and sunk outcomes, individual differences, including age and socioeconomic status, and a belief in personal relevance. These things all impact the decision-making process and the decisions made.
Past experiences can impact future decision making. Juliusson, Karlsson, and Garling (2005) indicated past decisions influence the decisions people make in the future. It stands to reason that when positive results come from a decision, people are more likely to decide in a similar way, given a similar situation. On the other hand, people tend to avoid repeating past mistakes (Sagi, & Friedland, 2007). This is significant to the extent that future decisions made based on past experiences are not necessarily the best decisions. In financial decision making, highly successful people do not make investment decisions based on past sunk outcomes, rather by examining choices with no regard for past experiences; this approach conflicts with what one may expect (Juliusson et al., 2005).
In addition to past experiences, there are several cognitive biases that influence decision making. Cognitive biases are thinking patterns based on observations and generalizations that may lead to memory errors, inaccurate judgments, and faulty logic sometimes termed “putting a stake in the ground” (Evans, Barston, & Pollard, 1983; West, Toplak, & Stanovich, 2008). Cognitive biases include, but are not limited to: belief bias, the over dependence on prior knowledge in arriving at decisions; hindsight bias, people tend to readily explain an event as inevitable, once it has happened; omission bias, generally, people have a propensity to omit information perceived as risky; and confirmation bias, in which people observe what they expect in observations (Marsh, & Hanlon, 2007; Nestler. & von Collani, 2008; Stanovich & West, 2008; see also West et al., 2008).
In decision making, cognitive biases influence people by causing them to over rely or lend more credence to expected observations and previous knowledge as absolutes, while dismissing information or observations that are perceived as uncertain, without looking at the bigger picture. While this influence may lead to poor decisions sometimes, the cognitive biases enable individuals to make efficient decisions with assistance of heuristics (Shah & Oppenheimer, 2008).
In addition to past experiences and cognitive biases (stakes in the ground), decision making may be influenced by an escalation of commitment and sunk outcomes, which are unrecoverable costs. Juliusson, Karlsson, and Garling (2005) concluded people make decisions based on an irrational escalation of commitment, that is, individuals invest larger amounts of time, money, and effort into a decision to which they feel committed; further, people will tend to continue to make risky decisions when they feel responsible for the sunk costs, time, money, and effort spent on a project. As a result, decision making may at times be influenced by ‘how far in the hole’ the individual feels he or she is (Juliusson et al., 2005).
Some individual differences may also influence decision making. Research has indicated that age, socioeconomic status (SES), and cognitive abilities influences decision making (de Bruin, Parker, & Fischoff, 2007; Finucane, Mertz, Slovic, & Schmidt, 2005). Finucane et al. established a significant difference in decision making across age; that is, as cognitive functions decline as a result of age, decision making performance may decline as well. In addition, older people may be more overconfident regarding their ability to make decisions, which inhibits their ability to seek and apply new strategies (de Bruin et al., 2007). Finally, with respect to age, there is evidence to support the notion that older adults prefer fewer choices than younger adults (Reed, Mikels, & Simon, 2008).
Age is only one individual difference that influences decision making. According to de Bruin et al. (2007), people in lower SES groups may have less access to education and resources, which may make them more susceptible to experiencing negative life events, often beyond their control; as a result, low SES individuals may make poorer decisions, based on past decisions because they fail to research new alternatives.
Over and above past experiences, cognitive biases, and individual differences; another influence on decision making is the belief in personal relevance. When people believe what they decide matters, they are more likely to make a decision. Acevedo and Krueger (2004) examined individuals’ voting patterns, and concluded that people will vote more readily when they believe their opinion is indicative of the attitudes of the general population, as well as when they have a regard for their own importance in the outcomes. People vote when they believe their vote counts. Acevedo and Krueger pointed out this voting phenomenon is ironic; when more people vote, the individual votes countless, in electoral math.
Decision Making Heuristics
Heuristics are general decision-making strategies people use that are based on little information, yet very often correct; heuristics are mental short cuts that reduce the cognitive burden associated with decision making (Shah & Oppenheimer, 2008). Shah and Oppenheimer argued that heuristics reduce work in decision making in several ways. Heuristics offer the user the ability to scrutinize few signals and/or alternative choices in decision making. In addition, heuristics diminish the work of retrieving and storing information in memory; streamlining the decision-making process by reducing the amount of integrated information necessary in making the choice or passing judgment (Shah & Oppenheimer, 2008).
