Decision Making Process Part 5e – Distance Yourself From Short-Term Emotion

We are all human and emotions can play a part in any decisions we make. However, emotions can sometimes cause us to make decisions against our own best interests. For example, a pro athlete claims his current team made him an “insulting” offer only to find when he reaches free agency that no other team will pay him nearly as much. In this post I will state some techniques that will help you combat this effect.

One technique to use is to first think about potential¬† “undesired outcomes” of your decision. As an example, think about a time you received a nasty email from a co-worker. Your emotions tell you to lash out and immediately respond in kind. Stop and think: what are the undesired outcomes? You are trading a few seconds of self-satisfaction over your clever response for a damaged relationship and an escalating flame war. Think before acting!

Another technique is to pretend you have made the desired decision. How will you feel about it 10 minutes from now? How about 10 days from now? Ten months from now?

My favorite technique for removing short-term emotion is asking yourself “If this was my best friend confronted with this decision, what would I advise them to do?” This works remarkably well and will help you make cool, logical decisions.

There is also a psychological factor at play in making decisions. It is called “loss aversion”. This is the tendency to feel more pain for losses than joy in gains (many sports fans will tell you that having their team lose always feels worse than the joys of victory). It can prevent you from taking calculated risks that would be in your favor. Be aware when this factor is in play and remove it from the decision making process.

The game show “Deal or No Deal” is a very good way to exercise your own decision making process vs. the on-show contestant. For example, if there were these 3 prizes left: $1, $5, $1 million dollars, and the Banker offered you $200,000, would you take the offer or take your chances and open another case?

You would weigh these two things: (1) the expected payout is about $333,000 (add the 3 prizes and divide by 3); (2) You have only a 33% chance at beating the $200,000 offer. Option 1 is better if you had multiple chances or “do-overs”; Option 2 in this case is a better way to beat the odds if you have only one chance. You would walk away with $200,000 more than when you started, with no regrets even if your case contained the $1 million prize.

In your daily life, take the opportunity to exercise the decision making techniques I have stated above and you will improve your overall outcomes,

Decision Making Process Part 5d – Identify and Mitigate Risks

When making important decisions, it is critical to identify and understand the risks for each alternative. Some hear the word “risk” and take that to mean “don’t do it!”. In project management and decision making, we understand that we want to take “calculated risks”, meaning risks where we understand the probability and impact of each risk, as well as how we might mitigate the risks and make contingency plans.

One way to quickly identify risks is to ask yourself and those involved in the decision “What worries me about this alternative?”. Also, “What are the possible undesired outcomes?”. Another way to help identify risks is to use a “Risk Hierarchy Chart” (you can Google this term for examples). These charts identify topics of possible concern and make a good starting point for brainstorming.

You will want to avoid “confirmation bias” (only seeking out information that confirms self-serving assumptions). For example, if there is a particular model car you wish to buy, you avoid reading any negative reviews of the auto. You will bury your “risk identification head” in the sand in you do this.

Another good way to identify risks is to seek out a “devil’s advocate”. We all have a least one friend or family member that sees the dark side of any decision. Although these people seem like negative thinkers, their insights can help you identify and avoid risks you may not have been aware of. If you know someone who has done what you are considering, consult with them and ask them what pitfalls they encountered and how they could be avoided.

Risks can also be found by looking at the big picture as well as the minute details. For example, if you are considering entering the gourmet cupcake business, you can look at the big picture by conducting research on how much competition you have, successes and failures, and current trends. You can look at the details by identifying specific businesses that are like you want yours to be and studying their methods and approach.

Once you have identified your risks, you will want to assign a probability (low, medium, high) and an impact (low, medium, high) to each. For the high probability and/or high impact risk, you mitigate them (prior to the risk occurring) by looking for ways of reducing the probability or impact of the risk. In the cupcake business example, you could keep your day job and start small as a side business. Start by trying to sell to friends, family and co-workers.

Contingency plans are created in case the risk occurs despite your mitigation plans. This is what’s known by many as “Plan B”. Make sure you always have at least one Plan B for every high impact risk.

 

Decision Making Process Part 5c – Identify and Analyze Your Alternatives

Many of us tend to think in a binary manner when it comes to decision alternatives. We think it is an “either / or” situation or “this or that”. This limits us to two options when in fact there may be more. Here are some methods you can use to expand your options:

  • Replace the “or” with “and”. For example, you may have started with “I either stay in my existing job OR change careers”. This can be replaced by “I stay with my existing job AND change careers”. This enables you to consider looking for different or additional responsibilities within your existing job or company. Try it with a decision you are now facing and see if it helps expand your thinking.
  • Remove both options. Then what? If your decision is “I either stay in an unhappy marriage or get divorced” and both options are off the table, you need to think about options to improve the relationship. Brainstorm ideas such as counseling, communication, empathy, etc.

Another consideration when making decisions is “opportunity cost”. Whenever you spend time and or money with or on something, that is time and money you are taking away from something else. For example, if you are considering upgrading your mobile phone for $700, think about what else you might do with that money that could be more satisfying. A trip? New clothes? Whatever it is, it will help expand your options and prioritize your alternatives.

If you can find someone who has solved your problem, seek them out. For example, if you are thinking of starting a consulting business, seek out others who have done this and learn from their experiences. This will help you avoid some bad decisions.

You can also look to others who had success with the alternative you are considering. You can seek online reviews for many types of decisions including purchases, places to work or live, contractors, stores, doctors, vacation spots, hotels and many more. These are valuable sources of information and should be part of your decision making methodology.

Decision Making Process Part 5b – Begin With The End In Mind

Before starting on any journey, you need to know the destination. Stephen Covey wrote in his book “The 7 Habits of Highly Effective People” that we should always “begin with the end in mind”. Our brains are wired such that if we envision a desired destination or an outcome, it immediately starts trying to figure out how to get there.

Start by listing the desired outcomes of your decision. I list here some guidelines to help you get started: Desired outcomes should satisfy one or more of the following:

  • Make or save money
  • Advance your career
  • Increase your job or general life satisfaction
  • Improve job or family relationships
  • Reduce stress
  • Increase satisfaction

This is not meant to be a comprehensive list. They are simply a starting point. When you list your desired outcomes, avoid being so specific that you limit your options or solutions. Here is an example:

  • “I want to move to Florida” is not a good desired outcome. It is too specific and excludes other options that may be more satisfying.
  • “I want to live where the weather is warm and the housing is affordable”. These are good desired outcomes. There are many places, not just Florida, that satisfy these conditions.

You also will want to think in advance how you will measure success. In the above example, what does “the weather is warm” mean to you? It may mean something different to someone born and raised in Minnesota as opposed to a life long Texan. You might measure success by stating “I can go swimming and cycling at least 9 months out of the year”. Knowing how success will be measured helps in the decision making process.

In your “portfolio of decisions”, you will want to avoid taking on too much risk, and conversely, being too conservative. You do this by toggling your efforts between preventing negative outcomes and promoting positive outcomes. An example of preventing a negative outcome is buying insurance. An example of promoting a positive outcome is a career change. I’ll post more about this in the upcoming post on the topic of risk management.