How Leaders Make eXtraordinary Decisions

If you had all the time and money in the world to make your decisions, do you think you could make accurate decisions? Of course. But that’s the problem with, isn’t it? You don’t have all the time or money in the world to make decisions. Research says that when you decide how to address any issue, you are subconsciously weighing a trade-off between effort and accuracy. (1) This trade-off between effort and accuracy leads to what Professor Hammond and his colleagues call, “the hidden traps in decision-making.” (2) Like sand traps to a golfer, these decision traps can bog you down and keep you from achieving your goal – an excellent decision.

Here's how you can use the eXpansive Leadership Method (XLM) to avoid these traps and make extraordinary decisions in the face of perplexing problems.

The process begins by framing your challenges with four fundamental questions seen below:

The precursor to eXtraordinary decisions is eXpansive thinking.

Management guru Peter Drucker writes that making difficult decisions in the face of ambiguous circumstances is critical for leadership success. Therefore, when your challenges become more difficult, ambiguous or complex, I encourage you to use the XLM as a guide for asking deeper questions. Listed below are several questions, categorized by the leadership style, which can improve your decisions when confronting these confounding challenges.

1. VISIONARY QUESTIONS -- begin by asking, "What would be an eXtraordinary outcome?" Visionary thinking invites contemplation of a broad perspective, strategic implications, and long-term considerations. When dealing with a difficult challenge, probe deeper by answering visionary questions, such as…

How does this challenge relate to the organization’s direction?

Is this a problem worth investing resources to solve?

What might be the downstream negative and positive consequences?

When do I really need to decide?

Shouldn’t I sleep on it?

Imagine that I am looking back on this decision from the future, and it has turned out poorly, what went wrong?

What might I be thinking when I'm sitting in a rocking chair reflecting on this issue during retirement?

Am I too invested in the status quo?

How is my ego affected by this?

2. RATIONAL QUESTIONS – explore how we know what we know. We therefore ask, "What are the facts and expectations of those affected?" Rational thinking helps us monitor our environment and be in touch with the facts. In deciding how to address a complex challenge, this means being aware of the external and internal context of our decision by asking...

Do I have the correct information (quality and quantity) to decide?

What is my backup plan?

What assumptions am I making?

How will I monitor the implementation of this decision?

What transparent process should I use?

3. EMPOWERING QUESTIONS -- concerns themselves with the moral code and values we use. We begin by asking, "What's the right thing to do, especially for others?" This is an empowering question because it focuses our attention on serving those whom we lead. When we’re dealing with thorny issues, consider asking…

If everyone in this organization had to do exactly what I am contemplating doing, what type of organization would we have?

What is the right thing to do for the greatest number of people without violating individual rights?

What is the most honest and fair thing to do?

Is what I am deciding to do consistent with who I aspire to be?

4. COMMANDING QUESTIONS -- remind us that human beings have free will and therefore are responsible for their actions. It leads us to the question, “What are the consequences of our options?" This commanding question compels us to refuse victim thinking and accept responsibility for our choices. Eventually you must choose what to do or not to do. (That is the question!) Here are a few more questions that will help you think expansively as you access your free will responsibly:

Have I solicited the opinions of those with whom I often disagree?

How risky are my alternatives?

Can I test the alternatives on a small scale before I decide?

What are my best options based on the answers to all of these questions?

Peter Drucker reminds us that while leadership used to be about having answers, it is now about asking questions. The best approach to meeting daunting challenges and solving perplexing problems is therefore, to use a consistent methodology that helps you ask expansive questions. This is exactly what the XLM does. It doesn’t tell you what to do, it frames the conversation with questions.

How do you make decisions?

Keep eXpanding,
Dave

http://www.DaveJensenOnLeadership.com

P.S. The web-based eXpansive Leadership Method (XLM) assessment measures 4 fundamental leadership styles, 16 core competencies, and 8 essential leadership skills. Within minutes of completing your assessment (which takes less than 20 minutes to fill out), you can download your highly personalized profile - a comprehensive, 21 + page report and customized action plan in PDF format. Go to http://xlmassessment.com/ to learn more.