As a result of research and theorizing, cognitive psychologists have outlined a host of heuristics people use in decision making. Heuristics range from general to very specific and serve various functions. The price heuristic, in which people judge higher priced items to have higher quality than lower priced things, is specific to consumer patterns; while the outrage heuristic, in which people consider how contemptible a crime is when deciding on the punishment (Shah, & Oppenheimer, 2008). According to Shah and Oppenheimer three important heuristics are the representative, availability, and anchoring and adjustment heuristics.
In decision making, people rely on a host of heuristics for convenience and speed. One important heuristic is the representative heuristic (RH), which is an extremely economical heuristic (Pachur, & Hertwig, 2006). In the event that one of two things is recognizable, people will tend to choose the recognized thing; utilizing or arriving at a decision with the least amount of effort or information (Goldstein & Gigerenzer, 2002; Hilbig & Pohl, 2008). Hilbig and Pohl remarked that it is difficult to research and answer definitively if an individual is using the RH alone, or if the person is using other information in drawing a conclusion. As a result, the research on the RH is mixed (Goldstein & Gigerenzer, 2002; see also Hilbig & Pohl, 2006). Goldstein and Gigerenzer provided seminal research on the RH. They maintained recognition memory is perceptive, reliable, and more accurate than chance alone; they argued less recognition leads to more correct decisions. On the other hand, according to Hilbig and Pohl, people often use additional information when utilizing the RH; that is, they do not rely solely on recognition along in decision making. Further, Hilbig and Pohl concluded that even when sound recognition was established, people use additional information, in conjunction with the RH.
Another highly researched heuristic is the availability heuristic. According to this heuristic, people are inclined to retrieve information that is most readily available in making a decision (Redelmeier, 2005). Interestingly, this is an important heuristic, as it is the basis for many of our judgments and decisions (McKelvie, 2000; Redelmeier, 2005). For example, when people are asked to read a list, then identify names from the list, often, the names identified are names of famous individuals, with which the participants are familiar (McKelvie, 2000). In the field of medicine, Redelmeier charged that missed medical diagnoses are often attributable to heuristics, the availability heuristic being one of those responsible. Redelmeier explained heuristics are beneficial as they are cognitively economical, but cautioned clinicians and practitioners need to recognize when heuristics need to be over-ridden in favor of more comprehensive decision making approaches.
The anchoring and adjustment heuristic is the foundational decision-making heuristic in situations where some estimate of value is needed (Epley, & Gilovich, 2006). In this particular heuristic, individuals first use an anchor, or some ball park estimate that surfaces initially, and adjusts their estimates until a satisfactory answer is reached. For example, if a person were asked to answer the question, “In what year did John F. Kennedy take office?” the anchoring and adjustment heurist would be used. The person may start with a known date, such as the date he was shot, November 22, 1963; then make an estimate based on the known information (Epley, & Gilovich, 2006). The practical application of the anchoring and adjustment heuristic is in negotiations; people make counter offers based on the anchor that is provided to them. Epley and Gilovich explained often people tend to make estimates which tend to gravitate towards the anchor side, where actual values tend to be farther away from the anchor initially planted. Further, anchoring requires effort; such a job is important in avoiding anchor bias.
After the Decision
After a decision is made, people experience a variety of reactions. In addition, present decisions influence future decision making. Several of the outcomes that may result from a decision are regret or satisfaction; both of which influence upcoming decisions.
Regret, feelings of disappointment or dissatisfaction with a choice made is one potential outcome of decision making. Interestingly, regret may shape the decision-making process. According to Abraham and Sheeran (2003), anticipated regret is the belief that the decision will be result of inaction. Anticipated regret may prompt behavior; that is, when a person indicates they will do something, such as exercise, they may follow through with their intended decision, to avoid regret. Once the decision is made, the impact of the decision, if regret is experienced, will impact future decisions. People can often get consumed with examining the other options that were available; the path not taken (Sagi & Friedland, 2007).
