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How to make better decisions in the face of uncertainty?

While you cannot eliminate uncertainty, PrOACT 31000 can help you make better quality decisions under uncertainty and risk.

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The future is shaping up to be even more unpredictable than usual. Individuals and organisations are now operating in an environment of a higher degree of uncertainty and speed.

While you cannot eliminate uncertainty, you can still do your best to reduce it as much as possible. There’s a big difference between embracing uncertainty as an invitation to explore things further and viewing it as an excuse to halt curiosity altogether.

This is where the PrOACT 31000 decision-making framework comes in. It can help you make better quality decisions under uncertainty.

Not all uncertainties are created equal

Uncertainty comes in degrees, or shades of grey. It is not black or white.

Let’s take two common responses I often hear:

  • #1 – “I will never know everything, but I can attempt to figure some of it out.
  • #2 – “I will never know everything, so there’s no point in even trying.

Person #1 accepts the situation but tries to explore it, while #2 takes a nihilistic view of indifference and apathy.

A statement like “I will never know everything” can be a vote for uncertainty. What you decide to do with that declaration thereafter will determine the level of success you can achieve. Having a positive mindset can make a difference between success or failure.

Person #1 believes that we should try to figure things out amid uncertainty. Although she accepts that she will never learn everything, she still wants to discover some semblance of certainty regardless. She is committed to the pursuit of truth while being humble enough to know that she will uncover only a tiny sliver of it in her lifetime.

Alternatively, Person #2 takes the reality of uncertainty and lets it overwhelm him with inaction and indecision. His nihilistic view puts him in a position where he will contribute nothing to his success. That lack of curiosity will likely have unfavourable consequences that extend to other parts of his life.

Here we read that Person #1 knows that uncertainty will never be eliminated. But she is making an honest attempt to reduce it whenever she can. Person #2, on the other hand, is fixated on making no effort to decrease uncertainty at all.

While it’s easy for you to declare that you embrace uncertainty, the important thing is what you choose to do with it.

Are you doing your best to reduce it, while knowing that it will never be entirely be gone?

The way you operate in uncertainty and use it to your advantage to make better quality decisions for better outcomes will make all the difference.

Take a positive approach to make informed decisions

Make that positive mindset shift to be successful. Be Person #1 instead of Person #2.

Learn four things from Jeff Bezos’s approach to decision making:

  1. Focus on decision velocity to drive innovation. (Speed matters to your future success.)
  2. Make decisions with 70% of the info you wish you had. (Perfection kills. Good enough succeeds.)
  3. Most decisions are easily reversible. (Don’t be paralysed with indecision.)
  4. Disagree and commit to a decision and take immediate action. (Agree to disagree.)

Focus on decision velocity to drive innovation

The choice facing companies today is simple – innovate or perish.

Those that will survive today’s economic environment and succeed in tomorrow’s are those willing to continually reinvent themselves, their products, their brands, and their processes. They transform the way they do business.

Innovation increases the likelihood and extent of your success. It gives you a better foundation to positively react to changes and discover new opportunities.

Speed matters in business. It matters to your future success.

Bezos is guided by a focus on decision velocity that drives innovation, change and transformation. This is done at the expense of consensus, even if it increases the risk of mistakes. He says, “I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins,” he said in his 2015 shareholder letter. “To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”

Follow the 70% decision-making rule

In a 2016 annual shareholder letter, Bezos talked about his approach to decision-making. He suggested that while it’s always nice to have access to all the information someone wants before taking action or making a decision, in the vast majority of cases, waiting until you know everything you should know is a problem in itself.

Perfect isn’t what your customers want. They want it to be good enough. And good enough is usually 70%. The last 30% probably takes three times as long as the first 70%!

Most decisions should probably be made with somewhere around 70 percent of the information you wish you had,” Bezos wrote in the letter. “If you wait for 90 percent, in most cases, you’re probably being slow.” Slowness or indecision kills success.

Making sound decisions is critical to living successfully or running a successful business. Life and business are all about opportunity-seeking and risk-taking.

So is knowing how and when to make a quality decision. Bezos has figured that out.

