In today’s post, I will be looking at the process of decision making and the use of a modified Pugh Chart to quantitatively conduct decision making.
The general process for decision making looks like something below;
- What do I have to decide? What is it about?
- What are my choices?
- What are the pros and cons for each?
- Act upon the decision and see if any further action is needed.
Decision Making is an Emotional Process:
As you go deeper into the decision making process, you can see that it gets more and more interesting. The neuroscientist, Antonio Damasio made the striking discovery that decision making is emotional in nature, and is rarely logical. He studied several patients who suffered injuries to their brains which impaired their emotions. Their reasoning capabilities were not impacted. They all had difficulty making decisions. The patients were all cognitively normal except that they had lost their ability to experience emotions, and this significantly impacted their ability to make decisions.
So at the point of decision, emotions are very important for choosing. In fact even with what we believe are logical decisions, the very point of choice is arguably always based on emotion.
Complexity in Decision Making:
As a leader in your organization, you are required to make decisions on a daily basis. The types of decisions can be broken down into three classes;
- Surface – Simple situations requiring routine decisions
- Shallow – Complicated situations requiring supervisorial or managerial level decisions
- Deep – Complex situations requiring Upper management level decision making
This approach is adopted from Bennet and Bennet. The surface decisions are made on a daily basis, and do not have a high risk associated with them. The shallow decisions are more infrequent and have a medium level of risk associated with them. Finally, deep decisions are rare and have high risk associated with them.
Jeff Bezos, founder of Amazon.com, talks about a similar approach. He argues that there is no one-size-fits-all approach for decision making. In his opinion, there are two levels of decisions to be made. “Type 1 decisions” are those decisions that have critical consequences and are irreversible or nearly irreversible. He calls them “one-way doors”. He advises making Type 1 decisions carefully, slowly and with great thought and deliberation. The other kind is the “Type 2 decisions”. These are simple and easily reversible decisions. These decisions should be made much faster and frequently. A wise man knows the difference between the two.
To Include or to Exclude:
When you think about it, decision making is a process of deciding whether to include or exclude something. I came across a great article on this involving the custom of arranged marriages in India. The decision making process in an arranged marriage uses the approach of inclusion or exclusion. The two types of thinking are;
- Inclusion – After careful thought, out of the 100 applicants choose the few that you think are most suitable for your child.
- Exclusion – After careful thought, out of the 100 applicants eliminate the applicants that you think are not suitable for your child.
The counterintuitive outcome is that if you utilize the inclusion approach, you will select much fewer candidates. If you use the exclusion approach, you will retain a higher number of candidates, even though you are using eliminating criteria. Additionally, when the exclusion approach is used, you are highly likely to choose an “average” candidate. On the other hand, when the inclusion approach is used, you are highly likely to choose a candidate who is very strong in certain categories.
Quantitative Pugh Matrix Method:
My favorite tool for decision making is a version of the Pugh Matrix method. The steps for the Pugh Matrix are as follows;
- Decide upon the categories that are most important for making the decision
- Assign a weighted scale for each category
- Choose a scale for each category. This can be 1 – 5, where 1 = worst and 5 = best
- Score each category for the different options
- Find the final weighted score for each option. The option with the highest weighted score wins.
As an example, let’s look at the highly complicated decision of where to go for dinner. The following categories maybe suitable for this example – food taste, service, pricing, dessert quality and drinks. The next step is to assign the weighted scale. The sum of all the weighted scales should add up to 1 (100%). I have shown this below.
The next step is to assign the scores (1 to 5) for each category for the different options (Restaurant A, Restaurant B, and Restaurant C). This is shown below.
The final step is to multiply each score with its associated weighted scale, and sum it all up. This is shown below.
This shows that Restaurant A is the best choice for me based on the initial categories I chose. This tool is applicable for all kinds of scenarios. I have attached the excel spreadsheet I used for the example here. Even in the Pugh matrix, some values carry an emotional component.
I will part with a teaching from the great Zen master Shunryu Suzuki.
“In the beginner’s mind there are many possibilities, but in the expert’s there are few.”
Always keep on learning…
In case you missed it, my last post was Talking Trash.