Sagi and Friedland (2007) theorized people feel regret in accordance with how the decision was made; regret may be dependent on the number of options that were available during the decision-making process; and how varied the options were may impact how regret is experienced after the decision was made. Through a series of experiments, Sagi and Friedland concluded that people feel remorse because they feel they were able to make a better choice by looking at more information, previously disregarded, and carefully weighing the pros and cons of each choice. In addition, regret is magnified when individuals revisit the other available options and considering what satisfaction the other option would have brought them. Interestingly, people who are dissatisfied with their decision feel obligated to embrace the decision, as a means to reducing anxiety regarding the quality of the decision (Botti & Iyengar, 2004; see also Gilbert & Ebert, 2002). For example, when a job applicant does not get hired, he may restructure the experience, and find many reasons that explain why he did not want to work for the company.
In addition to regret, individuals may also experience satisfaction with their decisions. Satisfaction refers to how pleased the decision maker is with the outcome of the decision. There are many things that impact levels of satisfaction. Botti and Iyengar (2004) observed individuals prefer to make their own decisions and believe they will be more satisfied with their choices; however, when people are given only undesirable options, decision makers are less satisfied than those who have had the choice made for them. Botti and Iyengar posited the explanation for this impact officer jobs phenomenon is that the decision maker assumes responsibility for the decision made. As a result, if the available choices are bad, they may feel as though they are responsible for making poor choices.
Also fascinating, aside from heuristics, an important decision-making strategy is evaluating positive and negative aspects of choices. Kim et al. (2008) discovered that when younger and older adults use this strategy, older adults tend to list more positive and fewer negative aspects of each choice, and older adults register more satisfaction with their choices when they use this evaluative strategy. One interesting finding was when the participants did not evaluate the options by listing the positive and negative features; there was no age difference in satisfaction (Kim et al., 2008).
As explained, future decision making is based on past decisions, as well as levels of satisfaction or regret (Abraham & Sheeran, 2003; Juliusson, Karlsson, & Garling, 2005; Sagi & Friedland, 2007). Even though there is evidence to support this notion, in many cases, particularly when the decision may be reversed, decisions may be based on the reversibility factor (Gilbert, & Ebert, 2002). Significant to individuals’ satisfaction is that people are willing to pay a premium for the opportunity to change their minds at a later date (Wood, 2001). For example, catalogue shoppers purchase items in a two step process; first they decide to purchase the items, then once the items arrive, they decide if they will keep them. Gilbert and Ebert examined if people prefer making decisions that are reversible. They concluded that people do prefer to have the option to change their minds; although people’s ability to change their minds actually inhibits their ability to be satisfied with their choice.
An Innovative Company Decision-Making Approach
Decision making is a critical aspect to feeling successful and happy in life; decision making is at the root of all we do. It is important to develop effective decision-making skills and strategies. Problem solving strategies include, but are not limited to brain storming, cost benefit analysis, written remediation plans, and an examination of possible choices (Wester, Christianson, Fouad, & Santiago-Rivera, 2008). The decision-making process can be complicated and overwhelming. As a result, it is valuable for individuals to learn a model to follow, that may be applied to everyday decisions, as well as life changing choices.
Krantz and Kunreuther (2007) posited that a goal and plan-based decision-making model is an effective and sound approach to take in decision making; in this model, the individual is encouraged to focus on goals, not happiness or usefulness. According to Krantz and Kunreuther, plans are designed to meet one or more goals. That is, people make plans to unconsciously or consciously meet the goals they have. And, some plans satisfy several goals. For example, people who attend a sporting event with a friend may be satisfying several goals; friendship and camaraderie, emotional stimulation from competitive sport, and potentially useful social knowledge gained from watching the game. In this model, goals are context dependent and plans are based on their ability to meet the goals. Essentially, in the goal/plan-based model, the context provides the backdrop for the decision that needs to be made; goals and resources, influenced by the context, contribute to the development of plausible plans; while the decision making rules are implemented and influence the plan that is ultimately chosen. Krantz and Kunreuther apply this theory to the insurance career, but imply the theory may be appropriately applied to a variety of contexts.
