Three Magic Ingredients to Better Group Decisions
Most business decisions are made by group, but how to ensure groups make the best possible decisions?
Groups make most business decisions. The person leading the group - from the CEO to a project manager — will likely have the final say. Nevertheless, the dynamics within the group significantly impact the decision-making.
Do groups make the best possible decisions?
Two examples of decisions which led to substantial losses
AOL and Time Warner in 2001. AOL acquired Time Warner for $164bn in 2001, following discussions that took place for over one year. Although Time Warner initially supported the deal, it soon realised it was not in its best interest and made a loss of $99bn only one year afterwards, in 2002.
The Royal Bank of Scotland's purchase of ABN Amro in 2007 led to the acquirer's near collapse. Following an investigation by the FSA (Financial Services Authority), the management team's decisions were a determining factor, including disregarding the bank's weak capital position and inadequate due diligence. In the aftermath of the deal, the bank was left close to collapse during the financial crisis and bailed out by the government in 2008.
What is it about people when they gather in groups?
These are past events, and we assess them with the benefit of hindsight. However, examining what happened within those two groups of very senior and experienced executives is essential to learn and apply those lessons.
The questions that need to challenge any executive are:
What was the process or framework (if there was one) used in the decision-making?
What information did they base the decision on?
How did the group dynamics influence the decision-making?
The rationale behind group decisions is sound: it fosters collaboration, shared responsibility, and commitment to a common purpose. Moreover, its members can contribute a broader range of views, experiences, and expertise. Discussion is considered a core activity of a group. It promotes the aggregation of information, and it can facilitate a shift of perspective and greater creativity. It can also identify the best solution, which tends to be provided by the best members of the group. Getting beyond groupthink to make groups smarter. There is that famous expression 'the wisdom of the crowds'. Despite the claim that groups are smarter than the smartest people within them, that depends on the circumstances.
In reality, people's thinking is influenced by biases, heuristics, and emotions, which can increase the potential for mistakes. Human behaviour influences both the process and the potential outcomes of decisions. These influences are maximised in a group situation. That’s why I am sceptical about the wisdom of the crowd.
These are examples of situations I have observed in organisations around the world:
Participants arrive at a decision meeting and look at each other aimlessly; they don't know where to start.
Group members contribute information and data they are not confident in and has not been adequately validated.
Groups are swayed by one charismatic participant who proposes an earlier, not-so-good idea and takes over the discussion stopping others from presenting alternatives.
Each of these situations gives us one of the magic ingredients.
How to make better group decisions: the three ingredients
Ingredient n.1
I have seen the aimless look among board members in large organisations, so you are not alone if this is the typical scenario in your company. The problem stems from focusing on the decision's outcome.
The magic ingredient is the focus on the process. Many companies lack this focus. There are detailed processes for ordering stationery and recording expenses, but there is no process for making decisions.
This process (or framework) doesn't have to be complicated and cumbersome (I don't advocate that). It can include steps such as 'define the problem', 'each team member has a brief presentation on his/her department viewpoint', 'there is an anonymous vote' and so on. Every group need to define a process to fit the requirements of the team and company.
Ingredient n. 2
It seems that the more data is available, the more lost we are. Or we keep searching for an elusive piece of data that we are sure will solve all our problems.
The magic ingredient is to sieve all data through the filters of useful, accurate, and relevant. It seems simple, but it is not easy. We need to continually strive to challenge and validate the information we receive.
The first step is to define the problem/question (much before you think of a decision). Let's say you want to open a factory in Bulgaria; for each piece of information, ask yourself (and especially those who give you this information): 'How useful is this data to the problem/question?' 'Explain how you validated this data to ensure that it is accurate' and 'What makes this data relevant to the problem/question we are dealing with?'. Then, listen and keep probing with more questions.
Ingredient n. 3
We have all been in a group situation where the extrovert participant expresses an opinion and prevents others from presenting alternatives. The psychology of why and how this happens is a whole new topic. For now, let's accept this as a fact of group decisions (and a reason why I believe crowds are not always wise).
The magic ingredient is to prevent that initial opinion and keep an open mind for as long as possible. It is a balancing act between encouraging people to contribute and not committing to any of the ideas just yet.
What I find most useful is starting with anonymous contributions; this levels the playing field and prevents people from being influenced by others. Simon Sinek once said, "Ask people to come up with 15 ideas each in 48 hours." It sounds like a lot, but it is a useful way to prevent overlap and get people to come up with beautiful nuggets that they would not if the target was three ideas each. This approach is also inclusive of all the smart introverts and reflectors in the team.
In conclusion, since most business decisions are made in groups, let's improve how we manage those groups to optimise our decision-making.
References
Martin, I. (2013). Making it happen. Fred Goodwin, RBS and the men who blew up the British economy. In. London: Simon & Schuster.
Kahneman, D., Slovic, P., & Tversky, A. (1982). Judgement under uncertainty : heuristics and biases. Cambridge ; New York: Cambridge ; New York : Cambridge University Press.
Thaler, R. H., & Sunstein, C. R. (2009). Nudge. Improving decisions about health, wealth and happiness. In. London: Penguin Books.
Kahneman, D. (2011). Thinking, fast and slow. In. London: Allen Lane, Penguin Group.
Sunstein, C. R., & Hastie, R. (2015). Wiser. Getting beyond groupthink to make groups smarter. In. Boston, Massachusetts: Harvard Business Review Press.
Surowiecki, J. (2005). The wisdom of the crowds. In. London, Great Britain: Abacus, an imprint of Little, Brown Book Group.