In these unpredictable and fast-changing times, individuals and organizations have to make decisions within an unprecedented level of uncertainty. How will the aftermath of the pandemic and shift to remote work affect Amazon’s decision to build the second headquarters in DC? If you are a commercial real estate company, what do you do with your assets when companies are going remote? How does the rise of autonomous vehicles affect the investment decisions of a large oil and gas company? The success in situations like that hangs on a multitude of factors, all of which increase the level of uncertainty for the decision-maker.
Fortunately, there are concrete approaches and tools a decision-maker can use to reduce the uncertainty and gain a clear perspective. Using a structured approach to identify potential solutions and multiple relevant desired outcomes can help ensure the best potential decision is being considered. Furthermore, using a structured and collaborative approach to understand how well each alternative satisfies the desired outcome can help select the best strategy to follow.
Below, we are going to explore, in concrete terms, how we can reduce uncertainty in decision-making when the stakes are high.
Step 1: Thoroughly explore the space of solutions and alternatives
While this first step may seem obvious, many people fail to consider the full spectrum of options available to them and settle with only the most obvious alternatives. Taking the time to explore and clearly articulate all the available options is crucial for thorough understanding of the problem and proceeding to explore the desired outcomes. Some of the tools you could use to help exploring alternatives space:
Consider non-starter options
Considering non-starters can be useful, when uncertainty is high. As you explore and break down the problem further, you may find some parts of these non-starters to be quite useful and may decide to incorporate them into your eventual final choice. Furthermore, if you involve other decision-makers, they may have an entirely different but valuable perspective, so introducing these non-starters can end up being useful.
Consider hybrid options
People often think about solutions as either one or another but fail to consider permutations that incorporate parts of 2 or more options.
For example, many companies face “build or buy” decisions when it comes to software. The build option is generally more expensive but allows the company to get an application to suit its exact needs. Buying an application, on the other hand, is, generally, cheaper but forces the organization to change some of its processes to conform to the way the software workflows are set up. Neither of these options might seem appealing and thus the decision might seem uncertain. In this scenario, the company might consider approaching one of the software vendors with a proposition to build-out the use-case on top of the existing platform. This could drive down the costs of development for the asking organization while providing an application conforming to its exact specs.
Consider doing nothing
Some decisions may appear uncertain when none of the options are appealing. People, however, tend to get stuck in the mindset that they have to do “something”. Considering pros and cons of not doing anything, in this case, can be quite informative.
When considering potential ways to comply with rules and regulations, many companies fail to consider costs of non-compliance – or at least not complying with the regulations immediately. Analyzing the costs of compliance in year one versus year two may yield a more clear path forward.
Step 2: Clearly define multiple desired outcomes
Rarely does a decision have just a single success criteria, but that is how a lot of people think about decisions. So before starting to evaluate the alternatives on that single outcome, take some time to think through “What matters in this decision?”. Within Rationalize we are calling this decision criteria and it is a crucial part of the evaluation setup process. Try some of these things to identify multiple outcomes:
Go one level deeper
For every desired outcome you identify, ask “what does it really mean?” and try to go a level deeper. For example, if you are buying a house one of the outcomes might be “Living in a good neighborhood”. This outcome might seem ambiguous and thus introduce some uncertainty in your decision. Asking what that really means, could yield a number of outcomes that are more quantifiable and interesting:
- Low crime
- Good schools
- Proximity to parks
Identifying more of these desired outcomes or criteria, allows us to get to things that are much more concrete and thus will drive uncertainty down.
Identify minor outcomes and criteria
Identifying minor criteria might reduce uncertainty when two or more alternatives seem quite close to each other. When you are faced with options that are similar and seemingly of identical value, try to look for outcomes that are less valuable to you but still might be the difference between the options.
Prioritize your desired outcomes
Not everything is equally important (at least not always), so understanding the relative hierarchy of priorities is crucial. Prioritizing your desired outcomes can be done in a variety of ways, some of the most common are:
Pairwise comparison
In pairwise you tradeoff alternatives one against another. The more alternatives you have, the more pairs you have to rank, so this method is only advisable when you have 10 or fewer outcomes you are considering
Rank order
This is a pretty straight-forward method where you rank each outcome relative to others. The outcome is the same as in pairwise, but the process generally takes less time
Weighted allocation
This is the method we use within Rationalize. The idea is that a fixed amount of points gets distributed between the outcomes. In our case, we use 100% points distributed across the outcomes or criteria.
Step 3: Systematically score your alternatives
Now that you have your alternatives and outcomes identified, you can get to understanding how well each alternative satisfies the criteria or outcomes you have identified. Using a basic decision matrix approach works really well here – you already have all the ingredients to do the ranking.
You can use a spreadsheet to run through this type of evaluation, but we recommend using tools like Rationalize.io because it allows you to leverage the wisdom of the crowds to further reduce the uncertainty – which is the next step.
If you need more insight into how to do a decision matrix evaluation, check out our article on that here.
Step 4: Solicit other perspectives
Up to this point, we took a rational approach to understand the problem and break down the solution space. You might have a decent perspective already. However, your perspective is inherently limited by your own experiences and biases. Involving other individuals in this decision-making process is a great antidote against this built-in bias that your individualized perspective brings.
As a rule, people are happy to contribute their perspective – if you are asking for it, then you probably value their opinion. However, there are a number of things you can do to make it easier for these individuals to provide their perspective while also making it more valuable for yourself. Here’s what you can do:
Make it easy for people to contribute
If you are not paying people to provide their perspective, then making it super easy for them to contribute is crucial. Using tools like Rationalize.io is the best way to make it as seamless as possible for these people to contribute their opinion. In fact, enabling collaboration on complex decisions is the main reason we decided to build this platform. So take advantage of these purpose-built tools to make it easy for your responders and yourself to make the best decision.
Find points of disagreement
Understanding where people disagree can help identify where real uncertainty lies. The best way to find the points of disagreement is to calculate the standard deviation between the responses. Rationalize.io comes with this type of functionality built in, making it very easy to understand where the real uncertainty is.
Talk to the outliers
Once you have a feel for how people and groups think, you can start seeing where they agree and disagree. These points of disagreement is where you should dig deeper and explore why people disagree. Conversations with people who buck the consensus can be particularly interesting. Do these individuals know something others don’t? In organizations, it is often important to ensure that the key decision-makers are aligned, so if you have a key stakeholder not aligned with the group, it is often crucial to understand what needs to happen to bring them along.
Figure out how groups of people think
If you were able to get a sizable group of people to contribute to your decision, you might want to consider segmenting this population to understand how similar people think. This technique is particularly useful when making cross-departmental decisions in large organizations. Figuring out how the perspective of marketing is different from that of engineering can provide some very good insights.
Summing it up
Making decisions with a high level of uncertainty is often a daunting task, especially when the stakes are high. Fortunately, there are some concrete tools a decision-maker can leverage in order to reduce the uncertainty and gain confidence to stand behind the decision. The four basic steps are:
- Step 1: Thoroughly explore the solution space
- Step 2: Clearly define multiple desired outcomes
- Step 3: Systematically score your alternatives
- Step 4: Solicit other perspectives
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