The Train of Decision-making Thought
QSB Insight TALKS is back with a presentation by Salman Mufti, Queen’s School of Business Associate Professor of Management Information Systems. In this video filmed at Queen’s beloved Grant Hall, Mufti discusses the science behind how the most successful managers and executives make key decisions. Faced with a conundrum, he suggests you start with your intuition, then test it with a three-step analytical process involving alternatives, criteria, and evaluation.
1:36 Managers will claim that they approach a problem by first considering the criteria, then generating alternatives before deciding which alternative is best. Salman Mufti reflected on how decisions are really made. When he and his wife were deciding on which house to purchase, he compiled an elaborate spreadsheet of all criteria. “Then we bought the house that my wife liked. . one that was not even on the short list.” Similarly, he says, managers do not make strategic decisions in the way they say they do.
6:14 What’s really going on when we make key decisions? Earlier theory assumed that individuals are purely rational, but more recently, experts have shown that we make decisions based on our tolerance for risk and perception of a given opportunity and threat. Faced with making a decision that we perceive as involving gains, we are risk averse; if we perceive that it involves losses, we opt for the risky path.
11:42 Mufti breaks down analysis and intuition. Analysis, he says, comes down to “categorization and counting.” It helps to generate a lot of data, which can require considerable resources. On the other hand, “too much analysis will get you into trouble, says Mufti. “Analysis paralysis.” Intuition is a snap judgment based on experience. Intuition is critical for managers who have limited time to assess all available information. But intuition can carry dangerous biases, such as pre-judgment or the belief that what worked in the past will work today.
14:44 Mufti’s approach to decision-making melds analysis and intuition. When trying to solve a problem, begin with your intuition, since this is the most natural course of action. Then test your intuition with analysis. In effect, says Mufti, this is how scientists approach their research, beginning with a hypothesis then moving to data collection and analysis. Mufti’s three-step process of analysis is (in order): identifying alternatives, setting criteria, and evaluating each alternative.