1. John W. Payne, James R. Bettman, and, Eric J. Johnson, The Adaptive Decision Maker, Cambridge University Press, New York, New York, 1993, page 2.

2. John S. Hammond, Ralph L. Keeney, and Howard Raiffa; The Hidden Traps in Decision-Making, Harvard Business Review, January 2006, pages 118 -- 126.

How Leaders Make Great Decisions

Several years ago, my company developed a product called Strategy - an interactive CD-ROM that automated medical marketing. I spent two years and a truckload of money creating and marketing this innovative product. It failed miserably. OUCH! (I'm still convinced it would have been a bestseller... if more people bought it! :-)

In previous blogs (http://davejensenonleadership.blogspot.com/2009/03/understanding-leaders-seven-decision.html), I discussed the common decision-making traps leaders fall into. These traps played a major role in my CD-ROM fiasco. As a way of helping you avoid these hazards, a quick recap…

My early profit projections were based on optimistic market penetration, thus subjecting me to the perils of the anchoring trap (#1). The status quo trap reared its ugly head when I refused to kill the project when I realized the project was in deep trouble (#2). Sunk costs almost buried me because my ego encouraged me to throw good money after bad (#3). I fell into the framing trap by comparing my losses to the many Silicon Valley entrepreneurs who were struggling (#4). I also made a number of false assumptions, including the belief that users would spend time entering data and that physicians cared about marketing (#5). Finally, I missed many signals, including hints from colleagues who were not enthusiastic about my product (#6).

Poor decisions flow from poor decision-making processes.

Just like a sand trap in golf, these decision traps are hazards to be avoided. This blog will show you how to use the eXpansive Leadership Method (XLM) to steer clear of these traps and improve your decision making. The XLM is seen below, with the four key questions that can help you make a better decision when confronting relatively simple challenges.

The XLM doesn’t tell you what to do; it shows you how to decide.

When you choose to ask these four key questions, you are actually drawing on the wisdom of the ages. That's because these four questions are offshoots from four branches in the tree of philosophy:

1. Metaphysics -- This branch of philosophy deals with universal truths and ultimate questions -- how it all relates to the big picture. In decision making, the second question we ask ourselves is "What would be an eXtraordinary outcome?" This is a visionary thinking question because it invites contemplation of a broad perspective, strategic implications, and long-term considerations. For example, when you are deciding how to handle an employee who made a mistake, do you take the time put their mistake in the context of their overall, long-term performance?

2. Epistemology -- This is the branch of philosophy that investigates the study of knowledge -- how we know what we know. In decision making, the first question we must ask ourselves is "What are the facts and expectations of those affected?" This is a rational thinking question because it's related to monitoring our environment closely and being in touch with the facts. For example, when confronted by poor performing employees, do you gather all the facts related to their performance prior to a counseling session?

3. Ethics -- This branch of philosophy concerns itself with the moral code and values we use when interacting with others -- how decisions affect others. In decision making, the third question we ask ourselves is "What's the right thing to do, especially for others?" This is an empowering question because it focuses our attention on serving those whom we lead. For example, is your heart's desire to help employees when they make a mistake or do you just want them to follow specific performance standards?

4. Existentialism – The last major branch of our philosophical tree reminds us that human beings have free will and therefore are responsible for their actions. It leads us to the final decision-making question, “What the consequences of our options?" This commanding question compels us to refuse victim thinking and accept responsibility for our choices. For example, where is the first place you look when an employee underperforms for the second time? If you answered, "the mirror," then you're a closet existentialist!

Ask these four key questions to avoid falling into the decision-making traps. One CEO recently e-mailed me the following:

Dear Dave,

Thank you for coaching me to use the XLM as a decision-making tool. This simple and powerful approach clarified our current situation and provided direction in making a decision that resulted in $147,000 to our bottom line. I now use the XLM as I make decisions throughout the day.

