Think you're making rational business decisions? If you're lucky you might make decisions using intuition based on experience.
And it is a very, very big but, decisions are much more likely to be made on emotion and intuition. The work of Nobel Prize winner Daniel Kahneman would seem to show this. Whether it is biased thinking or the focusing illusion. Taking the last of these first, Kahneman says
The focusing illusion leads to all sorts of disappointments in life and business. Happiness and satisfaction are not necessarily dependant income, the latest fashion or latest gadget. So watch out for exaggerations of importance by marketeers trying to persuade you that something they are promoting is a 'must have'. Oh, and let's not get started on the exaggerations of politicians...
Moving on to biased thinking. Does the dark cloud of emotional bias prevent you from improving business performance?
Actually, there is so much to intuition and reason, which Kahneman has also called automatic and deliberate thinking. He further divides intuition, automatic thinking, into what we shall call biased and skilled intuition. Biased intuition tends to be towards narrow thinking, is loss averse and is overoptimistic. Experience leads to skilled intuition (e.g. learning two times tables means that we can automatically give the right answer to 2 x 2). However, bias is always threatening particularly in new or unusual situations. This applies to the judgements and decisions that you as a manager must take.
In any given situation, our intuition immediately tells us something. The secret is first to acknowledge that it is your intuition speaking, then to check it out by analysing measured performance data from your system and processes. Always remember:
"The purpose of data is action."
as data analysis guru Don Wheeler says. That's effective action, i.e. doing the right things right.
Remember in my last blog we had begun to take action to improve performance by listening to our customers. In particular accepting their feedback. Moving on, in our journey around the 2F diagram you can see that that the next step is measuring performance to give us the data to balance intuition and resist focusing illusions.
Perhaps you have had - and accepted - some feedback from your customers. Alternatively, you may have some indication that something is not right or something has changed in your operating environment. Have you ever wondered what to do next?
Knowledge of the whole situation and proper measurements enable us to really understand what is happening so providing a factual basis for taking either immediate remedial action or thought out improvement activity.
"Just the facts ma'am"
as Stan Freberg's Billboard #1 parody (St George & the Dragonet), Detective Joe Friday was alleged to have said in 1950's TV detective series Dragnet. The humour may help you to remember that you need facts for effective improvement action and avoid biased intuition and focusing illusions.
To be clear. A fact is objective because it is based upon evidence and probably held by many, which is Kahneman's deliberate thinking. The opposite is an opinion, which may be due to a focusing illusion or biased intuition, is subjective. That means it is not necessarily true, but is belief that you as an individual might hold yourself with, as we have seen above, an emotional attachment.
More than a century ago the great British scientist Lord Kelvin said,
"If you cannot measure it, you cannot improve it."
The question for you as a manager is, are your decisions, particularly those to do with change and improvement, based on skilled intuition or better still deliberate thinking using facts, including reliable performance measurement?
In the next blogs we'll be looking deeper into good data and performance measurement as I continue to expand on the 2F diagram, drawing from my book Picture Your Business. This is available from me priced £12.00+P&P. The latest version of the companion 2F Worksheet is now available free in MS Word or PDF on request from me either via a Linkedin message or by emailing firstname.lastname@example.org.