A lot is riding on a CEO. If the average adult makes about 35,000 decisions per day, imagine how many choices a CEO makes with an entire company depending on their good judgment! As a result, they’ve developed some brilliant ways to make sure they always choose correctly.
Thinking Fast and Slow
by Daniel Kahneman
⏱ 12 minutes reading time
🎧 Audio version available
Have a Devil’s Advocate
A great CEO knows that no one person can possibly see all angles. That’s why appointing someone to propose a contentious opinion is a trick the best of the best use.
A devil’s advocate expresses an opposing opinion in order to A)provoke further debate and B)test the strength of the decision in question. Assigning a devil’s advocate on your team can actually make discussions more efficient as it helps reach viable conclusions. It also helps identify any weaknesses in your discussion. Which sounds more convincing, having someone on your team point out possible contingencies before they actually occur or discovering them too late?
A lot of people go through life merely reacting to situations. However, in business, or when trying to lead a business, simply reacting can’t cut it for making vital decisions that affect your company and the people working for it.
A talented CEO eventually learns– whether that’s through trial and error or through getting warned firsthand– that there’s a difference between reacting and making a decision in the spur of the moment versus making a decision based on your gut feeling. However, that’s something we’ll also get to later.
So instead of reacting when someone comes up to them with an alarming issue or an operational problem, think, what would a high-performing CEO do? If they don’t have a plan, they sit back and think.
Example? Take Elon Musk, who figured out a way that’s “really helpful for figuring out the tricky things.” His trick involves six simple steps.
Number one is asking a question.
Number two is gathering as much evidence about the decision as he can.
Number three is developing hypotheses, which are statements accepted as true as the basis for argument or inference, and then assigning a probability of truth to each one of them.
The fourth step is reaching a conclusion based on cogency– the quality of being logical– and determining whether these hypotheses are true, their relevance if they lead to the conclusion, and with what probability.
Once that’s done, Elon Musk likes to find a devil’s advocate on his own to disprove the conclusion he just reached. At this step, he asks others to break down his conclusion, just in time to reach the final move.
If no one can break down the conclusion or invalidate it, he goes with the decision. Now, he gets to say that the decision was strategic, driven by data, and is protected against possible outcomes.
Balance Risk and Reward
There’s always going to be some risk involved– that’s both in business and real-life decisions. That’s why it’s crucial to balance taking risks and measuring the rewards you could reap.
Think about it. The majority of CEOs regret the decisions they didn’t make the most– or they regret the decision they made too soon or too late. And that’s why most CEOs prefer using risk-aversive strategies. But then this happens: with the CEO avoiding risks, the company is kept in a static state. So rather than making headway towards the next goal, the company may actually fall behind.
Taking calculated, strategic risks is the way to go– at least according to Anne Mulchay, the chairman and former CEO of Xerox, says that being too risk-averse and too analytically driven held them back. Mulcahy added that by the time they reached a decision, someone else had already beaten them to it, or it was too expensive.
Make Less Decisions!
Is that true? Making fewer decisions leads you to make better decisions? Yes! Just ask Mark Zuckerberg or Steve Jobs– or even former President Barack Obama. All these successful figures share that they nitpicked every decision they were set to make and delegated what they could.
If you’ve noticed Zuckerberg’s iconic t-shirt and jeans combo– or Jobs’ indelible black turtlenecks, then you’ve already seen them implementing this strategy. This strategy keeps them from wasting time and effort that should be conserved for more important choices.
Speaking of making fewer decisions, you’ll find that all the best CEOs aren’t afraid to delegate what they can. CEOs feel the need to be responsible for every single decision for the company, but where does that lead? It’s a one-way ticket to experiencing what’s known as “decision fatigue.”
Decision fatigue is when you’re too burnt out to make sound and effective decisions after long periods of making them. So you’ve actually headed the opposite way when it comes to making the best decisions and is more likely to make poor choices.
Think of your mind as a reservoir with a limited number of decisions you can make. The more you draw from it, drain it, the harder it is to have the best, most beneficial, and most rational line of thinking.
That’s where your trusted team comes in. Find someone you trust who has the experience and authority necessary to aid you. You’ll find that your business will thrive more as it’s filled with a well-rounded team of talented, fulfilled employees who can make valuable decisions.
Always Say the “What” and the “Why”
Whenever you make a decision surrounded by your team of employees or stakeholders, it’s always important to know the answer to all the “why” and “what” questions they may have. This means you– and by extension, your team– further understand why you should go with a choice or not.
The opposite option is not communicating your point of view, which leads to teams finding it harder to support and execute what you told them.
Always Be One Step Ahead
What does being one step ahead entail? It’s easier than you think! You will find yourself rarely fumbling or unsure if you’re one step forward.
That means that you know everything there is to know about the competition, for example. You’ll never make the best decisions for your company if you have no idea what curveballs may jump at you in the market.
Being one step ahead means always looking forward to the future– and not only that but planning for growth. It means staying on top of whatever developments are going on in your industry, following consumer trends, and not being afraid to invest in new methods and technology.
Be Confident, Honest, and Humble
According to Mark Fukunaga, the CEO of Servco, confidence, honesty, and humility are the only things you need in order to be a great decision-maker.
He breaks it down like this: confidence is what pushes you not to be afraid of taking risks and helps you handle uncertainty.
He picked honesty– honesty with yourself– because self-doubt isn’t one of the traits a CEO should have. Fukunaga calls it self-deception a CEO’s “biggest enemy.”
Finally, humility is there to keep you grounded. Fukunaga also says it’s to avoid being too invested in an idea. That means being ready to drop an idea and picking another when you know it’s better.
Let Go of Small Fumbles
So you dropped the ball once, so what? Name one CEO who hasn’t. Everyone makes mistakes. Expecting to be the exception can lead to excessive self-doubt or arrogance– both will drive you crazy.
Instead of dwelling on the past, if you made an error, messed up with a client or meeting, own up to that mistake, take responsibility for it, and instead learn from it. The next decision you make is automatically better because you have more experience.
One of the top simple tricks high-performing CEOs use is the title: simplify.
Instead of looking at a problem as a “complicated problem,” see it as there is only “complicated thinking.”
Yes, there’s a big decision ahead. To simplify it as much as you can. Lay down the steps, your goal, the potential outcomes, et cetera. When you have all those laid out in front of you, decisions become easier.
Stick To Your Gut
Amazon CEO Jeff Bezos has decisions broken down into Type 1 and Type 2. To quote his newsletter, Type 1 decisions are “consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically.”
However, he admits that Type 2 decisions are “changeable, reversible – they’re two-way doors” and “should be made quickly by high judgment individuals or small groups.”
So if the world’s richest man admits that you need to have good judgment in order to be ready to make decisions, even if they’re reversible, you’ll find truth in his words.
Some decisions are going to come your way– and you may not have data to fall back on or even have time to analyze the best outcome. That’s why you should trust your gut. There’s a reason why you are the CEO. A gut feeling is something you’ve actually honed over the years. It’s based on countless experiences. And it may just be the reason why you get to make the best judgments you can based on the limited information you have at the moment.
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