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Making decisions in an uncertain world

Updated Friday, 13th February 2009

Sometimes making the right choice in business can be difficult. Jane Henry explores different approaches.

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Two exit signs pointing in opposite directions Creative commons image Icon marfis75 under CC-BY-SA licence under Creative-Commons license How do you choose between two equally compelling options? In times of crisis decisions become critical. What is the best strategy to deal with the bottom line to cut costs, examine the options carefully or act on your gut feel? Many managers, such as Toni of the Toni and Guy hairdressing business, rely heavily on intuition - and for good reason.

Experiments show that we implicitly understand complex, uncertain and novel situations long before we can explicitly articulate why this is so. And intuitively-based judgement is able to take account of much more information than conventional approaches. Researchers have found that a higher proportion of people are happier after making a gut decision than when explicitly weighing the pros and cons.

In contrast, in situations where the expertise needed to make an investment decision is spread across a number of different people or organisations, a more deliberate form of decision making is needed. In such situations, the rationale for different aspects of the case needs to be made explicit and brought together for the decision maker to weigh it up in a more considered fashion. In many large scale innovative projects it is often very hard to determine in advance which development project will pay off and it is important to be seen acting fairly, to keep stakeholders who favour an alternative project on side.

Crises also bring opportunity, the demise of one era leaving space to create something different. In a crisis, we may well be more open to new approaches than in the good times. For example, the environmentally conscious have been calling for investment in renewables for some time, but it is only now that various governments are prepared to invest large sums, for example, in insulating and upgrading our ageing housing stock. Now is a very good time for most of us to listen to our gut. It may know something we don't!

 

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