Decision making is a science. In fact, in order to get to the root of every decision ever made, you must first understand the psychology of the person who made the decision.
The myriad mental traps that managers fall into when making business decisions include everything from anchoring – basing a decision on an initial figure that may or may not be purposefully inflated – to being overly confident in our ability to make estimates and forecasts. In fact, there are so many ways that managers can make a bad decision that it’s hard to determine where to begin in training oneself to avoid making them. The answer lies in the common element among almost every decision: emotion.
Neurologists have proven that no decision can ever be made independent of emotion. People who have experienced damage to their brain’s frontal cortex – the area that controls emotion – are rendered incapable of making even the simplest decisions. Thus, to the average decision maker, our past experiences, current environment, and even basic temperament shape the way we see and interpret the information we have just observed.
Within any given company there are multiple decision makers. With those decision makers orienting themselves with data in different ways, the answers to important business questions are often open to interpretation. This creates conflict and uncertainty. And today, data is more widely available than ever. Big data no longer is looked at as the great unknown. It’s a part of everyday business life, helping organizations gain more comprehensive insight than ever before. Unless we have access to a tool that helps managers through the decision-making process with irrefutable data, company decision makers are slaves to their own culture and experiences.
But data doesn’t necessarily translate to answers. Even with extensive data at their disposal, many executives are finding it difficult to let go of habitual processes. Rather than embracing a newfound ability to incorporate factual insights and findings into decision making, many in the business world continue to let emotion, or that gut instinct, trump all else in the board room.
Business planning based on data intelligence and predictive analytics is still uncharted territory for many executives, particularly those without IT backgrounds. This leads to an ironic challenge: The data is there to reduce the fear in decision making, yet the inability to utilize it and the lack of trust in it perpetuates “go with your gut” as a standard business practice. And this needs to change because there are dangers in relying on gut instinct alone.
Facts Beat Fear
People remember successes that were based on a hunch. Just ask anyone who invested early in Apple. But there are just as many, if not more, failures that were based on a gut feeling, such as Blockbuster’s costly decision to pass on Netflix. As business problems become more ambiguous and challenging, there is no excuse not to consult and analyze the data available. In order to do that, businesses from the top down need to learn to embrace it.
Company-wide adoption of a business intelligence solution calls for nothing less than a shift in company culture regarding data. This culture shift will create a new company environment that is more agile, informed, and ready to act with confidence. A robust business intelligence platform does the heavy lifting in the decision-making process and delivers what was once confusing, convoluted, or distorted data in a clean, concise, easily understood, and – perhaps most importantly – accurate dashboard, report, or analysis.
At the personal level, data can help fuel the courage needed to make big decisions by providing an extra layer of reinforcement. That’s why, in many ways, business intelligence is in the business of courage. BI platforms make data easy to analyze, even for the not-so-IT-savvy employees in any organization. With the ability to make adjustments based on different purposes and user portfolios, individuals no longer need to rely on someone from IT to compile and visualize a report. That first-hand practice with data helps to demystify it for business users, leading to increased trust and a more routine data-centric thinking process.
Having a tool that can be customized for different user types also makes data analytics possible for the entire company. This increases scope, ROI, and project adoption. With no margin for error in manual entry, as in Excel alone, this eliminates the aged way of tracking data and leads to more trusted information throughout the company.
Access to data allows executives to back up their courageous decisions with more facts than ever before. With the right tools at hand, it is not necessary to be a data scientist to dig into data sets and read them like a story. As executives embrace this new way of business, more successes will be realized from smart decision-making rather than luck and chance.
Morten Sandlykke, founder and CEO of TARGIT, has been leading the company through 27 years of constant development and transformation. Morten’s academic path includes management education from Henley Management College and Scandinavian International Management Institute.
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