Making Decisions with Limited and Imperfect Information
Updated: Dec 18, 2020
This article was adapted from Prof. M.S. Rao’s book, 21 Success Sutras for CEOs
Article Author: Professor M.S. Rao, Ph.D., Founder, MSR Leadership Consultants
“Whenever you see a successful business, someone once made a courageous decision.”
―Peter F. Drucker
Anybody can make decisions when complete information is available. Anybody can make decisions when partial information is available. But it requires immense imagination and intuition to make decisions when there is a dearth of information. It has become a big challenge for CEOs currently to make decisions with limited and imperfect information.
Great leaders must be decisive. They must know how to make decisions as it involves not only their survival but also the success of their organizations. So let us explore decision-making skills in this regard.
We all make decisions every day. Some are simple, others are more complex. In fact, making decisions is not an easy task. Although everyone wants to succeed in making their decisions, the outcome may not match their expected objectives. At times, there is a disconnect between their expected objectives and achieved outcomes. Why does it happen? Are people not confident to make decisions? Why do most people fail to make the right decisions? What makes people to make the right choices?
When you have all the information, it is possible to make decisions easily. You can interpret the information and make a few right choices to execute. When you don’t have any information, it is tough to make decisions. You cannot interpret as you don’t have any information. It is a major challenge to make decisions when faced with uncertainty. Leaders at the operational level make decisions based on the available information and from their experience. Leaders at the strategic level make decisions based on their gut and intuition.
Senior leaders and CEOs conduct meetings regularly to understand the challenges from the grass-roots level. They listen to their employees and their challenges. They throw the challenges in the meeting to all members and brainstorm. After listening to all sources, and considering their viewpoints, they make decisions based on their intuition, experience, and gut. They know pretty well that all decisions might not go well. They are prepared to risk and implement their decisions. They take feedback from their decisions and reflect a lot. They learn lessons from their wrong decisions and move forward with remedial action.
Almost all successful leaders, including Richard Branson and Warren Buffett, failed in making the right decisions. But they learned lessons and improved their decision-making skills. Warren Buffett believed both in timing and time. He knew the right time to invest in the right companies. He made many mistakes while investing, and he advises youngsters and college students to invest wisely. Decision-making is not an easy task. There are many aspects to consider, such as collecting information from all sources, interpreting the information, consulting the concerned people, obtaining their viewpoints, building a consensus, and implementing the decision. Additionally, it is essential to get feedback and take corrective steps to achieve the desired objectives.
Make Your Decisions by Head, Heart, or Gut
Jillian Michaels once said, “Whenever you’re making an important decision, first ask if it gets you closer to your goals and or farther way. If the answer is closer, pull the trigger. If it’s farther away, make a different choice. Conscious choice making is a critical step in making your dreams a reality.”
Making decisions is a major challenge for leaders and CEOs. If they are expert in conceptual, technical, and business acumen and have access to authentic information, they can make wise decisions to achieve amazing outcomes.
Information is important to making wise decisions. Choosing accurate information is essential to achieve the desired objectives. It requires experience, expertise, and judgment to choose from the available information. If there is access to authentic information, and decision-makers have the ability to interpret and forecast the pros and cons of their decisions well in advance, they will be able to make decisions easily, quickly, and wisely.
Decision-Making on Complex Issues
Theodore Roosevelt once remarked, “In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” Making decisions on complex issues is a major challenge for leaders. You must have the spine to make tough decisions to resolve long pending issues. My personal decision-making involves keeping multiple options ready, and then seeking input from various reliable sources. I refine my decision from time to time and implement any changes. I ask for feedback to understand potential impacts. If there are any mistakes, I take precautions to make better decisions next time. I basically go by my head, heart, and gut. If I have complete information, I will go by head. If I have partial information, I go by head, heart, and gut. If I don’t have any information, I will go by gut alone. I am prepared for surprises and challenges after implementing decisions. Depending on the sensitivity of issue, I encourage consensus to make all members accountable.
Steps to Make Successful Decisions
Our decision-making differs from time to time and depends on our mood levels. We make better decisions in the early morning as we gave rest to our mind. In the afternoon, we often feel burdened and may not make effective decisions. At night, it is tough to make decisions as we get stressed out by having executed too many tasks. Thus, before making major decisions, keep your mind free from pressure and don’t be emotional. Take a nap to reset your biological button. Remember, sound sleep, physical exercise, and protein food helps make better decisions. Additionally, we may change decisions from time to time as we are rational and emotional animals.
Here are steps to making successful decisions:
Find out the situation. Understand the issues from multiple perspectives.
Think of the best and worst that will happen.
Discuss with your close connections to create appropriate alternatives.
Choose the decision that is possible and feasible to execute with limited risk and maximum returns.
Obtain feedback to improve your decisions in the future.
Remember, whatever the steps you take, there might be mismatch between your expectations and outcomes. So be prepared for the consequences before making your decisions.
Your personal decision decides your destiny. Your professional decision decides the destiny of the people in your professional life. Your social decision decides the destiny of the people around you in society. As such, you must be very careful while making your decisions. You must be even more careful while making your professional and social decisions. To conclude, obtain authentic information from multiple sources, think logically and analytically, foresee the pros and cons of your decisions, execute them effectively, and obtain feedback to improve your decision-making skills. Remember, all decisions don’t go well as some are bound to fail. As Warren Buffett noted, it all depends on your time and timing.
This article was adapted from Prof. Rao’s book, “21 Success Sutras for CEOs”