Gut Feeling / Intuition in Decision-making

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Decision-making and Valuation > Best Practices > Gut Feeling / Intuition in Decision-making

Gut Feeling / Intuition in Decision-making
Dale Kennedy
I don't believe in any rational decision-making methods for managers. The complexity of most management decisions is big, and the circumstances change quickly. So many executives prefer the 'Gut Feeling approach'. Even if we want to be rational, our rationality is influenced by multiple Cognitive Biases. And when we're working in teams the situations gets worse due to Groupthink etc. So forget about rational decision-making models.

I agree it's about gut feel and knowing your Values.

Gut feeling Approach
Brendan Dunphy
And how do you think Dale we develop our 'gut feeling approach'? It may seem that it is instinctive but in reality it has developed over time and as a result of much conscious and unconscious self-analysis, observation, questioning etc. To deny 'rational decision-making methods' for managers (or anyone else) can only serve to lessen our ability to make better decisions 'instinctively' when we need to.

Rational decision making!
Paul Ward
I hope I never work at a company that believes only in gut feeling approaches to decision making, and eschews rational decision-making models. One of the key contributions of management theory, and Kahneman's work, is that we can know our biases at some level, so that we can make better decisions. Complexity isn't just about things being complicated. It's about how something qualitatively different from the basic dynamics of the system emerges from that system. If a manager just stays within the system and never looks at what is emerging, and why, that manager is, as they say, toast. I'd be very interested in seeing Barbara's and Dale's Myers Brigg Scores. MBTI is a perfect example of identifying biases ...

Rational Decision Making
Andrew Smith, Quality Management and Auditing, Philippines, Member
I think the Gut Feeling Approach is only applicable for a situation where you need "a right away decision" or an unexpected situations that needs an immediate decision. However, i want to emphasize what Mr. Warren Buffet said "I put a heavy weight on certainty. If you do that the whole idea of a risk factor doesn't make sense to me. Risk comes from not knowing what you are doing"

Rational Decision Making
Ivan Lax
I think it is more about helping groups understand why they make the decisions they do or how they arrived at them. We deploy Multi Criteria Decision Analysis using Decision Conferencing and the value of this is in the social interaction and the breaking up of complex decisions into their component parts. In essence it utilises a lot of gut feel but at least we understand what is driving our gut the most!

Imagination and Intuition in Decision-making
NIGAH-E-NAZAR , Financial Consultant, Pakistan, Member
Albert Einstein acknowledged the importance of intuition when he said, " I believe in intuition and inspiration. At times I feel certain that I am right while not knowing the reason. Imagination is more important than knowledge because knowledge is limited, whereas imagination embraces the entire world."
(from the book of Fred R. David: Strategic Management).

Gut Feeling in Decision Making | Improving your Gut Feeling
pradeep deo, Strategy Consultant, India, Member
A situation which calls for decision making always creates stress. The duration of the stress is proportional to the time taken for taking a decision. Those who have gut feeling take comparatively less time for decision making than those who depend on data and statistics.
The gut feeling can be developed by practising spirituality, by concentrating in between eyebrows for few minutes daily. This is the place of pituitary gland (Editor: =hypophysis). An activated pituitary gland improves gut feeling or intuition.

Gut Feeling in Decision Making
Gandhi Heryanto, Management Consultant, Indonesia, Premium Member
Follow Your Gut, Your Instincts Are Seldom Wrong. That is a topic by Don Todrin, Yahoo! Contributor Network, Dec 27, 2009.
I read an article many years ago, that has suck in my mind ever since. It was about a Harvard study on how the best business leaders make decisions. It went on to describe how they would collect data, test hypothesis, do research, ask others opinions, do the numbers, etc, but in the end universally after doing their best research and evaluation, they all said then they would lean back in their chair and trust their gut instinct...
Wow, I thought, with great excitement, in the end the best decision makers of the time, the leaders of successful corporations trusted their gut instinct to make the most important decisions.
I think that this is a strong point for an entrepreneur in starting up a new business. An entrepreneur has a gut feeling about his vision, idea and a product to start a business.
A Professional usually sets up a business based primaily or only on numbers, business feasibility that sometime will not work.

Rational Decision Making or Gut Feeling
Bernd Born, Manager, Germany, Member
This is a different approach. I think an important aspect of your method is, that you do a step back. Then you will be able to consider aspects which you with a logical method would forget. Do you your method for each decision, or is it an daily exercise.

Gut Feeling is a Valuable Add-on to Decision Making Methods
Ivan Kohlinsky, Management Consultant, United Kingdom, Member
Gut feeling should not be a substitute for all the well-known decision-making and scientific / analytical methods BUT gut feel SHOULD be used as a kind of 'acid test' of whether the outcome / final decision, and maybe even the decision making methodology 'rings true' or 'stacks up'. A sort of: 'does this all make sense' or 'does this all look right'.
A feels-right-test before accepting the decision / conclusion and moving on to the action / execution stage.

