THE BLOG

How to Make Better Decisions - Seven Lessons for Business and Life

09/05/2016 11:25 | Updated 09 May 2016

2016-05-06-1462555667-7421545-Buffett.png

Have you ever wondered what makes the difference in the quality of people's lives?

It isn't talent. Or hard-work. It isn't that one person has more desire than another.

The difference lies in the decisions they make. And their ability to make the right choice at the right time.

You make an average of 35,000 decisions every single day. Decisions that involve your health, wealth and happiness. And, when you add these up, they'll be what separates modest success from becoming an all-time great.

Over recent years there have been massive breakthroughs in our understanding of why we do what do. Why we make the choices we make. What influences our decisions. What sways our minds.

Yes, behavioural economics can help transform you, and your business, by aligning what you do with what people want.

But these insights can also help you and your organisation improve of this quality of the decisions you make today and every tomorrow.

Here, in plain English and jargon-free, are 7 ways to avoid fooling yourself.

1. If they look like you and act like you, perhaps it's time to think it through

What's the most trusted source of marketing for every single business?

Friend referral.

For evolutionary reasons it makes sense to trust people we already know. The better we know them, the more reputational skin in the game. Give us bad advice and we may tell others that they can't be relied upon.

So when a friend says "you should really try this new restaurant", you probably will.

Wise salespeople know this. That's why charity fundraisers extend their hand to shake yours in the street, building a level of rapport.

Or why compliments, even if we know their motives, work so well.

And it's also why you'll trust someone who looks like you or reminds you of a friend.

Pro Tip: Want to persuade? Match and mirror. Want to avoid being persuaded? Ignore anyone that tries.

2. What you see is how you choose

Bangkok, Thailand is home to many ingenious scams. One classic example has become known as "The Dock 9 Scam".

Official tourist boats leave from Dock 8, taking tourists on a scenic boat ride around the city for a price of around £3/$5.

Some entrepreneurial locals realised there was a room to moor two boats just metres away from Dock 8. They named it, appropriately, Dock 9.

To drum up business a "friendly local" greets confused tourists and ushers them to Dock 9. There, a well-rehearsed script plays out, advising tourists that, unfortunately, Dock 8 is closed because of a religious holiday (Bangkok is 90% Buddhist). Typically the special ride from Dock 9 costs $20 but, today only, they can get it for just $15.

Of course Dock 8 isn't closed. But, before they've thought to check, the tourists have handed over the cash and are in the boat.

Pro Tip: What you see is all there is. Are you seeing the full list of options? What are you comparing your decision to?

3. Facts tell, stories sell

In June 1994 OJ Simpson was arrested and charged with the murder of his ex-wife, Nicole Brown Simpson, and her friend, Ronald Goldman.

In prosecutions eyes the case was closed. The evidence was clear. Simpson's blood was found at the scene. The outcome was obvious.

That was until Johnny Cochran was hired as the defence lawyer. Cochran knew one thing about persuasion: facts tell, stories sell.

After pulling out every trick in the book to prove Simpson's innocence, Cochran closed his argument with the simple, but powerful line, "If it doesn't fit, you must acquit". The jury bought the story. And OJ Simpson walked free.

You can bash people over the head with facts to prove your point. Or tell them a story they want to hear.

Pro Tip: When making a decision, pause for a moment: are you swayed by the facts or a good story?

4. Forget your mindset, start by changing your choiceset

Have you ever started a new diet and given up within days? Haven't we all?

Motivation is a billion-pound industry. And every year countless new best-sellers, seminars, public speeches, courses and strategies are created to sell you the secret to a becoming a better, more successful you.

But what if we've got it all wrong? What if the secret to getting things done is less about your mindset? And more about your choice-set?

Empty your kitchen of sugar and you'll eat less of it. Book and pre-pay for personal training and you'll go to the gym more often. Automate your food deliveries and you'll eat healthier.

Change is difficult. But it's not that difficult if you start by understanding and redesigning your choices.

Pro Tip: What's one thing your struggling to achieve? Map out the choice-set. Then work out how you can make it easier to make the right choice.

5. Are you ambitious? Then think small

Thomas J. Watson, the former Chairman and CEO of IBM, famously said, "Nothing happens in business until something gets sold".

But how did IBM recover from an $8BN annual loss in 1993 to become one of the most profitable companies in the world by 2000?

Pre-internet, most products were sold over the phone. But, whilst their rivals gave their sales teams ambitious targets of leads to "smile and dial", IBM took a different approach.

Instead their sales teams had a target of making just two calls each day with no consequences. But they found that once people made two calls they stopped worrying about rejection and kept going throughout the day.

If you've set yourself a big task it's tempting to set yourself a big goal. And it's this stress that leads you to give up before you build and embed the new habit.

Pro Tip: Set a goal well within your comfort zone to begin (e.g. Just put on your trainers if you're training for a marathon). You may be surprised, like IBM, how far you can go.

6. If everyone's saying "Yes", consulting with Mrs. No

The 2003 best-seller The Smartest Guys in the Room tells the story of corporate greed that resulted in the collapse of Enron.

How did a company posting reported revenues of $111BN in 2000 go broke so fast? Group-think.

They hired exclusively "Type A" sales-people, creating a culture built on aggression and fear. The C-suite built themselves private entrances and only saw who they wanted to see.

The result was ideas didn't get challenged. People only survived if the group accepted them. Lies, deception and greed went unpunished - even encouraged.

It's tempting to rely on the simplistic sport analogy and believe your organisation's success will happen if everyone agrees. Research shows diversity, both of people and ideas, pays dividends long-term. The question is: are you brave enough to listen to those who tell you "No"?

Pro Tip: Before going all in, ask someone who'll disagree. They may not be right, but at least you'll know why you might be wrong.

7. Unite your company around one number, don't divide them around dozens

What's the best way to stay on top of your company? And how do you encourage people to play their part?

It's become an archetypal entrepreneurial story. From his Harvard dorm-room, Mark Zuckerberg worked day and night to create the first incarnation of Facebook. Then grew it to become one of the largest and most valuable companies in the world.

But how did he stay on top of a vast global company? Did he have a dashboard? Or KPIs? Or health indicators?

No. He just asked everyone a simple question, "Does it help us grow?"

If yes, do it. If no, don't.

As Peter Drucker once said, "what gets measured gets managed". A metric is a very good way to encourage good people to make bad decisions because they're judged by that number, not the business outcome. Less is more.

Pro Tip: What are you trying to achieve? What is the one metric that matters?

This is an excerpt from "How To Make Better Decisions: 27 Ways To Avoid Fooling Yourself". To download the full guide - for free - simply click here to access the PDF.

Thomas Cornwall is the Director of Behave, London's behaviour change boutique

Comments

CONVERSATIONS