I graduated from the Company Directors course in 2007 when I was the General Manager of Pitcher Partners Sydney. It helped me quite a bit in my role which had significant interaction with the 18 directors of the firm. In keeping with my life long learning ethos, I recently did the two day refresher/update of the Company Directors Course. No need for an exam this time but the learnings remain significant. Here are some decision making ideas for accountants that I have taken from my two days in the company of some very experienced directors.
Decision making errors and biases
One significant difference I noted between the materials in 2019 compared with 2007 is the greater emphasis on how boards make decisions. I think this has flowed from the greater accountability the community at large is placing on directors to make “good” decisions.
One thing that can get in the way of good decision making is a range of biases that each of us as individuals may bring to the decision-making table. The course discussion touched on 16 decision making errors and biases as follows:
- Confirmation bias: selective search for evidence that supports our existing view and avoiding any that contradicts it
- Accessibility bias: selecting information for accessibility not quality
- Unwillingness to share views of another person
- Optimism, over confidence or over prudence
- Self serving thinking
- Distorting memory to justify past choices
- Faulty generalisations or over simplification
- Repetition bias: willingness to believe what is heard most often
- Sunk cost bias: increasing commitment because of past expenditure of time, money or effort
- Conforming to decision making expectations that others have of someone in your position
- Selective perception bias: screening out certain information
- Illusion of control or underestimating uncertainty
- Group think or peer pressure
- Anchoring bias: undue focus on initial information
- Perceptual bias: distorting problem identification
- Status quo bias: inertia or unwillingness to change habitual thought patterns
When you are making important decisions in your firm I think it would be useful to run through this list and consider whether any of these errors or biases are apparent. I’ve certainly seen some of them in practice.
If you want to read more, these come from The Hidden Traps in Decision Making by JS Hammond, RL Keeny and H Raiffa in the January 2006 Harvard Business Review.
Have a process for making decision
A great tip is to break decision into steps with processes agreed for each stage. I am a huge fan of having agreed best ways to complete tasks within accounting and advisory firms and it makes sense to me that this be applied to major decisions. That is, we have a best practice approach to making those decisions. Six stages to consider might be:
- Lay out the problem
- Define objective / criteria
- Generate options
- Evaluate options against objectives / criteria
- Select an option
- Monitor and change course if necessary
One additional thought in decision making which comes from my time as a generalist business coach is to consider your important decision from three different angles:
- A thinking angle – have we analysed the data/ evidence and made a decision based on that?
- A feeling angle – have we considered how it feels for us and also from the perspective of other stakeholders?
- A knowing angle – what is our intuition telling us?
Finally, please also consider the time you allow yourself for making decisions. In my experience it is not uncommon in firms to see little time allocated for debate and proper consideration of important decisions. That is one reason why for most firms I find two days for an effective planning workshop is the norm rather than one.
Happy decision making!