Decision Making in the New Economy
In 1998 I purchased my first home. The previous 3 years I saved for, planned, and anticipated the time that I would spend with a real estate agent in search of my new abode. After a few weeks of searching I found myself increasingly frustrated and disappointed. Sure there were plenty of nice homes, but they were not in the right location. Or I would find the perfect location only to learn that the available homes in the area lacked a garage, or the adequate number of bathrooms, or had closets that were too small. Eventually, I found the place that was right for me, although it wasn’t what I had planned or imagined. In choosing the home that I did, I satisficed. In other words, I made a decision that was sufficient to meet my minimum requirements, yet I ultimately sacrificed on key features of the home that I thought I wanted or needed. In the course of making subsequent significant decisions I have found satisficing to be the norm. It is what is required of decision makers who are responsible for tackling weighty problems at a time when it seems everything around them is changing – and quickly. In the current economy, the opportunities for slow, methodical, rational decision making are limited, because our circumstances are marked by hyper-competition, globalization, and rapid advances in technology at a rate we have never before experienced.
Originally coined by the Nobel Prize winning social scientist and economist Herbert Simon, “satisficing” is a decision making strategy that seeks “good enough” rather than optimal solutions or decisions. Although some decisions may approach optimal, certainly in my experience I have found that I have neither the time nor resources to hold out for these ideal solutions. Such is true in leadership, and especially when called upon to lead during times of crisis.
In ideal circumstances we could follow the decision making logic of Benjamin Franklin. In an 18th Century letter addressed to British theologian Joseph Priestly, Franklin describes his decision making algorithm as follows: “my way is to divide half a sheet of paper by a line into two columns; writing over the one Pro, and over the other Con. Then, during three or four days consideration, I put down under the different heads short hints of the different motives, that at different times occur to me, for or against the measure. When I have thus got them all together in one view, I endeavor to estimate their respective weights…” Franklin goes on to describe his several days of weighing out the pros and cons and ultimately finds where the balance lies. At this point he feels he is able to make a rational decision. I suspect the basic tenets of Franklin’s decision making algorithm are common to us all. In one way or another this kind of pros and cons analysis is fundamental. Yet as I observe leaders attempting to make decisions under the type of pressure that crises evoke, Franklin’s approach becomes almost unrealistic. He clearly has a luxury that leaders in crisis don’t have—time. Crises generally require immediate action; and consequently, several days (or in some cases, hours) of initial analysis is generally not an option.
Other subtle constraints to rational decision making include the presumption that each criteria is weighted equally, that decision making occurs unilaterally, that we can anticipate and simultaneously address the impact of our decision on all stakeholders, that additional information or challenges will not arise midstream and force us to reconsider, and so on. These constraints represent the reality of decision making in times of crisis. But bystanders voyeuristically watch and criticize the decision making of crisis leaders because they may not have had the experience in this type of urgent situation. And they will then attempt to apply their everyday decision making process to a situation that requires a much different mode of thinking and action.
Because the decision making for crisis leaders is much more constrained and rushed, and therefore imperfect both in process and in outcome, they satisfice to deal with the challenges that crises present. Rather than become paralyzed by the situation they find ways to use the resources at their disposal to move forward in the best interest of their organization, their city, or their country.
As I watch President Obama make decision after decision during this time of economic crisis, I may not agree with all of the decisions he makes; but I can certainly have compassion with the position in which he finds himself. There is no easy solution to a crisis as vast and complicated and far reaching as what this country is currently facing. And there is certainly no operating manual that describes what to do. Consequently Obama, and all leaders making decisions in these trying times, must rely on their own vision of the future to guide them, consider perspectives and the implications of their decisions on a divergent set of stakeholders, and ultimately make decisions that will no doubt satisfice.