Tag Archives: Kahneman

Decision making. Noise, intuition and the value of feedback.


By Elisabeth Goodman, 1st February 2017

There is a lot more ‘noise’ in decision making than we might suppose.

The Harvard Business Review has been running some very useful articles on decision making.  The most recent article by Kahneman D. et al, “The cost of inconsistent decision making”, October 2016, p.38, suggests that the incidence of professionals or experts making different decisions on the basis of the same facts and data is higher than we might suppose.  They call this “noise”.

HBR article by Kahneman D. et al on noise in decision making

HBR article by Kahneman D. et al on noise in decision making

This is different from bias, where people might make a consistently wrong decision based on their prejudices. (I wrote a blog based about this some time ago after reading Ben Goldacre’s book “Bad Science”.)

Kahneman et al suggest that this noise, or variability, in decision making could be quite important in professional settings that require judgement, such as medicine, finance, project management.  Presumably this would also apply to scientific research and development, and in such areas of management as evaluating job performance!

The authors maintain that people assume that they, and their peers, will be able to make good and consistent judgements, and yet this is not the case.

Decision making relies on intuition, as well as facts and data

I was reminded of a series of three blogs that I wrote a few years ago based on Gary Klein’s book “The power of intuition”.  To quote an extract from the third blog: intuition “is solidly founded on experience and can be enhanced or diminished dependent on our receptiveness, diligence and the environment in

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which we operate.  It is the result of our expertise and how we exercise it.”

The September 2016 article on decision making “How to tackle your toughest decisions”, by Badaracco J.L, p.104. suggests five key questions to consider, in order to use judgement effectively.  Badaracco defines judgement as a combination of thought, feelings, experience, imagination and character – so some echoes of Klein’s definition of intuition.

Decision making is enhanced by good feedback

Kahneman et al. remind us that in high skill areas such as playing chess, or driving, we get very rapid and significant feedback on our decisions.  If we make a false move, there are very tangible consequences!

By contrast, decisions made in projects, or in research and development can take quite a long time to play out before we know the outcomes and their implications.

Management decisions such as evaluation of performance, can also result in quite rapid feedback from the individuals concerned, but it may not always be considered in a very constructive way..

Practitioners of Knowledge Management already use a range of techniques to help them and their teams reflect on what they can learn from experience.  This is a form of feedback.  The techniques include short and sharp “After Action Reviews” after significant milestones, and more in-depth “Learning Retrospects” at the end of projects.

Systematic approaches for reducing noise in decision making

Kahneman et al, Klein and Badaracco between them suggest a number of approaches for enhancing decision making.. Their approaches, and some others that I have come across include:

Tapping into different mindsets

The MBTI zigzag model ensures that we use the different information and decision making preferences available to us: ‘sensing’ to review all the facts and data; ‘intuition’ to extrapolate to what might be; ‘thinking’ to consider cause and effect; ‘feeling’ to reference how we feel about alternatives and outcomes.

De Bono’s Six Thinking Hats is another variation of this, and helps a group of people work collaboratively in both generating and then evaluating ideas.

Badaracco’s five suggested questions is yet another variation (with thanks to my colleague Liz Mercer for talking me through these..):

  • Think, as widely as possible and with input from others, about the net, net consequences of all your options.
  • Consider your core obligations to the key people (stakeholders) affected by your decision: what they would think and feel about the consequences.
  • Think about the world as it is – be pragmatic about your chances for success.
  • Consider your values – what do you / your organisation stand for, and how would this decision align with those values.
  • Ask yourself “can we live with this”? Imagine explaining your decision to a friend or partner and what their reaction would be.

Using 4-box and more complex decision matrices

The 4-box decision matrix used in RiverRhee's Lean Sigma courses for evaluating decisions.

The 4-box decision matrix used in RiverRhee’s Lean Sigma courses for evaluating potential improvement solutions.

These are visual tools for evaluating alternative options against agreed criteria.  The 4-box matrix is the simplest version.  More complex decision matrices will have more criteria.

Check-lists and carefully formatted questions

This would seem a fairly simple way to document the factors to be considered when making perhaps more routine decisions, ensuring that all the necessary information has been collected and evaluated.

Constructing algorithms

This is Kahneman et al’s main recommendation for reducing ‘noise’ in decision making, after conducting a ‘noise audit’ to find out quite how bad the variability is.  They suggest that it would be possible to construct algorithms fairly simply, by identifying a few (6-8) key variables that are closely linked to the outcome. These could then be combined into a formula, with alternative decisions assigned to the different outcomes.  Sadly the article was missing a simple example to illustrate this approach.

Using Decision making exercises or ‘DMX’ from Klein

These are “an accelerated learning process” for developing individual intuition.  They rely on defining and working through scenarios as a group, so participants can gain quicker and deeper insights from each others expertise.

Kahneman el at suggest something similar: but with people working on a given scenario independently – and then coming together to explore the decisions made and what they can learn from that.

Conclusion

So, there are lots of factors to consider for improved decision making.

You could conduct a “noise audit”: have people make decisions independently to find out how different their conclusions are, and use this as a learning opportunity in its own right or…

….explore alternative approaches for your decision making.

You could use techniques such as “decision making exercises” to enhance people’s intuitive skills.

And you could ensure that you collect feedback and take time to learn about the consequences of your decisions on a more systematic basis.

What will you do?

About the author

Elisabeth Goodman is the Owner and Principal Consultant at RiverRhee Consulting., a consultancy that specialises in “creating exceptional managers and teams”, with a focus on the Life Sciences. (We use training, facilitation, coaching, mentoring and consulting in our work with our clients.)

Elisabeth founded RiverRhee Consulting in 2009, and prior to that had 25+ years’ experience in the Pharmaceutical Industry in line management and internal training and consultancy roles supporting Information Management and other business teams on a global basis.  

RiverRhee is a support supplier for One Nucleus and a CPD provider for CILIP (Chartered Institute for Library and Information Professionals).

Elisabeth is accredited in Change Management, in Lean Sigma, in Belbin Team Roles, MBTI (Myers Briggs Type Indicator) and is an NLP (NeuroLinguistic Programming) Practitioner.  

She is a member of CILIP and of APM (Association for Project Management) where she leads on Membership, Communications and Events for the Enabling Change SIG committee.