OPINION | Leaders make many decisions each day, decisions that range from simple, such as what tie or dress to wear, to more strategic matters such as where to invest, what product to launch and how to address falling margins.

It’s comforting to think that our brain, with its vast capacity for processing streams of information, is infallible. The truth is it’s highly fallible and often fails when it’s most needed – such as during times of change and uncertainty when the need for good decision making is essential to good organisational outcomes.

But why should this be the case? Unfortunately, it’s because we base our decisions on hunches and gut reactions. We let past experience create assumptions about how things should be and therefore how we should respond today. The danger with this approach to decision making is that it can be filled with blind spots and bias.

Mental short cuts

The pre-frontal cortex, the part of the brain that’s involved in thinking, analysing and reasoning, tires easily.

Consequently, very cleverly, it has found a way of conserving energy – it takes short cuts. These mental short cuts are known as heuristics and the brain uses them to make big things and complex issues easier to manage and, ultimately, to remember.

As the brain takes in new information it tries to make sense of it, so that it knows what it needs to do. To ease the cognitive load this processing takes, it compresses information and sorts it into patterns. It looks for things that it has seen or experienced before and when it finds them it tells itself, “Now I know what to do”. And often that will be a useful response.

Of course, the brain’s short cuts aren’t always reliable. The brain may expect to see something in a certain way, and so it will seek out information to validate that view. It filters out information that doesn’t fit with its view of the way things should be and it can be easily influenced.

Consequently, it’s easy for a person to close their mind to new information that may be relevant to helping them make a better decision.

For simple decisions with little or no consequences, it’s sensible not to devote too much of the brain’s capacity to making that decision. However, leaders facing uncharted territory are on dangerous ground when they rely on what they’ve always done before and slip into default thinking patterns in their decision making.

The Centre for Workplace Leadership has recently released a government-supported survey, The Study of Australian Leadership, which finds that Australian organisations should be concerned about the state of leadership and management capability. It finds that many senior leaders do not draw on strategic advice in making decisions about the future.

Failing to draw on outside and broad expertise means that leaders are often taking a myopic and narrow perspective on transformational challenges.

How good decisions are made

In a world of increasing complexity and ambiguity it’s essential that leaders know how to make good decisions to ensure good organisational performance.

Making good decisions involves taking deliberate steps to avoid falling into the trap of default thinking. This includes adopting practices such as:

  • Deciding how to decide based on the simplicity, complexity or adaptive nature of the challenge being faced.
  • Setting a clear decision-making process which is open to debate and challenge.
  • Testing multiple hypotheses and developing diverse scenarios to challenge dominant views and the status quo.
  • Not just looking for evidence to support ideas, but looking for data that disproves it.
  • Widening the frame of reference to include people not involved in earlier discussions and sourcing data from diverse sources.
  • Encouraging debate and welcoming a range of views, including listening to the silent minority and outlier opinions.
  • Considering both ends of the spectrum in terms of the range of possible outcomes.

Good decisions are at the core of organisational performance. If an organisation wants better outcomes they need more robust decision-making processes and leaders capable of making good decisions.

Michelle Gibbings is a change and leadership expert and founder of Change Meridian, which works with leaders and teams at a number of Australia’s largest institutional investors. She is the author of Step Up: How to Build Your Influence at Work.