We’re All Bad At Decisions
Somewhere between 70-90% of mergers and acquisitions fail. Meaning, they don't deliver the expected value or meet the strategic goals.
Consider all of the due diligence, research, analysis, planning, valuations, projections and more that go into these processes. And yet, a good majority of them fail to deliver.
This is a great example of just how bad at decisions we are. Strategic planning for a merger or acquisitions usually includes highly paid senior leadership and the sharpest analytical minds. And yet, you would do pretty well placing bets against their success.
Decision making is such a broad and complicated topic that we can barely scratch the surface in just one newsletter. I'll write a lot more about this in the future. For today, we're going to start by simply sharing some of the ways that we're bad at decision making…
We don't assess the problem
Often times, especially in business, we rush to solve problems without evaluating the actual problem itself. We have a room full of "doers" who are just eager to fix it. Even if they don't really know what "it" is.
This is where evaluation can be helpful. Can you define the problem? Do you even agree that this is a problem or is someone else convincing you that it's a problem? If it is a problem, is it one that you can and should be solving?
This is also where we consider the risk and/or scale of the problem. We make thousands of decisions a day and not all of them are created equal. Deciding where to order pizza from is a very different decision than deciding whether to acquire a pizza brand.
Ideally, we'd like to continue intuitively making small daily decisions while being a little more intentional about big life-changing ones.
We don't think meta-enough
Not Zuckerberg meta. Meta as is self-referential. We don't think about what tools we should be using to make particular decisions. Studies show that the process one puts around decisions is much more important than the analysis of the decision itself. Different types and scales of decisions will call for different strategies. Part of the skill in sound decision making is understanding the context of the scenario so that you can apply an effective approach.
This intentional consideration also includes reflecting on decisions after they've been implemented in order to improve your decision making ability over time.
We can't stop being human
Humans are inherently flawed and irrational. We're full of emotion, subjectivity and unconscious biases. Even if we're aware of our biases, avoiding them proves much more difficult.
Add to that the fact we're biological beings who are constantly fluctuating in terms of alertness and state of mind. Have you ever made a decision while you were tired, hungry, rushed, angry, etc. Did you ever find yourself later regretting a decision made in one of those states? Of course, we all have.
A little self-awareness here goes a long way but it also takes time. It pays to explore your unconscious biases so that you can catch-them more easily when they do creep-up. This isn't a one-time solve but a life's work. The good news is that you will start to get better at it over time.
We don't have the right amount of information
This problem cuts both ways. Sometimes, we rush into big decisions trusting little more than our gut. Other times, we may spend months in analysis-paralysis.
Both are real problems, as the right level of information depends on the situation. You likely don't need to create a spreadsheet for the thousands of small daily decisions you already make. At the same time, large-scale decisions usually do benefit from a more intentional process.
The challenge is being able to identify, for each individual scenario, how much and what type of information is needed. We won't always get it perfect, but being intentional here allows us to get better at it.
This Week's Action Items:
This week's action items are more self-reflective in nature…
When making big decisions, are you taking time to truly assess the problem?
Do you consider the right approach for different decisions?
Do you regularly take time to identify your unconscious biases?
Do you tend to gather too little information or too much?
