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Why organisations make poor decisions (and how to fix it).

Companies make more bad decisions than good decision, mostly without knowing it.

But what is a bad decision. The problem with decision making is is that good decisions can lead to bad outcomes, and bad decisions can lead to good outcomes. Decision quality can only ever be known over a lifetime of decision making, where the aggregate outcome for deliberate decision making is better than the alternative of arbitrary and random decision making.

Why do organization continue to make bad decisions?

  1. Powerful people believe they have special powers of decision making. Why else would a person reach of position of power in an organization. You can only conclude that if you are in a position power, you must be good at decision making.

  2. Self justification. Every organization has bias, biases they do not recognize, but the cardinal sin in decision making is self justification leading to cognitive dissonance. Whatever the outcome, we can always rationalize the decision that led to the outcome.

How to make good decisions and maximize the aggregate outcome?

  1. Develop a system for measuring decision quality.

  2. Train decision makers to recognize good quality decisions.

  3. Become sensitive to organizational bias through post-conventional thinking.

What is decision quality?

  1. A decision frame that structures the decision in the context most relevant to your needs,

  2. Creative alternatives that allow you to make a selection among viable and distinct choices,

  3. Relevant and reliable information upon which to base your decision, including the uncertainty of the information

  4. An understanding of the potential consequences of each alternative based on your choice criteria

  5. A logical analysis that allows you to draw meaningful conclusions from the information to reach clarity of action

  6. Effective facilitation to gain alignment and commitment to action

Some people are better at removing bias then other people. Some are naturally tuned to removing bias, other are trained to recognize bias. the best decision advisers are often post conventional thinkers.

Post conventional thinkers have the ability to transcend the norms of the business they work in, and will challenge thinking regardless of personal consequence. This type of thinking comes at a price, they are unlikely to be popular in organizations, and they are highly unlikely to reach positions of power. However, successful decision makers recognize the importance of post-conventional thinking and seek out the challenge that this offer. Great leaders keep post-conventional thinkers close by.

Post conventional thinking is a normally thought of a s philosophical moral construct, dealt with in Lawrence Kohlberg's theory stages of moral development. Post conventional thinking is defined as:

The third, and highest level of 'post-conventional' moral reasoning has two stages: first, an understanding of social mutuality and concern for the welfare of others, and secondly, adherence to individual conscience and respect for a universal principle of justice.

It sounds complicated, but in a decision making world can be translated to:

The highest level of decision making has two stages: first, an understanding of organizational mutuality and concern for the long term welfare of of the organization, and secondly, adherence to individual conscience and respect for the universal principle of decision quality.

To conclude. In order to recognize poor decision making requires knowledge of decision quality and the moral courage to challenge organizational norms and biases. To improve decision making requires that the six elements of decision quality are measured in an

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