Emerging best practices for decision making.

If your job is to make decisions, it’s worth treating it like any other subject to get better at.

Tobi Lutke, Shopify


From this Twitter thread on how great decision making orgs think about decisions.

Covering:

  • why good decision processes are so impactful
  • how to make better, faster decisions
  • frameworks & tools

1/ Leaders spend a lot of time making decisions.

Most C-level execs and managers spend over 30% of their time on decision making. Time spent on decisions increases with seniority. 61% say most of their decision-making time is used ineffectively. https://mck.co/3dvEu0R

2/ For big decisions, the ROI for good practices is huge.

Stanford had companies revisit existing projects and apply decision best practices to the major decisions taken. The savings from the changes made were $1000 per $1 spent on investing in decision analysis.

3/ Good decision making orgs make fast high quality decisions and are rewarded with higher returns

The foundational practices to achieve this:

  • Make decisions at the right level
  • Focus on enterprise-level value when framing decision
  • Build commitment from stakeholders

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4/ What does good decision making look like?

coinbase_good_decisions.png

5/ Outcome mindset vs. systems mindset

A good decision can lead to a bad outcome. Good decision systems lead to better outcomes on average.

6/ Decision speed and good outcomes are related

You would think that consistently good decision outcomes would require a lot of deliberation and therefore take longer. Studies have shown that orgs with better decision outcomes decide faster.

7/ Faster decisions give more time for course correction.

Even if you make the wrong decision, by moving faster you can learn that sooner and course correct. Holding out for 'perfect information' won't necessarily lead you to the right answer but you will have lost all that time.

8/ Just-right analysis

You want to gather enough information to make an informed decision but decide before you have all the information.

  1. There is no such thing as perfect information.
  2. There is diminishing returns after a certain point.
  3. You learn by taking action

I place more value on decision speed. If you can make twice as many decisions at half the precision, that’s often better. The improving of decision-making with additional time often flattens out. I think most people should be operating earlier in that curve. Make more decisions with less confidence but in significantly less time. In most cases you can course correct. Fast decisions are an asset and a capability in their own right.

Patrick Collison, Stripe

Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.

Jeff Bezos, Amazon

9/ The greater the impact of a decision, the greater the rigor to be applied.

By categorizing different types of decisions you can quickly apply the appropriate decision process.

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10/ Jeff Bezos' heuristic for categorizing decisions: Type 1 decisions are irreversible and consequential. Spend time on them. Type 2 decisions are reversible, like walking through a door. Make them quickly and move on.

11/ When is a decision framework needed?

The vast majority of decisions are Type 2 and should be made by the owner of that area. Type 1 decisions merit a framework to help stakeholders work through a decision in a methodical way.

12/ Some decision frameworks to consider for processing Type 1 decisions

14/ Push decisions down - don't micromanage Type 2 decisions

Higher quality, faster decisions happen when they are made by those closest to the problem. 'Localizing' decisions removes management bottlenecks and increases autonomy and engagement.

We strive to develop good decision-making muscles everywhere in our company. We pride ourselves on how few, not how many, decisions senior management makes. We don’t want hands-off management, though. Each leader's role is to teach, to set context, and to be highly informed of what is actually happening... unlike the micro-manager, the goal of knowing those details is not to change certain small decisions, but to learn how to adjust context so more decisions are made well.

Netflix Culture Doc

15/ What is 'decision quality'?

Decision quality increases when the decision is:

  • clearly framed
  • relevant information has been gathered
  • good alternatives have been considered
  • conclusions have been well reasoned
  • stakeholders have made a commitment to action

primer on decision quality

16/ Good framing ensures you are solving the right problem

Decisions are often too narrowly scoped e.g. "Should we do X?". When you broaden the frame e.g. "How can we improve A?" you invite better options with broader impact. Global Maximum > Local Maximum.

17/ Eigenquestion: What decision eliminates 100 decisions?

Via @shishirmehrotra, the eigenquestion is a framing technique to find the right question. This guide has a great example from Youtube deciding how to display their search results: bit.ly/3eFSUvb

eigenquestion.png

18/ Inclusion is the most powerful weapon in increasing decision quality

Tactically include perspectives that help reduce blindspots e.g. including an engineer in a design decision can quickly eliminate options and help define the parameters of what is feasible.