The essence of great decision making is effective decision framing. As you go about making your daily decisions, I encourage you to keep the XLM in front of you and ask these four key questions to frame your decisions. Use it at your meetings by asking your team to brainstorm answers to the questions. How surprised will you be when you find yourself making better and more consistent decisions because you are not failing into traps?

Be eXtraordinary,
Dave

http://www.davejensenonleadership.com/

P.S. The web-based eXpansive Leadership Method (XLM) assessment measures 4 fundamental leadership styles, 16 core competencies, and 8 essential leadership skills. Within minutes of completing your assessment (which takes less than 20 minutes to fill out), you can download your highly personalized profile - a comprehensive, 21 + page report and customized action plan in PDF format. Go to: http://xlmassessment.com/ to learn more.

How Leaders Manage the Paradox in Work

In a previous blog, I pointed out that a common approach to addressing any issue or problem that arises at work is to ask, what's the problem? Depending on the complexity of the problem, most of us then go through some problem-solving process to arrive at a solution. We then implement the solution in an attempt to solve the problem. This step-by-step problem-solving process works very well when we have a traditional problem to solve, such as whom to hire, which city to build the new plant in, or which vendor to select for the new IT project. Yet, traditional problem solving does not work when dealing with a paradox. That’s because a paradox has four unique characteristics. A paradox:

1. Consists of two interdependent issues
2. Has issues that recur over time
3. Requires choices be made that consider both issues
4. Is mismanaged when over-focus on one issue creates negative consequences

Listed below are the top ten paradoxes leaders mismanage, usually by addressing only one issue at a time, instead of managing them together:

1. Set uniform/standard procedures and meet customized/individual needs.

2. Cut expenses and maintain productivity.

3. Follow mandates from the central office and address local concerns.

4. Focus on long-term goals and execute short-term objectives.

5. Push for change and provide stability.

6. Maintain customer satisfaction and increase sales.

7. Motivate employees and increase accountability.

8. Stimulate creative innovation and improve existing products.

9. Foster individual initiative and improve teamwork.

10. Excel at work and maintain a fulfilling home life

Do you struggle with any of these? Of course you do. So the real question is not whether you deal with them, it’s how well do you manage them interdependently?

To Strike or Not to Strike

The nurses at the hospital wanted a pay raise, while the administrators wanted to cut costs. Because both parties justified their entrenched positions, neither identified the paradoxical nature of their dilemma. They fought fire with fire, the nurses went on strike, and everybody got burned.

In their two-year study of these New Zealand hospital leaders, Professors Kan and Parry found that legitimizing a paradox was the subconscious process people used to rationalize their biased view of the issues. (1) This tunnel vision led to “divergent realities” – the inability of either party to see any benefits of the opposing position, nor the side effects of over-focusing on their own position at the expense of the other side. This created a negative filter in their mind through which they perceived the changes in the hospital, and eventually a costly strike.

In another hospital 9,000 miles away...

Dan, was having problems getting the nurses union (who wanted to focus on improving overall patient care) and hospital administrators (who were intent on lowering expenses to stay competitive) at one of his hospitals to work out their differences. He invited representatives from both parties to a “negotiation meeting.” He then guided the nurses and administrators to map the quality and expense paradox (using the steps described in this chapter). He told me that mapping the paradox averted a strike, saved his healthcare chain millions of dollars, and may have saved patient lives in the process.

The simple mapping process Dan employed enabled both parties to see the benefits of the opposing position and the possible side effects of over-focusing on their own position at the expense of the other side. This expansive view of the issues created a positive filter through which everyone saw the possibility to achieve the common goal of improving patient care and quality at the same time. Let's see how you can do what he did.

