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Decision Judgement and Outcome Bias


Think about a big tough decision you have had to make. Maybe you decided to move to another state. Or you are an executive and decide to lay off 10% of your workforce. Or you are a student and decide to change your major.

It may have been difficult but you made the decision then moved on, hoping you made the right call.

How do you know you made the best - or even a merely good - decision? Typically, we feel that if the outcome is what we hoped for, it was a good decision. But evaluating the outcome is just the first step and should not be the sole basis for judging decision quality. Psychologists call this outcome bias - putting too much weight on the outcome when judging a decision.

Here is an unfortunate truth: Good decisions can produce bad outcomes.

The more external factors there are that can affect the outcome, the lower the odds are that things will turn out as you predicted. For example, the executive needed to cut costs because sales were lagging, hence the layoffs. But within the next 12 months, the economy unexpectedly picked up and sales rose. Now you are short staffed and struggling to find talent.

Judging the outcome(s)

Were the layoffs a good decision or bad decision? First, we need to recognize that most outcomes are not binary “success or fail” situations, but are on a spectrum from best to worst or anywhere in between. Also, decisions often produce multiple outcomes, both intended and unintended, so we need to identify everything that changed due to the decision.

The layoffs were intended to save money. Did they? Yes. What else did they do? They created more work for the remaining staff and some of them left due to burnout. They also caused you to be understaffed and unable to meet the increased demand for your products.

But none of that necessarily makes it a good or bad decision. How many of those outcomes could have been anticipated beforehand? What plans did you make to pivot in case the unknowable (the economy) turns out differently than you expected?

When a plan fails we are more likely to look at unexpected external factors as the reason. “It’s not my fault - nobody knew that would happen.” That may be true, but it may also be true that you knew there was a small chance those things would happen and you either 1) made a plan B to pivot to if needed, or 2) decided to accept the risk.

Conversely, don’t be fooled into thinking a decision was great just because it turned out well. I’ve seen football coaches make dubious play calls that turn into touchdowns. That doesn’t make it a great decision, though it may have been - they know more about coaching football than I do.

Review Questions

To help assess the quality of your decisions, set a later date for review and evaluation and ask these questions:

- What was the outcome? How close is it to our desired or expected outcome?

- What else had happened (tangential outcomes) that we didn’t anticipate?

- What is obvious now that was not obvious then. Could we have seen it then? What should we do differently next time to avoid the same mistake?

- Did we have an accurate assessment of probabilities? Did something happen that you thought was impossible but was merely improbable? Could you have planned for the possibility?

- Did we identify, find and assess as much of the relevant information as possible?

- Did we fail to consider all impacted parties, perhaps missing a red flag that would have been seen from someone else’s perspective?

Don’t just beat yourself up if a decision outcome is not what you anticipated. Figure out if it was avoidable or not and what you can do to improve your decision making in the future.

Think well - live well.

- Steve Haffner, speaker and mind performance strategist

Want to learn more about improving your decision making performance?

Click here for my free book, 7 Strategies for Making Better Decisions


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