Role of intuition in decision making

We tend to remember our decision making successes more than our failures. We thus tend to make associations between a given decision making practice and the results. We spend little time thinking about how to make decisions. Decisions are often focused on finding the problem rather than on looking for the best solution.The Role of IntuitionIn Decision Making James P. Gelatt, PhD Professor and Program Director Doctor of Management ProgramUsing Decision Making Practices That Are Prone to Fail • We tend to remember our decision making successes more than our failures. • We thus tend to make associations between a given decision making practice and the results. • We spend little time thinking about howto make decisions. • Decisions are often focused on finding the problem rather than on looking for the best solution.Making Premature Decisions • The first “right” answer: The more we fear making the decision, the more likely we are to go with the first “right” answer. • The Abilene Paradox: Making a group decision counter to the preferences of any member of the group. • Organizations often make decisions based on someone’s self‐gratification –ego, lust for power. • Organizations also often make decisions on what other organizations have done.Spending Resources on the Wrong Things • Organizations sometimes spend resources not so much on making good decisions –learning how to make good decisions . . . . – But rather on evaluations –including evaluations designed to reinforce what we already decided. – One blunder leads to another.We don’t see the Black Swans •We tend to assume the future will be much like the past. •We don’t do a good job of anticipating –hence the “Black Swan.” A Black Swan is a highly improbable event that … • Is unpredictable • Has massive impact •Is rationalized in hindsight to makes it appear less random and more predictable than it was. N. Taleb• It treats decision makingand problem solving as if they were the same. – Problem solving starts when we perceive that something has gone wrong, whereas decision making can –and should be –proactive. • The model assumes that decision making is “rational.” – In fact, what we know about decision making is that it is “bounded” by insufficient information, emotion, office politics, personal agendas, and limited time. (Simon, 1997) Why “rational” decision making often does not workMuch sound decision making is made based on partial information • Instinct, intuition, "gut" feelings are not only part of the decision making process, they may be key tools in today's tornadic environment. • In theory, managers plan, organize, direct and control. In practice, much of the work of managers is real time, impromptu, spontaneous, and harried.From Blink, by Malcolm Gladwell We believe that we are always better off gathering as much information as possible and spending as much time as possible in deliberation. We really only trust conscious decision making. But there are moments, particularly in times of stress, when haste does not make waste, when our snap judgments and first impressions can offer a much better means of making sense of the world. pp 13 ‐14 On which side of the brain? • Emotion and cognition appear to affect our behavior in very different ways. – Emotions are more elemental. They provide the drives that motivate us. – The reasoning part of our brain works in parallel, trying to harness, channel and constrain the emotions.It’s not the process, it’s us. The process is not the biggest challenge to effective decision making. It’s the people. • “Most organizational decisions are not made in a rational, logical manner;” “intuition and hunch are often the criteria for choice" (Daft, 2007, p. 473). • According to neuroscience research: Pure logical decisions do not exist. Emotion comes first (Damasio, 1994). It’s not the process, it’s us. • “Subjects who attempt to employ strategies based exclusively on rule‐based deliberation often end up making normatively worse choices than subjects who employ strategies that allow a greater role for intuition and the emotional processing associated with it" (Seymour & Dolan, 2009, p.11). • Conscious reasoning often leads to “a post‐hoc rationalization, or even a confabulation ‐‐a story born of the confusion between imagination and memory"(Frith, 2008, p. 45). Personal & Structural DeterminantsIn the Pace of Decision Making Personal • Cognitive Ability • Intuition • Tolerance for risk • Propensity to act Structural • Centralization • Formalization • Size • Industry effectsShould I Go With My Gut? • Faculty from 4 universities, including Stanford, conducted 4 studies involving over 230 students. Participants were asked to make decisions based on a feeling‐focused, reason‐focused, and no specific strategy. • Findings: “Results indicated that focusing on feelings versus details led to superior objective and subjective decision quality for complex decisions.” Mikelset al, May 2011.One a decision is made and announced • Unless there is a conflict created between the justification and the other person’s basic knowledge, people will agree with their friends and colleagues (Gazinga, 2008). • When managers do consult with their colleagues about their decisions, it appears that managers are doing so in order to seek out confirmatory information (Cross, Thomas and Light, 2009).References • Cross, R., Thomas, R. J., & Light, D. A. (Winter 2009). How who you know affects what you decide. Sloan Management Review, 50(2), pp 35 –42. • Damasio, A. (1994). Decartes’ error. New York: G.P. Putnam’s Sons Publishers. • Daft, R. (2007). Organization theory and design(9th ed.). Ohio: South‐Western College Publishing. • Finkelstein, S., Whitehead, J., & and Campbell, A. (2008). Think again: Why good leaders make bad decisions and how to keep it from happening to you. Boston: Harvard Business Press. • Frith, C. (2008, July 26). No one really uses reason.New Scientist,45. • Gazzaniga, M. S. (2008). Human, the science behind what makes us unique. New York: Harper Collins Publishers. • Gladwell, M. (2005). Blink: The power of thinking without thinking. New York: Little, Brown.• Mikels, J. A., Maglio, S. J., Reed, A. E., & Kaplowitz, L. J. (May 2011). Should I go with my gut: Investigating the benefits of emotion‐focused decision making. Emotion: American Psychological Association. • Naleb, N. N. (2007). The black swan: The impact of the highly improbable. New York: Random House. • Nutt, P. C. (2001). Decision debacles and how to avoid them.Business Strategy Review, 12(2), pp1 –14. • Seymour, B., & Dolan, R. (2008). Emotion, decision making, and the amygdala.Neuron, 58(5), pp662‐671. • Simon, H. A. (1997). Administrative behavior: A study of decision‐making processes in administrative organizations, 4thed. New York: Free Press