Map the Paradox

Once you have identified your key paradox, you are ready to map the paradox. The simple steps of this process are outlined below:

A. Identify key stakeholders

B. Outline a paradox map

C. Conduct a paradox process meeting

1. Brainstorm the benefits of both issues
2. Brainstorm the negative consequences of over-focusing on either issue
3. Gain buy-in from opposite sides

A. Identify key stakeholders

The process begins when you consider who needs involved. Identify stakeholders who are directly affected by, capable of influencing, or most concerned about the issues involved. The ideal number of attendees is between six and 12. For example, a senior bank executive was in the process of rolling out a new commercial banking strategy (Commercial banking provides services to businesses, such as a accepting deposits and providing loans). She felt that the new strategy might cause her team to lose focus of their existing retail banking goals. (Retail banking consists of those banking services offered to individual customers, such as savings accounts, personal loans, check cashing…). She therefore invited a few bank managers, senior loan officers, lead tellers, customer service representatives to her a meeting.

B. Outline a paradox map

Prior to your meeting, draw a paradox map on a flip chart as seen below. The paradox map is the primary tool that you’ll be using throughout the entire process. It was originally developed by Dr. Johnson.

Paradox Map

C. Conduct a paradox process meeting

After thanking everyone for attending, inform him or her that you have two issues with which you would like their assistance. Show them the paradox map outlined on your flip chart and write the names of the two issues in the left and the right boxes, respectively. For example, the left box could be retail banking, and the right box, commercial banking. Explain to the group that you would like to step through a process to help everyone understand the relationship between these two issues. Do not discuss paradox at this time. It is more effective to step through the process before talking about it.

1. Brainstorm the benefits of both issues

Ask the team to brainstorm all the possible benefits of focusing on the left issue. Explain that whatever they say, you will write it down. Now is NOT the time to process or discuss what they say. Write everything they say in the upper left quadrant using a green magic marker. It is critical to keep the discussion to an absolute minimum. This step is about idea generation not idea evaluation. (A manager ignored this advice and kept trying to process opinions as they created their paradox map. His team completely shut down. When people don’t buy into the process, they won’t buy into the outcome of that process.) So keep them talking by asking open-ended questions, such as What might be all the possible benefits of paying attention to this issue? Continue brainstorming the answers to these questions for five minutes.

At the end of five minutes, do the exact same thing for the right issue. Write their answers in the upper right quadrant using a green magic marker.

2. Brainstorm the negative consequences of over-focusing on either issues

Ask the group to brainstorm possible side effects and negative consequences of paying too much attention to the left issue at the expense of the right issue. Keep the ideas flowing by encouraging them to brainstorm the answers to questions such as What might happen if we paid so much attention to the left issue that the right issue was completely ignored? Write down everything they say in the lower left quadrant of the flip chart using a red magic marker. This brainstorming step also takes five minutes.

At the end of these five minutes, brainstorm all the possible negative consequences of over-focusing on the right issue at the expense of the left issue. Write down everything they say in the lower right quadrant.

3. Gain Buy-in From Opposite Sides

After spending five minutes filling in each of the four quadrants, facilitate a discussion about what they see. Ask them questions such as: What is this map telling you? Is focusing on the right issue or left issue the best way to continue? Do you find yourself feeling more of an advocate for one issue or the other? Do we as a group seem to value the left or the right issue more? How should we proceed?

During the debrief, those who favor one issue begin to see the upside and downside of both sides. This breaks the subconscious process of rationalizing their bias toward their favored issue. For example, imagine that you are a strong advocate for your bank's retail banking strategy, isn't it possible that you'll be more open to the commercial banking strategy when you see all the potential benefits of commercial banking, as well as the possible negative consequences of over-focusing on the retail banking strategy? Of course. That's why this process works. Individuals with an open-mind begin to understand the big picture and appreciate the pluses and minuses of both issues. (A closed mind is a wonderful thing to lose.)

In future blogs will discuss the paradox plot and how to manage the paradoxical tension over time.

Be eXtraordinary,
Dave

P.S. The web-based eXpansive Leadership Method (XLM) Assessment measures paradox in leadership using the “Agility Score.” Within minutes of completing your assessment (which takes less than 20 minutes to fill out), you can download your highly personalized Profile - a comprehensive, 21 + page report and customized action plan in PDF format. Go to: http://xlmassessment.com/ to read about the assessment.

