In this episode, Matt and Rick discuss the ideal framework on how to make good decisions in business and life. In business, just like in life, we are constantly making decisions. These decisions either make or destroy us; therefore, it is imperative to keep improving our decision-making skills.
Rick recently re-read the book Decisive by Chip and Dan Heath. The book is based on an exhaustive study of decision-making and introduces a four-step process designed to counteract decision making biases to make better decisions. It is about being confident that we’ve considered the right things and that we’ve used a smart process.
Rick and Matt look at the behavioral science behind decision-making and why most of us make flawed decisions, especially in business. Understanding the mental processes behind decision-making may help us make better choices. There are also villains or things that cause us to decision-making that can impede your ability to make consider all the options.
Research in psychology has revealed that an array of biases and irrationalities disrupt our decisions. We’re overconfident. We seek out information that supports us and downplay information that doesn’t. We get distracted by short-term emotions. When we make choices, our brains are flawed instruments. Unfortunately, merely being aware of these shortcomings doesn’t fix the problem, any more than knowing that we are nearsighted helps us to see. The real question is: How can we do better?
4 Villains to Decision-Making
1. Narrow Framing
We all have a tendency to narrow frame in most cases. What that means is you come up with an answer of only 2 outcomes, it’s either this or that. But the interesting thing about the book is just adding one option to your decision-making process will infinitely increase your chances of making a good decision. So instead of 2 outcomes, widen your scope and give yourself more options.
An example would be with fitness employees. The first thought when an employee isn’t performing is to keep them or get rid of them. You start with one decision with only two outcomes, but maybe there’s more than one decision. Maybe this person doesn’t need to be in the role that they’re in. Maybe they excel at numbers and spreadsheets, but they’re not great customer facing. Maybe there’s a better fit for them in your company, but they’re in the wrong seat.
2. Confirmation Bias
As we analyze our options, we tend to look for data that confirms our beliefs, assumptions and predispositions, instead of truly seeking the best information.
Sometimes, when you are in the owner trying to drive this big vision of your business, you want to surround yourself with yes people, people just like yourself. Let’s say you have one employee, that thinks differently and is often causing you to stop and go whoa! Everyone is swept up in the party or the excitement of the new decision, while this one person’s saying hold on or questioning your process. Sometimes you should embrace that person’s different view to prevent confirmation bias, and have people on your team that will test you in business or life. There is relevance in testing your decisions to make sure you consider all options.
3. Short-Term Emotions
Despite our detailed data and analysis, when we actually make our choice, we are influenced more by our short-term feelings. In the book, they discussed how to overcome short-term emotions attaining distance. It means just try to take a step back, zoom out a little, and look at the problem by giving it some physical distance, if it’s a person, distance from them. You can’t really make a good decision when you’re in the weeds and you’re emotional about it. One anecdote is to just sleep on it. Well, that’s probably a good idea. Don’t make a decision after dark, because you’re not in the right frame of mind.
One good example is the pandemic with how everybody abandoned their brick and mortar business and went straight virtual. It was a short-term decision based on emotions where you looked at the market and said alright, I’m going full online training and I’m going to sell my gym. Nobody really knew what was going on and they were all emotional, so of course, it really disrupted their business. Now what we seeing based on statistics from IHRSA, the governing body for the fitness industry, they’re showing that 2021 visitations to health club facilities are where they were in 2019. So now there is a massive swing back to brick and mortar as we saw in our Alloy corporate gyms and our Alloy franchisees saw when the veil lifted a bit from COVID. People started just coming back to the gyms.
After making a decision, we tend to feel more confident about how the future will turn out, when in reality we are merely guessing and have no way of accurately predicting the future.
One way to mitigate overconfidence is to prepare to be wrong. Ask yourself what’s the worst-case scenario and can I live with it? Would I survive it? List the pros and cons of the decision.
Overconfidence is the kiss of death. You see this happen sometimes when someone’s very successful in one vertical and then they go hop in another vertical in business, and they just flop. Just because you did great in the waste management business and sold your company, doesn’t mean you’re going to get into the painting business and kill it. We look at some examples of decision-making through our lens in the fitness industry and discuss the ideal framework for making those decisions.
We look at some examples of decision-making through our lens in the fitness industry and discuss the ideal framework for making those decisions. Listen in to learn how to improve the quality of our decision-making in life as well as business.
- Narrow framing – widen your options (03:45)
- Overcoming the fear of making wrong decisions (07:08)
- Confirmation bias – Reality test your assumptions(08:46)
- Short-term emotion – attain distance first (15:17)
- Overconfidence is the kiss of death – prepare to be wrong (20:10)
- What’s the worst-case scenario, and can you live with it? (22:45)
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