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Ebook excerpt: How leaders determine: addressing prejudices and dangers in decision-making

Excerpt from Chapter 1 of How Leaders Determine: Addressing Prejudice and Threat in Choice Making by Harjeet Khanduja. Printed with permission from SAGE Publications

Harjeet Khanduja

Harjeet Khanduja

The administration literature says “Examine options and choose the perfect various”.

This sounds deceptively easy. Anybody can select between two options and nonetheless have a 50% likelihood of success. At that time, it is pretty much as good as a coin toss. There are two issues with this strategy.

Initially, choice making will not be arithmetic. One query I nonetheless keep in mind being requested as a baby was that if 4 folks can construct a wall in 10 days, how many individuals should construct it in 5 days? The reply, intuitively, was 8 folks. This can be good math, however at no level did I think about the method of constructing a wall. In actuality, it may have taken 9 days to get permission from the federal government and the wall may have been in-built at some point.

Second, actual life affords no options on a plate. Suppose you’re the CEO of a multi-billion greenback group. Gross sales stagnate. You’ve got two choices. Provide a 20-30% low cost to prospects or make investments the identical cash in an promoting marketing campaign. Which one will you select?

Suppose you go together with the primary choice. Provide a 30% low cost and solely present prospects will purchase your product. You get by lowering your earnings by 30%. Perhaps go together with the second choice. You spend cash on promoting, and gross sales do not develop. That is all the cash burned proper there. Now, which one will you select? What threat do you are taking?

There could possibly be a 3rd choice. Distributor margins are small. Perhaps, in the event you enhance the distributor’s margin, this might enhance gross sales. There may be many choices that aren’t even dropped at the desk and have the potential to extend gross sales. Choice making is commonly not about selecting an choice. It is about feeling another that is not on the desk that may clear up the issue, nonetheless, the seemingly weird resolution can generally be.

Let’s increase the stakes for this concern. Think about that it’s 2012 and also you make this choice for Nokia. Not one of the above choices will work, because the market has moved to superior merchandise, and your product division has not reached this new smartphone development. The choice to put money into upgrading the working system and performance of Nokia telephones ought to have been made 5 years in the past, when the iPhone was introduced.

Nokia is a basic case. Nokia had a 50% market share of all telephones even after Apple launched in 2007. In simply six years, Nokia’s market share fell by 90% and the division was acquired by Microsoft in 2013. Fallacious choice and a fantastic firm like Nokia has disappeared from the cell phone market.

Organizational choice making will not be straightforward. What makes the group’s choices tough?

Feeling makes it tough for the group to make choices

John and his spouse Alice Marriott began a root beer stand throughout the scorching summer time in Washington in 1927. The meals naturally grew to become a part of the basis beer menu. Finally they opened their very own restaurant after which a collection of Sizzling Shoppe eating places. They have been a thriving enterprise within the Nineteen Fifties.

In 1957, Marriot noticed the administration of US President Eisenhower constructing public highways. They felt the chance for all these individuals who have been constructing highways to want a spot to take a seat. That is when the Marriott group opened its first motel. Right now, the Marriott is the biggest lodge chain on this planet when it comes to the variety of rooms out there. It has 30 manufacturers in 131 international locations and territories. If somebody may current this various to different enterprise homes, they will surely have made the identical choice.

Choice making is about perceiving alternatives.

So the million-dollar query is how will we understand alternatives? The reply is easy. Each time political, financial, social or technological (PEST) components change across the enterprise, it’s a good time to judge the enterprise technique and understand new alternatives. This may be accomplished by analyzing the competitors. Pepsi felt the chance for bottled water as a mass market product and began a bottled water enterprise in 1994 in India. Coca Cola did not really feel that. Nonetheless, they noticed the success of Pepsi and moved into the bottled water enterprise in 1999.

However seizing alternatives will not be sufficient.

Sensing dangers and threats is simply as vital in making choices. Inside a couple of months of the pandemic, Airbnb bookings fell by 70% and its ranking fell by half. Airbnb felt this risk. As a substitute of ready for the pandemic to go, he determined to scale back his dependence on the journey lodging enterprise and refocused on his core long-term rental enterprise. This introduced them again into enterprise. Airbnb is now anticipated to be the world’s hottest hospitality firm.

Choice making additionally refers to threat notion.

Ultimately

Choice making within the group is totally different from simply taking a look at a set of choices and choosing the right one at hand. It is about feeling the options that are not even offered generally. (L) earn extra by reviewing the ebook for data, ideas, and methods for enhancing decision-making abilities.

Take a look at the ebook on Amazon right here

printed on

July 18, 2022

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