1. Melanie M. Kan and Ken W. Parry; Identifying paradox: A grounded theory of leadership in overcoming resistance to change, The Leadership Quarterly, 15, 2004, 467–491.

http://www.DaveJensenOnLeadership.com

How Leaders Avoid the Eight Errors of Poor Decision-Making in Tough Times

The eight errors of poor decision-making (and problem solving) are all related to the mental blinders leaders wear, especially under pressure.

1. Not knowing what to expect

Researchers from Harvard Medical School replicated in a lab the process of screening for weapons at airports. Study participants screened bags for dangerous objects after being told how often these how objects would appear. When they were told that the objects would appear 50% of the time, participants had a 7% error rate. But when they were told that the objects would appear only 1% of the time, the error rate skyrocketed to 30%. (1) We tend to see what we expect. Tell me what a leader believes and I'll tell you what he sees.

2. Refusing to question what you know

Professors at Columbia and New York University tested leaders’ perceptions about their industry. (2) They surveyed 70 managers about sales growth, sales fluctuations, industry trends and so forth. The researchers then compared the leaders’ answers with published market reports and statistics. More than half of the executives made grossly inaccurate statements about sales in their very own business units. About one third of them underestimated sales, while 25% overestimated sales. They thought they monitored their environment closely, they didn’t. To paraphrase Will Rogers, what you don't know may hurt you, but it's what you do know that it isn't so that'll kill you!

3. Not knowing what you are looking for.

When Secret Service agents scan a crowd, they can easily detect an individual reaching into the pocket or moving forward in the crowd because they know what they are looking for. How about you?

4. Failing to solicit outside perspectives.

It's always best to assume you're missing something and to ask questions about it. If you have too many yes-people around you, pay for outside perspectives (and “deselect” a few of the yes-people).

5. Rejecting disconfirming evidence.

When you listen to arguments or read a report without contradicting data, watch out. That should raise a red flag. Invite others to play the devil's advocate and argue contrary positions.

6. Lack of information diversity.

Make considering numerous points of view the norm for your team. One executive I coach makes it a habit to go to the front lines and ask those who are doing the work for their input. Another has made one person responsible for assembling information from multiple sources.

7. Applauding only those with answers.

Many of the meetings I attended as an executive involved people in the meeting trying to look good in front of each other. I can't believe I was caught up in that silly game, but I was. The problem with trying to look good is that people think that admitting you don't know makes you look bad. As a leader, if you start saying “I don't know, let’s find out,” and applauding those who do, others will follow. Cultivate and celebrate truth tellers.

8. Conducting “home on the range” meetings.

I once consulted with an organization that conducted meetings where “seldom was heard a discouraging word.” They were afraid to engage in any conflict. Cognitive conflict actually improves decision-making and results. It's emotional conflict that causes difficulty. Teach your team the difference.

Former CEO of Citicorp, Walter Wriston says that he has driven through his share of rainstorms, listening to some radio announcer in a windowless room telling him that it's a sunny day. He says that the biggest mistake a leader can make is not recognizing the changing economic climate. His advice, never stop looking out the window.

My advice, use this article to help you avoid the deadly sins and let me know if you need help.

Keep eXpanding,

Dave

http://www.DaveJensenOnLeadership.com

1. Cited in Max Bazerman and Dolly Chugh: Decisions Without Blinders, ‘Harvard Business Review,’ January 2006, 88 - 97.

2. John Mezias and William Starbuck: What Do Managers Know, Anyway? ‘Harvard Business Review,’ May 2003, 16 - 17.

Understanding the Leader’s Seven Decision-Making Traps

Yesterday’s blog identified the seven most common decision-making traps leaders fall into. As promised, this blog discusses each one in more detail.

I. Anchoring - Let me ask you two quick questions:

1. Do you think that the population of Malaysia is greater than 100 million?
2. What is your best estimate of the population of California?

