Intuitive Decision Making
When to trust your gut
Business leaders are involved in a daily regime of decision making, how then do they quickly make decisions effectively? How do they instinctively know what the right decision is? How does one hone this ability and does it always work? Hayashi tries to explain this phenomenon in the Harvard Business Review. After interviewing many top executives he found that they had difficulty explaining how they made important decisions which were seemingly counterintuitive, but were in fact the essence of intuition. Words which were used to try to explain how they knew instinctively what to do included “professional judgement”, “gut instinct”, and “hunch”, but that was as deep as the explanations became.
What Is Your “Gut”?
The left brain and right brain terms were adopted to distinguish between rational, conscious and logical thought processes (left brain) and subconscious, emotional and intuitive thought processes (right brain). The mind is continuously processing information that you are not necessarily aware of, both during sleep and while you are awake. A sense of revelation occurs when your conscious mind learns something which your subconscious mind has already known – the “aha” feeling. The brain is also linked to other parts of your body through the central nervous system, explaining why intuitive feelings are often compounded by a physical reaction.
Top executive tap into their right brain by engaging in activities such as:
- Jogging
- Daydreaming
- Listening to music
- Meditating
The X Factor
The ability to make effective decisions in this way becomes more important as one moves up the ranks in an organisation. At middle management levels, decision making can be more of a quantitative process, but when problems become more complex and ambiguous, intuition is required to an increasing degree. While it may be an elusive concept in many ways, top CEOs such as Larsen, the CEO of Johnson & Johnson and Abdoo, the CEO of Wisconsin Energy Corporation agree that to ignore your gut leads to bad decisions. While the available data might support a proposal, there are times when intuition will lead them to know, if it is a good or a bad deal.
The Importance of Emotions
Damasio, a leading neuroscientist at the University of Iowa College of Medicine found that patients with damage to a specific area in their prefrontal cortex not only had trouble experiencing certain emotions, but also with making even very simple decisions. Damasio believes that this adds weight to the notion that emotion is inextricably linked to decision making and not always the cold, detached process that some believe it to be. According to Damasio, “our emotions and feelings play a crucial role by helping us filter various possibilities quickly, even though our conscious mind might not be aware of the screening. Our intuitive feelings thus guide our decision making to the point at which our conscious mind is able to make good choices.”
A Pattern in Patterns
The ability to see a pattern or make sense of market data is compared to doing a jigsaw. Those with more diverse experience, both in life and the workplace, will have a greater wealth of analogies to draw from, so, while they may not have seen that exact pattern before, they may have seen one similar in a different context, and therefore, they will be better equipped to deal with the pattern or problem and know “instinctively” how to what to do. Grand masters in chess for example, can remember up to 50,000 significant patterns of the ways in which the chess pieces can be arranged on the board. Other useful information is linked to these patterns, such as possible defensive or offensive moves that the clusters might lead to. Therefore, they are able to make decisions “intuitively” but the process is not as magical as it may appear, they are simply drawing from previous knowledge, without a conscious awareness of the process their brains are going through to come to this conclusion.
Cross-Indexing
According to Hayashi, the ability to apply principles learned in one field to problems in another, is the key to truly excellent intuitive decision making. The power of this increases with the variety and diversity of a person’s background as they will have had more exposure to, and therefore have the ability to recognise more patterns.
When Instincts are Wrong
Sometimes of course our instincts can be blurred and as a result we make poor intuitive decisions. This can occur for a variety of reasons, including:
- Taking unnecessary risks to recover a loss
- The self-fulfilling prophecy – doing our best to make a decision work – resulting in it being a good one
- Overconfidence – research has shown that we tend to overestimate our ability in most areas – decision making included
Self-checking seems to be the way that top executives avoid these pitfalls. they take time to reflect on and rehash the decisions they have made – particularly the bad ones, frequently learning something new about the decision which helps them in future decision making.
Finally, perhaps the most useful aspect of intuitive decision making is that it can be used for rapid responses. Even if the wrong decision is made, intuitive decision makers find that they can quickly change it to take a different route, leading, over time to more right decisions than wrong ones.
From HBR Summer 2014
