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16 Dec
2014

Nastaran Heydari

Associate Consultant
 

Decision making can be a very daunting task especially when you have to take a leap of faith based on data which are not always accurate. In what follows, I will provide an easy framework to establish where you are and a couple of golden rules improving decision making.

Information Quality & Decisions Accuracy

The relationship between information quality and decision accuracy on outcomes is quite intricate and not immediate to grasp.

The following chart tries to pictures it out.

Please note that the convention used to draw this chart is that an outcome is correct if a correct decision has been made based on correct data or an incorrect decision has been taken on incorrect data. This is important to keep in mind to understand what follows.

As you can see, this chart is divided into 4 areas by two lines (100% accurate and inaccurate decisions) meeting at a single point in the middle. This point represents a situation in which information and your decisions are wrong 50% of the time, leading to an outcome correct 50% of the time. Funny, isn't it?

What is quite remarkable, is that if you consider a situation in which your decisions are incorrect 50% of the time, you will still get a correct outcome 50% of the time regardless of the information quality if you take them randomly (orange line).

All it takes is flipping a coin ... This might explain some leaders behaviors ...

No kidding!

But let's get back to our main subject.

The chart can be divided into 4 areas corresponding to the following situations:

- "WE CONTROL"

This is where we all want to be!
Data feeds and decision capabilities are reasonably accurate.
We have improvement actions in place.
Our ultimate goal is to near the (100%,100%) point.

- "FIX IT FELIX!"

This is unfortunately where many of us lie.
Decisions are based on incorrect or insufficient data feeds.
We are continuously in fire fighting mode.
No time left to think about improvements.

- "GET LUCKY"

This is a pure "textbook" case. Forget about it ... Will never ever happen ... ever ...
If there is the slightest chance for things to go wrong and you are not in control ...
Things will go wrong! For sure!
I am not aware of any method on this planet insuring to consistently get lucky.

(If you do, please contact me ASAP)

- "SNAFU"

SNAFU is military slang acronym meaning "Situation Normal: All F....d Up".
Yes this happens. More often than what you think.
We have good information but we consistently take the wrong decisions.


Strong of the previous explanations, ask yourself in which area you are and where you would like to be. It will open your eyes an hopefully push you to spend more time working on data accuracy,streamlining and rationalizing your decision process(es).

Believe me, it is worth the efforts!

Golden Rules

Strong of the previous explanation on the impact of information quality and decision making on correct outcomes, I came up with 3 golden rules to insure that you improve your decision making and do not fall in the usual traps.

- MEASURE

The first rule is to measure: assess the importance, effect, or value of the factors which will be used in your decisions.

How many times have you bypassed this simple step? How many times have you spent trying to resolve differences of interpretation? How many times have you checked which method has been used to build or consolidate your data?

Yes, we have a natural tendency to take things as granted, assume that everyone has the same understanding and that our systems (or functions) deliver perfect data. Remember that the devils lies in the details. Always challenge your data before you intend any kind of analysis or decision.

As George E. P. Box said "Essentially, all models are wrong, but some are useful".


- BENCHMARK

The second rule is to benchmark: establish a standard or point of reference against which things may be compared.

Once you have a better understanding on how your variables measure, you need to better understand their limits, their dynamics, and assess what is reasonable and what is not.
You might as well compares your company's own data to those of another company (usually a leading one in the same industry). It will give you another way to sanity check your data.

Bench-marking is a difficult but essential part of the process.


- PROJECT

The third rule is to project: estimate or forecast outcomes on the basis of a decision.

This is one way to better anticipate what would happen had the decision been taken.

Try it on some of your decision to make.

Picture yourself as it is already done, feel the mental state linked to your decision and try to experience the feeling you might have in the future (I know easier said that done, but just try it ... you will see ... sorry feel ...). Visualization is a powerful tool that helps to better plan a decision, especially on outcomes which are not really measurable.

You might also make a three point estimate (low, average and high) in order to get a better and easier way to estimate the outcomes for each decision. Having more than a single estimate gives you a general idea of the dynamics of your outcomes.
 

I will end this post by a famous Sherlock Holmes quote:

It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."

This post originally appeared on Linkedin. Written by Yannick Feder

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