If you're like most people, the answer to the second question was influenced by the "information" in the first question. This is an example of the anchoring trap -- our tendency to give a disproportionate weight to the first information we receive. When do you fall into this trap? How about when creating forecasts? Do you rely too heavily on past data? The trap is also seen frequently in negotiations (opening positions), during the hiring process (first impressions last), and during performance evaluations (let me review last year's evaluation first). Leaders who answer today’s challenges with yesterday’s solutions also fall into this trap. (By the way, the population of Malaysia is 25,274,132 and California is 36,756,666 :-)

II. Status Quo - Please complete this sentence, “a body in motion tends to..." if you answered, "stay in motion" you get a gold star. This physics law is also at work when we make decisions. We have a tendency to stick to the status quo -- to leave well enough alone and go with the flow. When making decisions, this means that leaders feel safer not to trying something new. That's because they have been conditioned by their organization’s culture not to rock the boat. It’s less risky to do what is conventional in most organizations. As Professor Hammond states, "Sins of commission (doing something) tend to be punished much more severely than sins of omission (doing nothing).” (1)

III. Sunk Costs - Have you ever continued to fund a project that should have been canceled long ago? Did you ever spend too much time trying to improve the performance of an employee that you should have fired earlier? Have you heard about bankers who continued to lend money to a failing business? These scenarios are all examples of the sunk costs trap -- "the tendency to continue an endeavor once an investment in money, effort, or time has been made." (2) The reason leaders continue to “throw good money after bad” is that they are reluctant to admit errors to themselves or to others.

IV. Framing Trap - The framing trap can be illustrated by asking you a few questions:

Would you accept a 50-50 chance of either losing $300 or winning $500?

What if, instead, I asked you this question:

Would you prefer to keep your checking account balance of $2,000 or to accept a 50-50 chance of having either $1,700 or $2,500 in your account?

If you actually had $2,000 in your checking account, these two questions pose the same problem and risk. From a rational perspective, your decision should be the same. However, numerous studies have shown that many people would decided to refuse the 50-50 chance in the first question, but accept it in the second. This is because of their different reference points (i.e., frame). The first question emphasizes absolute gains and losses, which triggers the thought of losing money. The second question, with its reference point of $2,000, frames the decision in a different perspective by emphasizing the relatively minor financial impact of losing money when you already have $2,000.

You also see the same principle apply in this stem cell debates. The pro-life politicians frame stem cell research as "murder" because it destroys human embryos. Stem cell advocates fight back by framing the research as our best hope of attacking debilitating diseases, affecting millions of Americans. Advocates know that it is difficult to call an influential spokesperson like actor Michael J. Fox a “murderer.”

V. False Assumptions - Professors Robert Cross and Susan Brodt tell the story of a Fortune 100 company that made a major investment to manufacture and distribute a core product in Asia. (3) They reported that the project’s champion knew very little about Asia, but was convinced he could succeed there just as he had in the United States. He held fast to his assumptions despite financial, operational, and strategic information that contradicted his views. After the fiasco, the project manager and senior executives realized that they had made a bad decision because of false assumptions. How often do you ever do that?

VI. Missed Signals - In the Mid-1990s, one of England's oldest merchant banks was bankrupted by $1 billion of unauthorized trading losses. A federal report on the collapse of this bank concluded that “a number of warning signs were present, but that individuals in a number of different departments failed to face up to, or follow up on, identified problems.” (4) Based on the current economic situation, many financial institutions have not paid attention to these signals. How often do you miss the signals?

VII. Competition Trap - The emotional urge to win during a competitive challenge often leads to costly decision errors. Boston Scientific fell into this trap during its acquisition of the medical device maker Guidant. As you may recall, Johnson & Johnson (J&J) announced plans to acquire Guidant late 2004. Soon thereafter, J&J threatened to pull out and lowered their purchase price offer because of Guidant’s pacemaker recall. That's when Boston Scientific -- J&J's rival -- offered to buy Guidant. The bidding war was on. Eventually, Boston Scientifics’ final and “winning” offer of $27.2 billion was $1.8 billion more than J&J's initial bid. Most financial analysts believe that this was a disastrous acquisition by Boston Scientific. According to an article in the Harvard Business Review, the emotion of winning overrode sound decision-making. (5) Does this sound familiar to you?