Decision making is an important area of research in cognitive psychology and essential to deeply understand in making impactful decisions as a Chief Impact Officer or Consultant attempting to drive and create exacting impact. Understanding the process by which individuals make decisions is important to understanding the decisions they make and effectively influencing the impact outcomes. There are several factors that influence decision making. Those factors are past experiences, cognitive biases, age and individual differences, belief in personal relevance, and an escalation of commitment. Heuristics are mental short cuts that take some of the cognitive load off decision makers. There are many kinds of heuristics, but three are important and commonly used: representative, availability, and anchoring-and-adjustment. After an individual makes a decision, there are several differing outcomes, including regret and satisfaction. Decisions that are reversible are more desired and people are willing to pay a premium for the ability to reverse decisions; though reversibility may not lead to positive or satisfactory outcomes. Cognitive psychologists have developed many decision making models, which explain the process by which people effectively make decisions. One innovative model is based on goals and job chief impact planning. There is yet a lot of research to be conducted on decision making, which will enable psychologists and educators to positively influence the lives of many.
Especially interesting in Impact Directives is leadership gauging impact in the complicated community impact programs social sector. Because impact decisions are morally significant. Government officials, funders, and nonprofit leaders’ decisions influence lives in many ways, both for the better and for the worst. If we reflect on our own life, I’m sure you’ll reach a similar conclusion. Therefore, the role of a chief impact officer is vital to the mission, vision and values of the organization when achieving the brand promise on a daily basis. Impact is the relationship our decisions as an organization have on the environment or ecosphere in which our business model exists or resides. The relationship is always symbiotic and may vary based on inputs from our competitors.
A chief impact officer or impact consultant’s role is to make a difference in people’s lives adhering to the startup chief impact values, mission and vision of the enterprise. Grasping the distinctions we make and the choices we make are properly aligned is a constant challenge. Better choices result in a legacy that we can be proud of creating a positive impact in the lives of our multiple constituencies.
What can we do to improve impact? There are numerous options! Because there is so much untapped potential to enhance how we ultimately do things, decision-making is an exciting area in social impact. Scholars and practitioners have been developing approaches for studying and making decisions for decades, but philanthropy, government, and impact investing are only now adopting them. I’ve constructed my own approach based on my body of work to assist myself and my partners/clients in making key decisions with intention and focus creating the desired impact.
Start with a strategy.
It’s critical to put decisions into context. Theoretical decision-making can’t predict what goals should motivate you or who should be in charge of making impact decisions. Decision-making isn’t a substitute for strategy. Decision-making, on the other hand, is an expression of a chosen strategy. Could a chief impact officer or consultant truly be a chief strategy officer? As a chief impact officer or chief strategy officer, when you already have a good notion of what you’re attempting to accomplish and how you want to go about doing it, decision analysis approaches are most effective. They’re most effective when the task at hand is to figure out how to put the broad direction and values the organization previously committed impact officer salaries into action in this particular type situation.
As a result, it’s important to have the goal, vision, and values set out and committed to paper or pixels before using the following recommendations. You should know who has final decision-making authority and how conflicts among group members will be resolved if decisions must be taken as a group team. You should also have a good understanding of the environment in which you operate and the precise, near-term outcomes that are most important to perceived success. It is always good to ask early on, “what does success look like”.
It may not be immediately evident why anything additional is required. Isn’t it simple to apply a general strategy to day-to-day decisions if you’ve previously laid out a plan? It could be in some circumstances. After all, not every option is a brainteaser. But, virtually & invariably, sacrifices must be made between goals or values that cannot be met simultaneously or to the same degree. People on the team or in our brain trust will almost certainly argue the likely consequences of various paths forward, and there will be no easy way to decide who is likely to be correct. And, virtually invariably, the right average chief impact decision may potentially enrage the wrong people.
For situations like this, decision analysis was created.
Choosing between options
Every day, we make hundreds of decisions, from what to eat for supper to whether to open Twitter right now to how to respond to your coworker’s somewhat insensitive remark. Most of these aren’t even worth considering, let alone employing a consultant to assist you to figure them out.
