As a manager you are probably good at looking at sets of data and making quick decisions. However, do you sometimes agonize over a decision because there is so much emotion attached? Do you wish you could step back, slow down, and see the various perspectives for what they are worth?
If you intentionally evaluate the possible gains and losses from taking an action, then you will make better decisions.
Evaluating Potential Gains and Losses
By nature, individuals prefer avoiding losses rather than acquiring gains. This is especially true when faced with a decision that may lead to a risky outcome. Managers are often so focused on what could go wrong that they become paralyzed. This leads to doing nothing — not because doing nothing is the best option, but because the person is in a state of inertia. They tend to make a “safe” decision to avoid risk. This in turn can lead to apathy, self-doubt, and isolation. How can you measure and weigh the reasons for decisions?
Fear No Risk!
To avoid getting caught up in the trap of doing nothing, determine the risk. When considering an action in which you are unsure of what the outcome might be, identify decision factors and assess each factor’s relative importance. Explore the potential gains and losses of taking an action as well as the gains and losses from doing nothing. Make a conscious effort to identify, analyze, and rate the alternatives between:
- taking action as planned
- taking an alternative action
- taking no action
Draw the following table and complete each box:
Evaluating Alternative Actions
Once you have identified and analyzed possible actions, ask yourself the following questions before you make your decision:
- How do my potential gains from taking action compare to potential losses if I don’t take any action?
- How do my potential losses from taking action compare to potential gains from not taking any action?
- Which alternative makes the most sense for me in achieving my commitment?
- Is there an action that might make more sense?
After answering these questions you will have a clear picture of the risks. It will give you more confidence in decision-making, and eliminate self-doubts after the fact.
Questions to Deepen Thinking
How is your decision-making process working for you?
What are the consequences of allowing emotions to affect your decision-making?
Can you make decisions differently?
Tversky, A. & Kahneman, D. (1986). Rational choice and the framing of decisions. The Journal of Business 59. Halvorson, H. (2013). The hidden danger of being risk-averse. Harvard Business Review.