Individual Decision Making
Making a Decision
Leaders face two tasks in dealing with threats & opportunities: Make & Implement decisions
Making a decision is about selecting the best possible option to get to your goals it involves:
- Goals (Outcomes) you want to achieve
- Options (Actions) for getting you there
Decision analysis is a systematic framework for selecting actions for getting to goals. Uncertainty makes decision-making difficult
It consists of:
- Action Options i.e. what are the choices
- Uncertainty (associated with each action outcome) & Probability
- Outcomes of actions
Heuristics allow us to makes decisions. Many times we either have to fill in the blanks when there is no information or limit considerations when there is too much information.
In process of using heuristics, our subjectivity can create bias i.e. anything based on tendencies or something that influences without us realizing it.
One such heuristic is Anchoring. It is being influenced by a reference number when estimating. For example, a person looking to buy a used car may focus excessively on the odometer reading and the year of the car, and use those criteria as a basis for evaluating the value, rather than considering how well the engine or the transmission is maintained.
Framing is another heuristic. It means being influenced by whether the choice is presented in terms of losses or gains. It happens because most people are risk-averse to protect gains but risk-seeking to protect losses.
Fostering Creativity in Decision Making
Creativity is the ability to think differently. It is important for leaders because they deal with most complex problems that don’t have readily available solutions.
Creativity generates additional options when it is easy to fall into typical responses.
With the changing world, you cannot use same old thinking as it generates same old answers.
Factors impacting (positively or negatively) creativity are:
- Interest (Intrinsic motivation)
- Haste or rush (Not giving enough time)
- Sanctions or Penalties (for deviating from norms)
Everyone who can “think” can learn to think differently and hence be more creative.
Reference: Lectures by Prof. Gregory Northcraft