When Should You Trust Your Instincts?
A new study suggests that most executives let emotions trump data when it comes decision making. This may not be a bad thing---if you've thought about when it's appropriate.
I have a gut feeling we’re never going to be done talking about gut feelings.
According to a recent survey by Fortune Knowledge Group and Gyro [PDF] , 62 percent of U.S. executives say they rely on “gut feelings and soft factors” when it comes to decision making. Moreover, 65 percent say that “an increasingly complex business environment has made it more difficult to base decisions on purely ‘functional factors,’ such as cost, quality or efficiency.” As Associations Now‘s Katie Bascuas put it last week, the “results suggest that while execs are using more data than ever because there is more of it, they’re still relying predominantly on emotions to make decisions.”
This is contentious territory in the wider business world, and within the association world as well. Some say leaders rely too much on data and do a disservice to the emotional side of decision making; others that they’re not doing nearly enough with the data they have. Either way, it may be best not to put a lot of stock into gut checks alone. As Dan Heath told the audience at last year’s ASAE Annual Meeting & Expo in Atlanta, “Our guts are good witnesses, but they are not to be the judge.”
But the problem isn’t with gut checks themselves. It’s in figuring out when a gut check is appropriate. And that’s a challenge, because a lot of people are saying they go with gut checks simply because they don’t have the resources to do otherwise: More than a third (37 percent) of respondents to the Fortune/Gyro survey said that “insufficient analytical capacity” drives their decision making when it comes to assessing business partners.
How to thread this needle? Last month, German psychologist Gerd Gigerenzer spoke with the Harvard Business Review‘s website about when gut checks are appropriate in business. Gigerenzer proposes simplifying and reducing the amount of data that leaders rely on. “Identify the world in which simple heuristics work,” he says.
Gut checks are part of doing business, but Gigerenzer argues that if you’re going to make an emotional decision, own it as one; too many leaders make a random decision and then attempt to rationalize it after the fact. As he puts it:
In the companies I’ve worked with, which are large international companies, about 50 percent of all decisions are at the end a gut decision. But the same managers would never admit this in public. There’s fear. There’s fear of being made responsible if something goes wrong. And they have developed a few strategies to deal with this fear. One is find reasons after the fact. So a top manager may have a gut feeling, will do this option, but then he asks an employee to find facts in the next two weeks, and thereafter, often the decision’s presented as a fact based, big data based decision. That’s a waste of time, intelligence, and money. Only because we have no reasonable attitude towards intuition.
It may be that leaders struggle over the value of gut feelings when it comes to big decisions because they tend to be valuable with smaller ones. A few weeks back, National Fluid Power Association CEO Eric Lanke blogged about a telling moment during a board meeting. The meeting room was enormous, and the seating arrangements kept the participants far apart. In response, the chair stood up and interacted directly with the members in ways that staying put wouldn’t. “The chair made the information compelling–if for no other reason than he seemed to lay the recommendations directly in front of each and every Board member,” Lanke wrote.
It may be that the speaker had access to information about optimal seating arrangements and speaking posture, and responded appropriately. More likely, though, he went with his gut. It does work, sometimes.
How often do you rely on emotions to make big decisions for your organization? Is that because you have too much data, the lack of capacity to analyze it, or something else? Share your experiences in the comments.