Monday, December 28, 2009

Tough Decisions

I received an interesting email the other day on Insight into Decision Making – Tough Decisions.

A group of children were playing near two railway tracks, one still in use while the other disused. Only one child played on the disused track, the rest on the operational track. The train is coming, and you are just beside the track interchange. You can make the train change its course to the disused track and save most of the kids. However, that would also mean the lone child playing by the disused track would be sacrificed. Or would you rather let the train go its way?

Let's take a pause to think what kind of decision we could make...

Most people might choose to divert the course of the train, and sacrifice only one child. You might think the same way, I guess. Exactly, to save most of the children at the expense of only one child was rational decision most people would make, morally and emotionally. But, have you ever thought that the child choosing to play on the disused track had in fact made the right decision to play at a safe place? (albeit of course playing near any track in the first place is unsafe). Nevertheless, he had to be sacrificed because of his ignorant friends who chose to play where the danger was.

This kind of dilemma happens around us everyday. In the office, community, in politics and especially in a democratic society, the minority is often sacrificed for the interest of the majority, no matter how foolish or ignorant the majority are, and how farsighted and knowledgeable the minority are. The child who chose not to play with the rest on the operational track was sidelined. And in the case he was sacrificed, no one would shed a tear for him.

The great critic Leo Velski Julian who told the story said he would not try to change the course of the train because he believed that the kids playing on the operational track should have known very well that track was still in use, and that they should have run away if they heard the train's sirens...

If the train was diverted, that lone child would definitely die because he never thought the train could come over to that track! Moreover, that track was not in use probably because it was not safe. If the train was diverted to the track, we could put the lives of all passengers on board at stake! And in your attempt to save a few kids by sacrificing one child, you might end up sacrificing hundreds of people to save these few kids.

While we are all aware that life is full of tough decisions that need to be made, we may not realize that hasty decisions may not always be the right one. 'Remember that what's right isn't always popular... and what's popular isn't always right.' Everybody makes mistakes; that's why they put erasers on pencils.
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The reason why decision making is so tough is because of the consequence we need to face when making the wrong decisions. In the above example, it could be a psychological impact that we need to live with. Decision making today also comes with risks and trade-off. Making the wrong decision on your investment could mean great financial losses, or a missed opportunity. Marketing Management decision making impacts the marketing mix strategies and brand perception and positioning.

It seems the complexity of decision making can be proportional to the perceived consequence or impact. For simplicity case, let's categorize them into 4 levels;
Level 1 - Little or no impact, including personal and daily decision making, such as what's for dinner?
Level 2 - Involving 2 or more opportunity cost variables, such as cost, time, or product design changes which cannot be regained
Level 3 - Involving second person, especially when impacts trust and perception (example contracts, agreements, policies, negotiations)
Level 4 - Involving more people or the general public, especially impacts credibility and social perceptions, and including a combination of some of the earlier levels (also advertising campaigns, promotion, positioning strategies)

I heard that we need to make about 500 decisions a day on average. And since it's an overwhelming experience, we try to auto-pilot or delegate some of these decisions and even set up algorithms to make some decisions for us faster. Basically what we are doing is avoiding the consequence of making a wrong decision - since it was based on some model, or someone else's idea. And with the more decisions we pass over, we lose our thinking edge and decision-making intuition.

But how do we have time to manage over 500 decision a day? Well, with the impact levels, it helps to create a threshold when certain decisions can be auto-pilot (or delegated), and when certain decisions are just too important and need our attention and intervention - no matter how simple the surface impact may look. As a guideline, I would say anything from levels 3 and 4 should have our personal attention.

We need to recognize that each and every decision we make can have a different outcome. As much as we want to standardize things, it's impossible to have spaghetti every dinner. Circumstances (hunger, time) and expectations (motive) can change our decision making process, and ultimately the outcome. Simply setting auto-pilot or delegation decisions with level 3 or 4 impact can be disastrous - especially since it involves another person - and we've heard many times before that you can not be efficient in a relationship.

In making decisions, people try to get the best outcome. But what's the best outcome is also relative to the person making the decision - especially for post-purchase experience. The marketing team needs to persuade the potential customer that the product/service will satisfy their needs. Having made a purchase, the customer should be encouraged that he or she has made the right decision with the after-sales support and services.

Finally, in the book by Wharton on Making Decision by Stephen J.Hoch, we look at 7 Strategic errors in decision. Understanding and overcoming these strategic shortcomings will help improve our decision making effectiveness.
  • Being blinded by emotions
  • Overreliance on intuition
  • Emphasis on speed
  • Failure to detect deception
  • Underestimating risks
  • Insufficient information technology for decision support
  • Insufficient regulation

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