Gut Feeling in Decision Makin
Bernd Born, Manager, Germany, Member
@Pradeep deo: I used your idea especially in cases there was no time to sort out all facts. For me it works!

Intuitive Decision Making
Sridhar Gopal, Management Consultant, India, Member
When making everyday management decisions, most of the time we adhere to well laid-out standard procedures of our companies, yet we could go wrong in our decisions. Sometimes our intuition scores better than the standard procedures. Do we need to heed to our intuition at such times?

Recently I had an opportunity to be a part of the selection process for the position of a delivery head of a large company. I was one among three people – two others were insiders of the company belonging to the company’s Human Resources and project team. The outsider (that’s me) was called in to basically have third (unbiased) opinion in the selection process.
Among the short listed final runners for this one position were Parth and Vijay (no real names). One of them was to be declared “winner” for this level B position (level A being the highest position). Parth and Vijay were presently engaged at mid level management positions.

Both of them had credentials that the position required. Parth had 14 years of professional experience and Vijay had 15 years. They both had served this company for around 10 years. In my assessment Parth was a problem solver; Vijay was a go getter; Parth seemed to be a good communicator who can explain the complex problem in a way one can understand the situation and make an appropriate decision quickly, while Vijay could explain the same problem in highly diplomatic terms the other person can never mistake him.

When it came to presentation – be it profile, personal or subject matter - Vijay scored higher than Parth at any given time. Of course, there were common points such as technical competence, learning abilities etc they both almost stood on the same scale.

On conclusion: I had filled out the evaluation form and summed up the scores for each one of them and later found not to my surprise that Vijay stood clearly ahead of Parth. The two other officials also completed their evaluation and Vijay was also clearly their front runner for this position. Parth was still to wait for his next chance to climb higher.

During the discussion, I mentioned that I truly “sensed” that Parth was a better person for this position and to an extent, under reservations, my hosts agreed with me! For I felt there is a “true element” present in Parth that can drive deliveries better and so Parth should have been the head of deliveries. Then why did I not conclude that way? Well, the company has policies and guidelines for inducting professionals. We needed to just follow them be it in the interviewing pattern, evaluation or documentation.

Three months later I heard that Parth had resigned. Presumably he was disappointed with the selection group. Vijay too has plans to move out because of continuous differences with his client and to an extent a relational strain with his offsite team. So there is a significant loss of well groomed talents.

This now prompts me to think about the effectiveness of intuitive decision making: if only I had pushed for Parth to the position he would have perhaps remained and with “some convincing discussions” we could have had Vijay in another fitting position. This way we could probably retained two talents.
Why did we neglect this natural intelligent decision making tool? If something is preventing us from using this tool, It could be the trust deficit in this cognitive process and logical arguments surrounding its adoption in the corporate world.
I am not advocating doing away with all other present processes - in fact I dare not. But encouraging managers with high intuitive management thinking to apply their skill is one of the ways of achieving organizational success. I believe intuitive management decision making is a skill which may be developed best when young managers are trained and mentored by managers who have been through this process in an organization. Having said this, there is no guarantee that intuitive management decisions are the best approach at all times, places and problems. But this skill is most certainly a valuable tool in the manager’s survival kit.

Technocratic versus Intuitive Decision Making
Anneke Zwart, Student (University), Netherlands, Moderator
In managing a business efficiently, managers have the task to make the right decisions. The types of decision-making and its effectiveness can differ highly between managers and organizations. Two types of decision-making styles can be distinguished when managing an organization. The effectiveness and appropriateness of each decision-making style depends on the environment within which the business is operating:
1. Technocratic Decision Making:This decision-making style relies heavily on quantitative knowledge and data. Besides, technocratic managers tend to highly systematic, analytical and scientific in making their decisions. The decision process can be described as follows: a technocratic manager analyzes all characteristics of alternatives, generally in a compensatory way. This means that an attribute with inferior performance can be compensated by another attribute with exceptional performance. An example is the compensation of a product lower quality by a low price. The choice that is finally taken is based on an attractive and optimized combination of alternatives.
2. Intuitive Decision Making: This type of decision making relies less heavily on quantitative information and data. Rather, it relies more on heuristics –which uses less data input and makes decisions on an uncompensative way- for choosing between alternatives. This type of decision making is preeminent in dynamic, fast-changing environments in which competition is high.
Source: A. Rusetski (2014) “Pricing by Intuition: Managerial Choices with Limited Information” Journal of Business Research Vol. 67 Iss. 8 pp. 1733-1743

The Rationality of Decision Making is Limited Anyhow
Jaap de Jonge, Editor, Netherlands
Herbert Simon wrote that cognitive blinders prevent people from seeing, seeking, using, or sharing relevant, accessible, and perceivable information during decision-making. The rationality of actual human and company behavior is always partial, or ‘bounded’ by human limitations. For more info see bounded rationality.

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