Updated: 1 October 2024
In 2004, English gambler Ashley Revell sold everything he owned and bet $135,300 on a single spin of a roulette wheel in Las Vegas. Despite the odds being slightly against him, the ball landed on red, and Revell doubled his money. An excellent outcome, but was it the result of good decision making?
In contrast, Coca-Cola faced a challenge in the mid-1980s. Pepsi was gaining ground, so Coca-Cola developed New Coke after detailed flavour engineering and market analysis. It was a better cola in blind taste tests. But when launched in 1985, the backlash from loyal customers was severe. A bad outcome for the company, despite their thorough decision-making process.
These examples highlight the (often inconvenient) truth: outcomes don’t always reflect the quality of a decision. Good decisions can go wrong. You can get lucky with a bad decision. It happens all the time.
“You can’t tell by the outcome whether you made a good decision. It’s just a logical mistake to say, ‘I got the good outcome, I must have made a good decision.’”
Ronald Howard, Stanford University
Challenges in evaluating the quality of a decision
When assessing a decision, several challenges arise:
- Imperfect information: We rarely have all the data we need.
- Timing: Poor timing can derail an otherwise sound decision.
- Delayed outcomes: There can be a significant gap between making a decision and seeing results.
- Unintended consequences: Particularly in complex systems, unforeseen outcomes can occur.
What is a ‘good’ decision?
Despite the challenges, it’s still possible to define what makes a good decision:
- Consideration of context.
- Clearly defined purpose and goals.
- Involvement of the right people.
- Exploration of alternative options.
- Use of relevant data and assessment of its credibility.
- Application of clear logic, considering potential outcomes and their likelihood.
- A conscious decision that is well communicated.
- Ensuring the effort or cost to make the decision doesn’t exceed its value.
The benefits of a good decision-making process
Following a structured decision-making process leads to better outcomes over time.
“The only proven way to raise your odds of making a good decision is to use a good decision-making process—one that gets you the best solution with minimal loss of time, energy, money, and composure.”
John Hammond, Harvard Business School
A repeatable decision-making process allows us to step back and look at our track record, helping us avoid overemphasising individual outcomes. It also enables feedback and improvements, providing insight into how our decisions can be refined over time.
“People become better decision makers when they expect their decision to be judged by how it was made, not only by how it turned out.”
Daniel Kahneman, author of Thinking, Fast and Slow
The Impact Society decision-making process
We’ve developed a six-step decision-making framework to help people consistently make better decisions. This process is designed to be simple and repeatable, backed by powerful tools.
Step 1: Understand the context
Identify the factors which are relevant to your decision.
Gather any missing information that will be needed to make a good decision.
Recommended tool: The Munger Two Step
Step 2: Get clear on the purpose
Make sure you are clear on the problem that you are trying to solve, and the outcome you’re trying to achieve.
Recommended tool: Five Whys
Step 3: Involve the right people
Getting more people involved can reduce bias and increase buy-in from people affected by the decision.
But the more people, the longer it takes to make a decision.
Recommended tool: RACI/DACI Framework
Step 4: Identify your options
Identify the alternatives that could solve the problem.
Consider a broad range of alternatives, including those outside of your comfort zone.
Recommended tool: Inversion
Step 5: Make the decision
Now it comes to actually making the decision between your options.
For each, consider the likelihood of success and balance this against the costs involved and potential side-effects.
Then decide.
Recommended tool: Impact-Effort Matrix
Step 6: Review and reflect
After making a decision, document it and schedule a review for one month’s time.
When reviewing: identify the outcome, what you have learned, and whether any course-correction is needed.
Schedule follow up reviews if necessary.
Recommended tool: Decision Journal
How can we help you?
If you’re an aspiring or established leader, we’d love to support your development.
Here are three ways:
- Subscribe to our free newsletter – we offer weekly actionable insights, expert strategies and inspiring content on leadership, management and personal development
- Connect with us on LinkedIn – we post practical advice on management and leadership every day
- Join High Society – this is our exclusive membership-based community for modern leaders from around the world who are creating impactful and meaningful change in their organisations
We’re Impact Society – join 5,000 aspiring and established leaders
from 50+ countries who are changing the world, one team at a time.
Read our story
