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Friday, August 10, 2012

Risk and uncertainty stymies decision making

No cats where harmed in preparing this blog!

One of the most critical tasks for the leader is decision making.  The ability to choose rightly or wrongly is essential and greatly affects the performance of any company.  Any decision-making process relies on a basis the leader selects as a mode of operation and the use of the process tends to be rather consistent.  Some decisions stem from a pure gut feel.  There is a tendency for much of these decisions to have a good outcome even though the in depth analysis is missing.  The reason is that prior experiences weigh heavily into the gut feel.  Waiting a while and performing an analysis may yield a superior result but the time lost can result in loss of deals or other benefits. 

The decision making process is critical and great leaders realize making decisions as an essential part of their job.  The decision must consider all risks and any uncertainty that has a potential to affect the outcome.  As an example, the following description of the Schrödinger's Cat thought experiment is provided  and I am certain you are wondering what a quantum mechanics thought experiment has to do with decision making. 

“Schrödinger's Cat: A cat, a flask of poison and a radioactive source are placed in a sealed box. If an internal monitor detects radioactivity, the flask is shattered, releasing the poison that kills the cat. The Copenhagen interpretation of quantum mechanics implies that after a while, the cat is simultaneously alive and dead. Yet, when we look in the box, we see the cat either alive or dead, not both alive and dead.”

There is uncertainty as to whether a cat is alive or dead in the experiment.  However, there is a risk that opening the box will expose the observer to radiation that will be harmful.  Any decision would weigh the curiosity and need to evaluate the cat’s wellbeing with the risk of radiation poising.   This decision would be very easy for people today because of the knowledge of radiation.  If you knew nothing about the toxicity of radiation, perhaps your desire to help the cat would over compensate and you would open the box only to find out years later you were dosed with high levels of radiation. The risk of exposure was not a problem due to lack of knowledge.  The desire to help the cat took over.  You could not have done a complete analysis of the problem because the research on radiation was too new at the time. 

Similar risks and uncertainties occur in all decision making.  Your knowledge can be used to the best possible but the unknown always has the ability to affect the future outcome.  Many times, it is better to perform the best analysis possible and just decided on a direction.  Learning how to monitor and PIVOT makes a huge difference in altering the course of the future.  Fear of making the decision can have a greater negative when it causes stagnation. 

So when faced with your version of a Schrödinger's Cat decision, weigh the risks and uncertainties.  After careful thought, decide what you must do.  Monitor the results and adjust as needed.  You will come out just fine!