But if the study of decision analysis teaches us anything, it’s that certain decisions are more important than others. The decisions that require the most continuous attention are those in which the stakes are high, the context is unfamiliar, and the definition of success is not immediately apparent.
However, because many teams work at such a quick pace, we often only begin to pay attention to decisions just before they must be made. As a result, we overlook many of our most crucial judgments and risk succumbing to cognitive biases that lead to poor outcomes.
Of course, we can’t afford to thoroughly evaluate every single decision we make; we’d rapidly become engrossed in the process and unable to accomplish anything. So we’ll need a system for anticipating and prioritizing our decisions so that we can devote the necessary resources to the ones that actually matter.
Fortunately, a simple process known as a decision inventory can help you solve this problem. The decision inventory is a process for cataloging, aggregating, and classifying all of the significant decisions you intend to make in the near to medium term, adapted from a method devised by decision analysis pioneers Strategic Decisions Group. The exercise predicts which chief purpose officers challenges you’ll need to focus on and when, as well as which ones you should address quickly vs completely investigate.
Dissecting your chief purpose officers decision
Okay, now we’re getting down to business. It’s time to start examining the selections at the top of the pile once you’ve figured out which ones are the most important. There are a few different ways to break down a choice into its constituent elements. The following are elements of my own method:
• The variables at play. What is the larger strategic/organizational context in which this decision is being made? It’s fine to rely on your gut for this one as a first pass because you and your team members will usually have a strong instinctive feel of what’s relevant here. What are the most important opportunities and concerns in this situation? What excites and/or concerns you the most?
• What you might be able to do. What are the possibilities available to you? What options should be explored but haven’t been brought up yet? What are the advantages and disadvantages of each?
• Techniques for improving performance. Is this the right time to make this decision? More strategic/consequential decisions should, in general, come before tactical decisions. Other decisions should be made after a series of events has occurred or new information has become available. Finally, it’s occasionally a good idea to “bundle” options so that the strategy is organically aligned.
• Stakes. At the inventory stage, you’ll have started to analyze the stakes of a decision, but it’s helpful to keep them in mind when you figure out how much overall time and money you’re willing to invest before committing to a direction. A thoughtful stakes analysis will consider who and what might be impacted by the decision’s outcome(s), how much, and for how long. It would also examine the decision’s reversibility; how difficult is it to reverse a decision once you’ve made it?
• The number of sources and the degree of uncertainty. What would you do if you had to make this decision right now? If the answer isn’t evident right away, it’s typically because you don’t know something (or several things) that you wish you did. Identifying the sources of uncertainty can assist you in determining what additional knowledge would be most beneficial in this case. (Note that you can usually get a much more precise understanding of the value of additional information by modeling the decision quantitatively, as discussed below.)
Don’t be intimidated by the breadth of the above list. Chances are you’re already making these kinds of assessments about your decisions, you’re just not (yet) doing it in a systematic way. This process helps to bring that thinking into the realm of the conscious mind. And in many situations, that can happen with just a couple of meetings and some back-of-the-envelope estimates.
Some decisions really do require careful attention to get right, though. For those, there’s no substitute for an in-depth quantitative model.
Going chief impact officers mental with decision modeling
The preliminary analysis described in the previous section will give you a holistic overview of your decision dilemma, but it optimizes for breadth over depth. It’s like exploring the world by looking at a two-dimensional map — you can see the complete picture, but not all the details.
To achieve both, it’s necessary to model your decision explicitly using mathematical tools. This is like exploring the world from your desktop using a combination of Google Maps and Street View. The map helps you understand the broader context, but you can improve your understanding of the details by zooming in on specific points of interest.
My invocation of technology here is intentional, because building decision models is a technological enhancement to human decision-making. We are leveraging the power and speed of modern computing capacity to help us gain a deeper understanding of our decision dilemma than would be possible using our minds alone. You are still in the driver’s seat — you are still the one who makes the decision, after all — but the mathematical model we create serves as a kind of supercharged coach or advisor.
The nuts and bolts of putting together a decision model are too involved to cover here, but I wrote a handy primer featuring a grantmaking case study if you’re interested in learning more about how to do it.
