There are times when we face difficult decisions made even more difficult by competing individuals and departments. Sometimes when we make these decisions, we may not select the best solution. Instead, we select the one that has:

  1. More gravitas
  2. Been anchored
  3. Status-quo written all over it

The last two items are two of the eight decision-making traps identified by John Hammond, Ralph Keeney, and Howard Raffia in HBR’s 10 Must Reads, The Hidden Traps in Decision Making. Our decision could also stem from an individual with the most pull, like your immediate superior or for that matter, the CEO.

In order to obviate such conundrums, we should work on using a systems’ approach to help with the decision-making process. This type of approach considers the totality of what the solution will provide rather than items, as mentioned above, that may affect the decision. We should also understand that the way we think and feel has an effect in the way we make decisions. That is, based on what is presented to us, and the way it is presented, affects our decision-making process. Moreover, if we are in a “nothing to lose” situation, then the way we decide will be different than someone who is in a “if it ain’t [sic] broke, don’t fix it” one. The two situations depending on where you are at shall have significant implications in your decision one way or the other.

Daniel Kahneman, recipient of the 2002 Nobel Memorial Prize in Economics, and his colleague Amos Tversky, developed back in 1979 what is known as Prospect Theory. It has revolutionized many of the understandings of how we may think and decide. This theory is not applicable to individuals that are autistic in the sense that they do not recognize emotions. Their theory is predominant in behavioral economics and finance.

Succinctly, people hate losing more than they love winning. They also react differently based on their own circumstances. For example, in the former, you invest an equal amount of money in stock A and B. (Assume both stocks are valued at 100 units and you invest 100 units in each.) Stock A yields a 20% return while stock B loses 10%. Although you are still 5% in the plus, you feel less elated because you lost 10%. On the other hand, if Stock A gains 7% and B 3%, the theory proposes that you will be happier in this situation than the previous one even though the overall outcome is the same, 5%.

In the latter, suppose that you and a friend began your career at the same time. Ten years later, one is in a position that keeps them busy at night and weekends, and interferes with the family. At the same time, this person is a senior manager, enjoys a hefty salary, and travels the world for business. Conversely, the other person leaves work and work stays behind. This individual has their nights and weekends to themselves and has been able to spend quality time with family and friends. However, the person’s salary is about half what the other person makes, yet still good. Given these two scenarios, the decisions that one makes for, say selecting a vendor and their product, will be different from each other.

The first person may dive heavily into the decision-making process. This individual spends more time learning as much as possible about the product and vendor, and where the outcome may be such that this person shall oversee onboarding the vendor. The second person will work on it, but given the lifestyle that the person enjoys may affect the outcome of the vendor selection–the person does not want to own it and will not likely spend the time and learn about the vendor and their product as did the previous person. Thus, this person who is not as involved as the first one will lead to a different outcome.

If we know that making difficult decisions will be part of our lives, whether in business or home, then there must be a way where we can keep track of what we are doing while at the same time helping us to examine multiple alternatives. We must be able to choose an alternative based on a system’s view that is ultimately for the betterment of the company. There must also be a way where we can understand that what might be important to us might not be important to someone else, yet we still make a decision for the betterment of the company. There must be a way to make decisions that are repeatable, reliable, and efficient. Well, there is.

Dr. Gerard Ibarra, is a Consultant, Author, Speaker, & Entrepreneur. He is the author of “Good Decisions, Better Outcomes: A Simple, Five-Step Process to Help You Make Important and Difficult Decisions with Confidence and Clarity.” You can learn more about Dr. Ibarra and his work at his website.

This post was updated April 27, 2021