19/ How many participants?

Stay in the goldilocks zone when inviting people to participate in a decision. Involve least 4 people to get broader perspective, no more than 6 to keep discussions efficient.

20/ Diverse teams make better decisions

Hack decision-making at work by including participants with a diverse mix of genders, ages and geographies. Diverse teams outperform individual decision-makers by 87%. https://drive.google.com/file/d/1578SPMNyqTjeBP8ZsihSTBrskUOlmsdQ/view

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21/ Inclusive decision making builds trust

80% of workers want to know more about how decisions are made in their organization and 87% want their future company to be transparent according to Slack’s Future of Work survey.

22/ Asynchronous decision making is becoming more popular

As more teams go distributed there is a shift towards asynchronous decision making. This unlocks some powerful dynamics.

The key is keeping synchronous decision making down to a minimum.

Patrick Collison, Stripe

23/ Async decisions = less meetings

Async decision making allows a decisions to be collaborated on across all hours. This passing of the baton gives workers agency to design their own day and collaborate across timezones and geographies.

24/ Async decisions builds a culture of documentation

If you really want to ruminate on the implications of this I highly recommend the short story The Truth of Fact, the Truth of Feeling by Ted Chiang(wrote story Arrival was based on). It follows a tribe's transition from an oral culture to one mediated thru documentation.

25/ Async decisions empower introverts

The medium of face to face meetings is biased towards: dominating personalities, quick wits etc. Async decisions create more space for considered input over live reactions moving towards what @RayDalio calls an idea meritocracy.

26/ Async decisions scale well

Decisions driven by the written word are self documenting. It is easy to share them, build on them. New hires and your future forgetful self can see the what decisions were made and why.

27/ Farm for dissent

Netlflix has built a culture where they cultivate dissent as a tool for refining thinking.

A decider should encourage dissent to stress test their reasoning but make it clear that they are ultimately making the call. This gives agreeable personalities the green light to air their reservations.

28/ Disagree and commit

Decision by consensus is slow. If you want to move fast then the decider needs to make the call and gather commitment. If you disagree with a decision and don't commit to it its failure will be self fulfilling prophecy.

29/ Decisions as objects

A writing culture that drives decisions through documentation reveals that decisions are objects like projects or tasks. This makes it easier to create processes to optimize for speed, outcomes, communication, execution.

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30/ Decision making is the highest leverage activity in an org

Even something as high leverage as hiring is downstream from decisions. When you optimize your decision processes everything improves.

31/ Feedback loops

Documented decisions make it easy to revisit a decision after it was made to learn why it was or wasn't successful. When you can compare your predictions directly with reality it can be a wake up call for how you model the world.

32/ Make predictions and revisit them

Documenting and revisiting decision predictions changes your mindset when you are making the decision itself. You start thinking about what will actually happen vs. what you hope will happen. Seeing the future in a starker light can help you navigate it better.

Sources

Winning decision organizations: McKinsey

Decision types: McKinsey

Three keys to faster, better decisions, McKinsey

Decision Quality: Decision Strategy Group - fundamentals, 5 min intro

Netflix culture doc

Cloverpop: Best practices

Cloverpop: Diversity

Gitlab: 2 phases - info gathering as consensus, deciding as hierarchical.

Gitlab: Async communication

Nesslabs: Eisenhower Matrix for prioritizing decisions

Decision Template: How we make decisions at Coinbase

Prediction practice: Kevin Kwok on Venture Stories

First Round Summary of Frameworks

Flat Iron decision matrix

Square(Goku Rajaman): SPADE framework

SPADE template on Coda

Farnam St Decision Matrix Prioritization

BAIN Rapid framework

Matter Disagreement Framework

Stripe's Clare Hughes Johnson: Scaling decision making

Claire Hughes - stripe decision type framework vid (https://youtu.be/oqWoFrRM8sA?t=1483)

Stripe - async decisions

Coda - using eigenquestions for framing

Adam Nash describing type 1 and type 2 decisions.

Decion making tools

Automattic: P2 tool for async communication

Disagree and committ

Team size impact on decision making study