There are two main reasons to put together a decision model. The first is that it’s possible to get much better precision about the factors at play and which ones are really important. When putting together a decision model, I use a statistical technique called Monte Carlo simulation that dynamically generates thousands of potential futures based on the estimates and assumptions that you provide (and can easily tweak in real time). Developed by nuclear physicists in the middle of the 20th century, Monte Carlo simulations have been empirically tested and shown to yield better judgments than alternative strategies in real-world settings. It’s the method that NASA swears by when preparing for so-called “complex projects” like launching human beings into space.
The second awesome superpower of quantitative models is that they can help guide role research or learning agenda created for the express purpose of reducing uncertainty about important factors relating to the decision in question. You can use the concept of value of information to pick out the most important things to measure, measure them, and re-run the model in an iterative cycle until there is literally no more value to wring out of seeking further data. This method is called Applied Information Economics and was invented by information scientist Doug Hubbard for use in high-stakes investment decisions in the social sector and business world alike (read about a couple of examples of its use here and here). As far as sustainability decision analysis techniques go, AIE is pretty much the gold standard approach.
With that said, modeling does have some costs and drawbacks. The main challenge is that, compared to the quick and easy process described in the previous section, modeling does usually require a more significant minimum investment of time and expense, an investment that scales with the number of stakeholders that need to provide input. In addition, modeling may feel somewhat intimidating or unnatural at first to staff or partners who have little experience with quantitative methods. Finally, while I’m a firm believer that anything worth modeling can be modeled, it is true that some kinds of goals and decision factors are harder to translate into mathematical terms than others and may require more specialized role expertise.
When should you make the leap to modeling your decision? Ultimately, it comes down most of all to the stakes of the decision. Although all such situations should be judged case by case, a good-enough rule of thumb is that if your decision has more than $25,000 (for an individual) or $50,000 (for an organization) riding on it, it’s worth considering putting together at least a quick-and-dirty quantitative model to help ensure you get it right. And if the stakes are in the $250,000 and up range, I’d say it’s actually pretty irresponsible not to attempt a quantitative treatment of the situation.
Finally, remember: the math is there to help you make your decision, not to make it for you. You are free to ignore it if you want. When making a decision model, work hard to make sure it accounts for everything the decision-maker cares about. But never deliver a recommendation without also considering the qualitative analysis that was developed alongside it.
After the math, the aftermath
Congratulations, the decision was made with impact in mind! While the dilemma itself may be resolved, the consequences or impact of the choice are just beginning to be felt.
Here are some helpful questions to ask and things to think about in the post-impact decision phase:
• How should you talk about this decision (and the process that went into it)? Strategic Decisions Group’s Decision Quality framework notably includes “commitment to action” as one of six key pillars to a high-quality impactful decision — meaning that they include commitment in the very definition of what constitutes a high-quality decision. Particularly when the decision is about a charged topic or conversation in your organization or community, having a robust, transparent process like this one can help to build consensus and buy-in moving forward.
• Do you expect to make similar decisions like this in the future? If so, it’s likely you can reuse much of the analysis and basic framework you developed for this one in those scenarios to come. And if you created a quantitative model for the decision, you can turn that model into a standardized template that can accommodate any such situation in the future. In my own practice, I’ve built templates like this for things like whether to apply for a new consulting opportunity. In such situations, the work you put in initially to develop the model is amortized across many uses, making the investment of time effectively a no-brainer.
• How does this decision affect other decisions you need to make? Decisions usually beget more decisions. You or your team might have been waiting for resolution on this situation because it would provide crucial information for other dilemmas in play. In other cases, a decision to, say, move forward with a project will create lots of new choices about how exactly to implement it. Be sure to document the more important of these so that you can devote the appropriate amount of attention to them, and if any seem especially high-stakes and/or uncertain, the techniques discussed in this article are here to help.
You, too, can decide like a Chief Impact Officer Pro Contact Us!
So that’s how I help clients make decisions. If you have grappled with how to make smarter decisions for your company, consultancy, organization or philanthropy and come up with similar or different techniques, please let me know. There is always more to learn, and I love to learn! If you would like help creating an impact decision making platform promoting consistent impact decision making, contact [email protected] 318-349-4998.
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