How Leaders Can Make Better Decisions

How Leaders Can Make Better Decisions

By Mark Wager

If you are in a Leadership role, your job, your value and even your career will be defined by the quality of the decisions you make. If you are a good decision maker then your career will soar yet if you make bad decisions then the career will be short lived. As a Leadership Coach, it’s a common occurrence to receive phone calls from  Leaders who have to make  difficult decisions and want advice so in this weeks article I want to share with you some of the most common advice I give to Leaders so they can make better decisions.

The most common mistake that  Leaders make when making  decisions is that they misinterpret the key information they have been given. This failure of understanding creates a blindfold that makes the Leader come to a conclusion that may seem logical at first glance but is soon found to be flawed. It’s like the old story of a group of blindfolded men who are in the same room as an elephant and they are asked to describe what is in the room with them based on what they feel. One man feels the long nose of the elephant and believes he has found a snake while another feels the leg of the elephant and assumes he is feeling the truck of a tree. As a Leader it is not enough to have the information you need to be able to correctly interpret the information.

If you want to interpret information correctly you need to understand the difference between correlation and causation. Let me first explain these terms in a psychological way then we will look at them in a more practical workplace scenario. 

Correlation vs Causation 

Correlation as a statistical term, is the extent to which two numerical variables have a linear relationship. Basically this means two actions seem to be linked so for example the more money you spend on advertising the more enquires you receive so there’s a correlation between adverting spend and enquires. Leaders also assume that because what has happened elsewhere will also happen here yet this may not be true. The  Leader is looking at the correlation yet what correlation doesn’t do is explain the how and the why between the two actions and this is where correlation differs from causation.

Causation goes a step further and states that the change in one action will cause a change in another so using the example above causation would be when you know the enquires have come as a direct result of responding to your advertising campaign instead of other factors. The best way of thinking about it is that correlation is seeing a pattern between two actions while causation is seeing a clear link between two actions and often a Leader will confuse the two. If you act on correlation you are likely to make a bad decision yet if you act on causation you will make much better decisions. Let me provide you with an example.

There was a study in New York in which they found that when the sales of ice creams increased so did the number of murders committed. The more ice creams the more murders. There is a correlation between the two yet if they decided to ban ice creams in order to reduce the number of murders it obviously wouldn’t work because while there is a correlation there is no causation. The number of ice creams are not causing more murders. The how and why is because when temperatures are high in New York more people buy ice cream and when temperatures are high people are also more irritated and irrational which makes murder more likely. Just because actions are correlated it doesn’t mean there is a cause and effect.

It’s very tempting to jump to a conclusion when you see patterns that have a correlation. So a Leader may see that sales are down and assume that the reason is that the team is not performing well or in the opposite scenario, sales are up so the Leader believes it’s because the team is doing well. Both of these scenarios may be true but if you want to make  better decisions you can’t assume you have to go a step further and dig a bit further at each. There are other factors that are influencing sales. A Leader needs to look for causation and not just settle for correlation. Focus  on asking why and how and don’t just assume that you know because when you do you may find other factors, other pieces of information that will help you make a better decision. 

When a Leader calls me for advice about a decision I ask them if they are basing their decision based on a correlation or a causation. Remember the elephant story. The  man who held onto the elephants leg assumed he was holding a tree while the other man who held the elephants trunk felt he had a snake. Both men felt they were right and reached understandable conclusions based on the information they had and it was only when they removed the blindfold that they saw the truth. They saw the elephant. As a Leader you need to remove your own blindfold, a blindfold created with assumptions. Instead you need to focus on asking why and how, understanding  what may look obvious at first glance is in fact much more complex when you dig deeper. If you do then you will find that you will make a very different decision than the one you originally intended to make because this time  you have found the causation rather than the correlation and so you will be making the right decision.

About the Author

Mark Wager is a Leadership Coach with over thirty years of managerial experience across a range of industries. A former Broker Sales Manager with a London Finance House and a National Manager for the Ministry of Justice Mark specialises in working with Leaders helping them overcome the barriers, both technical and mental standing between themselves and success.

A strong believer in taking complex leadership & psychological theories and making them accessible to people regardless of their background, education or industry Mark has helped develop Leaders from some of New Zealand’s leading organisations such as Fisher & Paykel, Heartland Bank, NZRL, NZ Netball, NZ Soccer, NZ Basketball, Amnesty Int, Barnardos, Oxfam, Red Cross and many more.