Decision-making in high-stake situations with Marwan Sinaceur

Every day, we are faced with many decisions and choices. About making an investment, assessing an existing project, engaging in a new project, deciding on a strategic priority, solving a problem, responding to a proposal, hiring a new team member, assessing someone’s performance, choosing how to best present a case, doing a forecast, buying a new house, or planning an event. Being an executive is about making decisions. The quality of decision making determines who are the best leaders.

Biases are one of the biggest causes of poor decision making. To prevent biases from polluting our mind, executives should carefully structure their decision making processes, argues Prof. Marwan Sinaceur. He is full Professor at ESSEC Business School in Paris, and for thirteen years a professor at INSEAD.

“A good decision is first and foremost a rational decision. And a rational decision is a decision that is based on information rather than on ego or on emotions.”

Professor Marwan Sinaceur, ESSEC Business School

Consistency is critical
‘One key issue, for example, is to clarify what the ultimate goal is and to make sure that the decision is aligned with the goal in mind’, he says. Consistency between decisions and goals is critical. ‘Another key issue is to think about the information you need to make a decision before you look at the information that is readily available before your eyes including when there’s a lot of uncertainty, time pressure and stress’, he adds. ‘In this way, you won’t be biased by how easy it is to get information or how available the information to make your decision is.’

‘A good decision is first and foremost a rational decision. And a rational decision is a decision that is based on information rather than on ego or on emotions’, says Prof. Sinaceur. He has several decades of experience with decision making both in business, working at big corporations like P&G, Airbus and HP, as well as in academia and in consulting with businesses. A Stanford PhD graduate, he blends findings from empirical research with real-life examples. At the Amsterdam Institute of Finance he teaches the programs Leadership: Influencing People & Managing Change and Decision-making in high-stake situations.

Professor Marwan Sinaceur, ESSEC Business School
Prof. Marwan Sinaceur, ESSEC Business School

Non-rationality can easily enter decisions, Prof. Sinaceur sees. A typical example at the personal level is when executives face a decision that follows an earlier decision they themselves made in the past, like when it comes to evaluating a person whom they hired. ‘When a manager hires somebody, research shows that when they evaluate the person months after, they will tend to evaluate this person more favorably than they would otherwise do. That is a way to justify the decision made before. If the manager assessed the person to be incompetent or falling behind, it would mean questioning the decision made in the past. This type of bias can create significant conflict with the team if the person being evaluated by the manager is differentially evaluated, and rightly so.’

Fresh eyes
Another example are investment decisions, Prof. Sinaceur adds. ‘When we invest in a project, it’s going to be difficult to cut our losses when the project turns out to be not as interesting as we thought. Again, this is an early decision working its way into a later decision. We can be affected by the history, by the web of decisions we have made in the past instead of looking at a decision in the present and in itself. There is often a path dependency when we make decisions: we get caught today in a web of decisions inherited from the past; we act in the present in a way to justify what we did in the past. Looking at every single decision with fresh eyes is essential. Daily examples include how difficult it is to cancel a subscription: we are loath to cancel a subscription made in the past, even though we are not really benefiting from it any longer today.’

Different people taking different roles
So how do leaders prevent these biases that result from ego or poor information-processing getting in the way of better outcomes? ‘One way is to make sure that the person who made the initial decision is not the same as the person doing the evaluation’, Prof. Sinaceur answers. ‘You can have different people taking on different roles, it’s that simple. In case you have a board that is responsible for making investment decisions, you could work with subcommittees so that the decision made by a subcommittee is evaluated by another subcommittee.’

If involving different people is not possible, another way is to ensure you look at the decision with a fresh pair of eyes. ‘This means, for example, disregarding the notes you took while thinking through the decision initially and thinking through the decision from scratch, as if it were a totally new decision. Don’t check the maths, but do the maths again. According to a recent biopic, this is what the French engineer Eiffel did when doing the math for laying the foundations for the Eiffel Tower. The key thing is to foster independence in judgments.’

Failure of leadership
Another situation where biases creep into executives’ decision making process is when not all available information is reaching the decision-maker. The posture a decision-maker takes vis-a-vis information, and in particular negative or unwanted information, is critical in this regard. ‘If as a manager, you always provide negative feedback to people who bring you bad news, they will at some point stop bringing you that kind of news. This is a failure in leadership. You need to cultivate the information you get. Intelligence reports suggest that this was, for example, key in Putin’s ill-fated decision to invade Ukraine. He had limited knowledge about the Ukrainian people’s real defense potential and the Russian army’s real military capability. You get the information you seek.’