Just like a sand trap in golf, these decision traps are hazards to be avoided. Which ones cause the biggest problem for you?

Keep on eXpanding,

Dave

1. John S. Hammond, Ralph L. Keeney, and Howard Raiffa; The Hidden Traps in Decision-Making, Harvard Business Review, January 2006, pages 118 -- 126.
2. Itmar Simonson and Peter Nye, The Effect of Accountability on Susceptibility to Decision Errors, Organizational Behavior and Human Decision Processes, 51, 416 -- 446, 1992.
3. How Assumptions of Consensus Undermine Decision-Making, MIT Sloan Management Review, Winter 2001, pages 86 -- 94.
4. Information Failures and Organizational Disasters, MIT Sloan Management Review, Spring 2005, pages 8 -- 10.
5. D. Malhotra, G. Ku, and J. Murnighan, Harvard Business Review, May 2008, 78 -- 86.

Leaders Fall Into Seven Decision-Making Traps

If you had all the time and money in the world to put forth a maximum effort whenever you had a decision to make, do you think you could make accurate decisions? Many leaders say yes. But that’s the problem with decisions, isn’t it? You don’t have all the time or money in the world. Research says that when you decide how to address any issue, you are subconsciously weighing a trade-off between effort and accuracy. (1) This trade-off between effort and accuracy leads to what Professor Hammond and his colleagues call, “the hidden traps in decision-making.” (2) Like sand traps to a golfer, these decision traps can bog you down and keep you from achieving your goal – an excellent decision.

This blog identifies the most common traps leaders fall into. Subsequent entries will discuss them in more detail, and how you can use the eXpansive Leadership Model (XLM) to avoid these traps and improve your day-to-day decision-making.

1. Anchoring Trap – The inclination to give a disproportionate weight to the first information we receive.

2. Status Quo - The tendency to stick to the status quo, to leave well enough alone and go with the flow.

3. Sunk Costs - The predisposition to continue an endeavor once an investment in money, effort, or time has been made.

4. Framing Trap – The propensity to be influenced by different reference points (i.e., frames)

5. False Assumptions – The proclivity to assume something is true without evidence to support it.

6. Missed Signals – The penchant to ignore warning signs.

7. Competition Trap – The urge to win during a competitive challenge that blinds leaders to reality.

The product was called Strategy - an interactive CD-ROM that automated medical marketing. I spent two years and a truckload of money creating and marketing this innovative product. It failed miserably because I fell victim to these traps. (I'm still convinced it would have been a bestseller... if more people bought it! :-) My early profit projections were based on optimistic market penetration, thus subjecting me to the perils of the anchoring trap. The status quo trap reared its ugly head when I refused to kill the project when I realized the project was in deep trouble. Sunk costs almost buried me because my ego encouraged me to throw good money after bad. I fell into the framing trap by comparing my losses to the many Silicon Valley entrepreneurs who were struggling. I also made a number of false assumptions, including the belief that users would spend time entering data and that physicians cared about marketing. Finally, I missed many signals, including hints from colleagues in the medicine who were not enthusiastic about my product.

Just like a sand trap in golf, these decision traps are hazards to be avoided. Future blogs will show you how to use the XLM to shoot past them.

Keep on eXpanding,

Dave

1. John W. Payne, James R. Bettman, and, Eric J. Johnson, The Adaptive Decision Maker, Cambridge University Press, New York, New York, 1993, page 2.

2. John S. Hammond, Ralph L. Keeney, and Howard Raiffa; The Hidden Traps in Decision-Making, Harvard Business Review, January 2006, pages 118 -- 126.