Tuesday, November 26, 2013

Are You Really in Control of Your Decisions?

Economics assumes that all human decision-making is rational. In an economist's dreamland, we're able to balance both the cost and the reward of a purchase to make the appropriate economic choice. Modern economists, particularly those studying behavioral economics, have shown that we don't always make rational choices. We make choices based on subjective evaluation instead of on objective, predetermined criteria.

Dan Ariely, head of Duke University's Center for Advanced Hindsight and author of the book Predictably Irrational, says that people do a good job of visualization when looking at the physical world. In the physical world, we build smarter to get around our limitations. Alternatively, we struggle to visualize abstract concepts, and marketers have developed strategies to leverage those mental limitations. 

Ariely uses the example of an ad that "The Economist" once used to draw in new subscribers. Subscribers could choose the digital edition for $59, the print version only for $125 or both digital and print for $125. When they used quick, subjective evaluation, choosing both digital and print for the same price as the print edition seemed like a bargain. In fact, in a survey involving a group of MIT students, most respondents selected the digital/print subscription instead of choosing the budget-friendly electronic version.

Since unconscious factors do so much to sway individual decisions, crowdsourcing decision making has obvious benefits. A crowd may make fewer subjective errors. Also, tapping the crowd enables smarter, faster selections within a fast-paced business environment. Management may not possess the tacit knowledge necessary to make decisions outside of their areas of expertise. For example, a great CFO may have no feel for engineering. In some cases, he or she needs to tap the collective intelligence of the firm's engineers to make better financial decisions related to engineering.

Crowdsourcing decision making enables faster action by taking advantage of employees' tacit knowledge. For both managers and the crowd, an easy-to-use crowd input collection and visualization tool makes choices easier to process. Soliciting collective intelligence requires managers to trust their employees, which isn't always easy. However, considering how easily individual judgment is influenced, perhaps we're wise not to act on our own.

Monday, November 18, 2013

Should You Really Trust Your Instinct?

In today's data-driven world, people approach decision-making processes in one of two ways. On one hand, we have data devotees that won't make choices unless their views are backed by statistical evidence. On the other hand, we have the "go with your gut" camp arguing that waiting for data means missed opportunities.

According to Malcolm Gladwell, author of "Blink" whether we choose to rely on instinct or data must depend on our experience level with the subject. What happens when you need to make a fast decision about an unfamiliar topic?

Crowdsourcing

Tapping the power of collective intelligence by using a tool for crowdsourcing decision making can enable smarter, faster decisions, especially when we have no time to collect data. By letting employees give input, you gain access to people whose experiences may be more relevant than yours. 

Instead of making a subjective evaluation of a topic you know nothing about, you can tap into the tacit knowledge of experienced people. By harnessing tools for data visualization, you can then process crowd wisdom faster and transform that wisdom into smarter company decisions.

Is Collective Intelligence Always Reliable?

When you're crowdsourcing decision making, you have to choose the right crowd. For example, if you own a manufacturing business and you're presented with a huge order, then you should ask the people that work hands-on with assembly whether the work can be done quickly. You should also ask people that work with your suppliers to make sure your company could get the materials that you'd need. 

On the other hand, asking the marketing department won't be helpful because marketers won't have tacit knowledge about manufacturing. They may make a subjective evaluation based on their desire to increase revenues, but they won't know instinctively whether the company has the resources to fulfill the order.

The Bottom Line

When you tap experienced people, sometimes less data produces better decisions. Alternatively, instinctive judgments made without experience can lead to disaster. Consider investing in tools that enable targeted crowdsourcing that you can interpret quickly thanks to clear data visualization. You'll have a better shot at catching great opportunities when you trust your gut--the smart way.

Monday, November 11, 2013

Four Key Questions to Encourage High-Caliber Group Decision Making

Many leaders of small and medium businesses say that they want to involve their employees in the decision making process. However, few leaders actually tap into the collective wisdom of their subordinates, which James Surowiecki calls "the wisdom of the crowds." Crowdsourced intelligence helps leaders to make smarter and faster decisions. To benefit from crowd wisdom, managers must first cultivate wise crowds.

Setting the Tone for Smarter, Faster Group Decision Making

Before tapping the wisdom of the crowds, managers should reflect on whether their management styles encourage independent thinking. Four good questions to ask include:
  1. Does my management style encourage diversity of opinions? Employees should feel comfortable bringing their own perspectives into any group decision making process.
  2. Do I encourage my team to express their opinions even if they differ from my own? Teams need to know that their honest, uncensored opinions will be weighed without any retaliation from management.
  3. Do I maintain a good balance between control and decentralization? While managers do need to make some unilateral decisions, they should maintain a structure within small and medium businesses that empowers team members to make their own choices.
  4. Do I have a tool that can turn employee opinions into collective decision making? Instead of walking around and asking certain individuals their opinions about a decision, management should utilize a tool that allows everyone to feel involved. The solution should provide some visualization of employee input so that team member opinions become tangible.
Giving Up Control
True crowdsourced intelligence thrives in a decentralized environment. If the workplace is divided into "decision makers" and "those who carry out decisions," then employees won't gain confidence in either their independent opinions or their ability to speak with authority. Also, decentralization teaches employees to trust one another. Forcing compliance from the top cultivates suspicion, not trust.

Giving decision making power to the crowd means giving up some control of the outcome. However, by encouraging autonomy among employees, managers access true human wisdom instead of parroted statements of support. Ask employees for opinions, and give them the visualization tools that bring their input to life. Before anything else, however, empower them to think for themselves.