This also means being open to all information, whatever the status or position of the messenger, Prof. Sinaceur adds. Having a good process in place helps to unbias decisions. ‘One way to assess the effectiveness of a decision is to assess the effectiveness of the process that led to that decision. You can make sure that a group makes a good decision by first ensuring that the group follows a process that will allow everybody to have unbiased views on the problem at hand, and that allows the group to discuss information openly and freely.’

Discuss process first
‘I often observe that groups get to the substance of the decision very early in meetings and that, as a result, they don’t discuss enough how to work together as groups, what criteria to adopt for the decisions, what goals these should serve, what different methodologies to select from, what alternative scenarios to consider: they don’t discuss process first. Empirical research has shown that when a group does not discuss process first, that is how to work together and what criteria for judgment to adopt, it significantly impacts the performance of group decision-making’, Prof. Sinaceur says.

Leaders should be aware of the implicit influence they have on a group. Group members are likely to publicly align themselves with a leader’s opinion, regardless of what they think privately. This will kill the debate in group meetings . Thus, to foster debate, a manager should want to speak last rather than first. ’Fostering a real debate before making a decision is also about who gets to give input at what point and who reviews draft decisions or draft documents, or who shares certain information.

Critical thinking
One way to promote critical thinking through the process is to assign somebody in the team the task to question decisions, and to consistently take counter positions. This is termed playing “the devil’s advocate”. Some intelligence agencies take this approach on a rotating basis.’

Another way to improve decision making is to let different people work simultaneously on the same problem. Prof. Sinaceur: ‘I have worked with an organization where they give the same project to two different teams that don’t know that another team is working on the same project. Granted, you don’t always have the luxury of doing this, but you could do this for very important projects. Here again a key concept is independence in judgments. If you have two or three independent groups of people that don’t talk to each other, from different backgrounds and different perspectives, coming to the same conclusion, it is likely that the solution is going to be a good solution to adopt. And if the two independent groups don’t reach the same conclusion, it’s helpful to discuss the respective approaches from the different groups.‘

Multiple angles
Executives faced with a decision could take a similar approach. ‘Say you thought about a decision on Thursday at the office. Think about the same decision again on Sunday at home. Here as well, it is better not to look back at the notes that you took on Thursday but to start from scratch on Sunday, and see whether you come up with the same insights or not. Looking at the same decision at different points in time, and doing so while being in different physical locations, helps coming up with multiple angles to the decision. There’s a lot of research showing that physical locations unconsciously influence our thinking.’

Quantifiable information
When there is a proper process in place, and the flow of information is in order, one issue that can yet cause bias is that people tend to overweight quantifiable information, Prof. Sinaceur continues. ‘We have this tendency because information that is quantitative is reassuring to us. It looks solid, and scientific. And, we want to factor in what’s readily available to factor in. So we need to find a way to take into account information that is not quantifiable, harder to assess, as much as we take into account quantifiable, easier to assess information. For example, in the decisions to go for lockdowns during the global COVID crisis, we considered obvious factors such as disease spread and death rates, but neglected less quantifiable factors, such as the hidden impact on children’s schooling or teenagers’ mental health.’

One obvious approach is to try and quantify as much as possible. However, many things cannot easily be translated into figures and numbers. Prof. Sinaceur returns to the example of the performance of a recent hire. ‘One factor that is hard to assess is how much one individual affects other people’s performance. You have some people whose performance may not be stellar, but who will have a very positive impact on other people. At the same time, you may have people who have above average performance, but because of the way they behave or because of their competitive style they could have a detrimental effect on other people. Speaking to this, research has shown that Westerners are less likely to take the unintended consequences of their decisions on the greater social environment into account. In particular compared to East Asians such as Chinese and Japanese.’

“Reflecting on what made a decision bad or good is really a way to improve our style of management, and our interpersonal efficiency, both in business and in personal life.”

Professor Marwan Sinaceur, ESSEC Business School

Discussing uncertainties
Discussing all these uncertainties when making decisions is important, Prof. Sinaceur adds. ‘These are not easy issues to deal with, but trying to think them through will make people more ready to face the unknown. It will make them more comfortable with uncertainty or complexity, thereby helping them make better decisions.’

Better decision makers make better managers, Prof. Sinaceur concludes. ‘Taking decisions is the one thing that managers do daily, and which has a major impact on business. It’s one ability that we all need to cultivate, and that we could never cultivate enough. Reflecting on what made a decision bad or good is really a way to improve our style of management, and our interpersonal efficiency, both in business and in personal life.’

Improve your effectiveness in uncertain or complex situations. Join the 2-day Decision-making in high-stake situations program by Prof. Marwan Sinaceur at AIF. Learn more & reserve your place here.

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