Making Major Business Decisions: Pay Attention to the Obvious!

Recently, a client asked me about some concerns she had about hiring an outside candidate for a critical senior position. She had interviewed the candidate and they had conceptual agreement on the position. She liked the candidate, and the candidate seemed to have the right skill set for the position. The process seemed to be moving ahead well—and then communication went dark. Just as my client was about to finalize the hire with a meeting to sign the candidate, she was unable to reach the candidate by phone, email, or text. She was anxious to get the candidate signed by the end of the month so the candidate could begin the job early the following month. As a result of being unable to communicate with the candidate, my client called and asked for my counsel.

As we discussed the candidate further, it was clear that there had been warning signs. In fact, there had been two. First, the candidate had been slow to deliver references even though she had verbally committed to doing so. Second, the candidate had postponed two previous interview appointments because of personal issues. Any single issue, in isolation, can be overlooked; but a pattern of behavior is more revealing. As I explored my client’s motivation to overlook these “red flags” and hire the candidate quickly, I found that the position for which the candidate was applying had been vacant for some time. It is a critical position in the business and had been hard to fill because of a particular required skill set. My client reluctantly acknowledged that, when a candidate with the requisite skills became available, she jumped at the chance all too quickly. My client’s eagerness to fill the position obscured her awareness of the data and warning signs.

Once I helped my client talk through the many issues involved in hiring this candidate, most of which were obvious in retrospect, she immediately saw that this would have been a poor hire. In spite of the difficulty in filling the position, she withdrew her offer. Not surprisingly, my client never heard back from the candidate. The search went on for quite some time. However, with my client better informed and balancing the need to fill the position with paying attention to obvious data, she ultimately made a good choice.

The greatest mistake I see leaders typically make is to fail to observe the obvious. In fact, they regularly overlook the most fundamental principle of psychology: “The best predictor of future behavior is past behavior.” It is human nature that, once we become emotionally committed to a direction or course of action, it is hard for our intellect to intervene and reverse that course. In fact, the more we become emotionally committed, even to a bad course, the harder it is to reverse it! We do not want to see facts that would conflict with the direction in which we are heading. In addition, we are masters at rationalizing and creating elaborate, but erroneous, rationale to justify our pursuit.

This behavior is not just relegated to business. It pertains to many areas, such as love (“He promised he will not cheat on me again.”), diet (“Just three donuts can’t hurt.”), exercise (“I promise I will begin tomorrow.”), or money (“I will feel better after some retail therapy—a diamond or a new car.”) It regularly happens in business when we are emotionally committed to a person (the faith investors had in Bernie Madoff), a business plan (JCPenney’s flawed plan to offer deep discounts and door busters), or a product (Amazon’s failed commitment to the Kindle phone). Once a business leader becomes emotionally attached to a direction and gains momentum, the facts are overlooked in making a bad decision. I have three rules of thumb in helping business leaders in the midst of making major business decisions:

1. Personal Commitment. It is essential to understand just why a particular course of action is important to the decision maker. In other words, why does the person making the decision care about what choice is being made? Exploration of the degree to which the leader is emotionally involved in the outcome can reveal the level of attachment he/she has to the course of action. Is there some secondary gain in the balance? A raise? A promotion? Saving face? Ego? Only when a leader can unequivocally say that the solution to the problem is in the best interest of the organization, whether or not he/she benefits, can one comfortably believe that logic and reason will win out over emotion.

2. Seeing the Obvious. What issues have surfaced during the course of understanding a problem and coming to a preferred solution? Are there issues that have surfaced more than once? Is there a history regarding why the proposed solution has not been used before? What are the consequences if the proposed solution fails?

3. Data. Take a cue from the various CSI TV series. When solving a crime, the detectives are always trying to follow the evidence. In other words, they do not let preconceived ideas about a case interfere with where the facts are leading them. A true test of whether a business decision is being made on the basis of emotion or ego is whether or not it stands the challenges of existing facts. Having a “devil’s advocate” to challenge your assumptions should be the sine qua non of making major business decisions. Leaders should only proceed after their assumptions have been challenged and have stood up to the scrutiny of the facts and data. The more risky the decision, the more essential it is to test it.

When facing major business decisions, ask yourself:

1. Why is it important to you?
2. Why have your decisions not been tested in the past?
3. What issues have surfaced that will occur again?
4. What are the data telling you about the potential success of your decision?
5. Have your assumptions been tested sufficiently and stood up to scrutiny in light of the facts?

When you have successfully answered these questions, you will increase the likelihood that your decisions will be the right ones.