Uncertainty is Everywhere in Leadership Decisions. Here’s How to Handle It

Every business decision involves an element of uncertainty. Here’s how your team can wrangle it in to make better decisions.

executive-diceMaking decisions is a core part of any team’s job, but for the top leadership team, it is their most important activity. They set the direction of the company by choosing key priorities and establish how work will get done by defining policies and operational processes.

The hard part is that they need to make these decisions with imperfect information and estimates about what the future might hold. Variability and external factors can make choosing the right path extremely difficult.

Unfortunately, many teams struggle with these uncertainties. They either ignore them and press forward with wanton disregard for the risk they are exposing themselves to or they decide not to make any decision at all, which causes them to miss key strategic opportunities.

Effective teams openly discuss uncertainty and work to quantify and reduce it where possible. They know they need to take action and can make calculated trade-offs between risk and reward.

When discussing options, they use the following strategies to get information and increase their level of confidence so they can effectively process that information and make good choices.

1. Don’t poison the well.
When discussing estimates or likelihoods, the first rule is to not blurt out your guess. This creates a psychological effect where everyone else now has to answer in relation to the first guess. As a result, other people will unconsciously adjust their guesses and prevent the team from getting a true range of estimates.

2. Clarify the question and goal.
It is important to make sure everyone understands the specifics of what is being discussed. Does the budget include labor costs or just materials? Are we assuming stock items or custom designs? Does the deadline mean when we ship or when the customer receives the product? Starting with these types of clarifying questions will ensure you are all on the same page.

3. Give individuals time to think.
Many teams rush right into making guesses. Instead, set a timer and give people a few minutes to collect their thoughts and consider options. You can’t effectively listen and think at the same time, so create some quiet time without conversation.

4. Have people write down estimates.
Before starting the discussion, have everyone write down their estimates, key assumptions, and rationale. By writing everything down they will be less likely to be influenced by the conversation and more open to sharing their ideas, important information, and perspective.

5. Focus on the boundaries and limits.
Instead of trying to get the exact right number, talk in terms of ranges and confidence levels. For example, what is the likelihood that the project will take less than 16 weeks or more than 24 weeks? Talking in terms of specific dates will lull the team into a false sense of precision.

6. Explain logic and assumptions.
Often, it is the underlying assumption and logic in an estimate that is more important than the number itself. If one person has a high number, ask why and what lead them to that result. They may have identified a risk or task that others missed.

7. Strive for 80 percent agreement.
You will rarely be 100 percent in agreement on tough problems. And typically, the cost of trying to get consensus is extremely high in terms of time and team morale. Instead, shoot for around 80 percent agreement on the numbers and make your decision accordingly. While you might be off once and awhile, your ability to make many decisions more efficiently will more than make up for it.

Decisions come in many shapes and forms, but a good team uses the same, well-honed processes and heuristics to get through them effectively. For leadership teams, this is a critical skill to develop and can mean the difference between being a leader in the market and struggling to stay afloat.



Bruce Eckfeldt

Bruce Eckfeldt

Bruce Eckfeldt is an entrepreneur, a former Inc 500 CEO, and member of the New York City Chapter of the Entrepreneurs’ Organization. He is an expert in organizational performance and coaches startups and high-growth companies on leadership and management.

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