Most decisions are easily reversible

It is important to classify decisions into two types since not all decisions have equal consequences.

Type 1 decisions can’t be reversed and as such requires great care. Type 2 decisions, on the other hand, can be easily reversed. This is where most decisions fall into this category.

As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions,” Bezos said in his 2015 shareholder letter. “The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently and, consequently, diminished invention.”

Use the right process for the right type of decisions. “Any companies that habitually use the light-weight Type 2 decision-making process to make Type 1 decisions go extinct before they get large.”

It is therefore okay to make mistakes or talk about mistakes or near misses. Learn how you can fix them quickly.

Disagree and commit

Bezos has instituted the specific phrase “disagree and commit” within Amazon to save time and to avoid indecision and procrastination.

If you have a conviction on a particular direction even though there’s no consensus, it’s helpful to say, ‘Look, I know we disagree on this, but will you gamble with me on it? Disagree and commit?‘” Bezos writes in the 2016 shareholder letter.

By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes. If you’re the boss, you should do this too. I disagree and commit all the time.

Have the right process for making decisions

Decisions made under uncertainty can only be judged by the quality of the decision making at the time it is being made, not by the quality of the consequences after the outcome of the decision making becomes known.

Given that you can only control the quality of your decision but not the long-term outcome in the face of uncertainty, there are six quality requirements for making good decisions according to the book, Decision Quality: Value Creation from Better Business Decisions:

  1. An appropriate frame – Right frame (What is it that I am deciding?)
  2. Creative alternatives – Right alternatives (What are my choices?)
  3. Relevant and reliable information – Right information (What do I need to know?)
  4. Clear values and trade-offs – Right values (What consequences do I care about?)
  5. Sound reasoning – Right reasoning (Am I thinking straight about this?)
  6. Commitment to action – Decision maker (Will I really take action?)

An appropriate frame specifies the problem or opportunity that you are tackling, including what is to be decided.

Along with the frame, three things must be clarified – The creative alternatives define what you can do; relevant and reliable information captures what you know and believe (but cannot control); and values and trade-offs represent what you want and hope to achieve. Together these three form the decision basis.

They are combined using sound reasoning, which guides you to the best choice given what you want (based on your values) and considering what you know (relevant and reliable information). Reasoning helps you understand what you should do, creating clarity of intention. It can generate conclusions from assumptions or premises.

However, an intention has little practical value. To have a real decision, you must act. Thus, commitment to action must be an integral part of the decision and decision-making process.

When all these six quality requirements are met, you have reached a decision quality (DQ).

PrOACT 31000 supports quality decision-making

As I like simplicity and common sense in processes, I have created the PrOACT 31000 decision-making framework to reach a decision quality practically. It combines key elements of making smart choices and the risk management process adopted from the international risk management standard, ISO 31000. The combination of these two powerful approaches sets the right foundation for quality informed decisions to be made where there are positive opportunity-seeking and risk-taking.

PrOACT represents five key elements of making smart choices:

  1. Problem statement
  2. Objectives
  3. Alternatives
  4. Consequences
  5. Trade-offs

The PrOACT 31000 decision-making framework is the contemporary way of making better-informed decisions under uncertainty and risk.

The structured process for making quality informed decisions consists of the following elements or activities:

  • Find the right problem to start with.
  • Identify your real objectives.
  • Create a range of alternatives tailored to your problem and objectives.
  • Understand the consequences each alternative would have for each of your objectives.
  • Make trade-offs among conflicting objectives.
  • Review your problem definition, objectives, alternatives, and consequences.
  • Identify opportunities and uncertainties that may affect your decision and objectives. The international risk management standard, ISO 31000 sets out the risk management process to identify, assess, evaluate, and treat any known uncertainties – threats opportunities – that may affect your decision and achievement of your objectives. Understand the outcomes that might unfold, their likelihoods, and their consequences.
  • Take account of your risk-taking attitude.
  • Plan for linked decisions over time.

Decisions invariably involve taking calculated risks, many different opportunities, and uncertainties, and of varying levels of importance. Learn how to apply PrOACT 31000 to your family situation.

Do reach out if you require help in applying PrOACT 31000 in your personal or work circumstances.

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