Gut Feeling - Greatness or Gluttony for Power?

In a recent [March 2010] article published by McKinsey Quarterly, two scholars, Daniel Kahneman and Gary Klein debated the power and perils of intuition for senior executives.

Klein, believes intuition to be a powerful support tool to good decision making in certain circumstances. In high-pressure environments, where time to explore a more analytical decision making process, intuition is a powerful ally. But that doesn’t mean one should ‘trust’ ones gut feeling; it must be valued for no more than it is - an important reference point. One should always explore ones intuition in the context of the current situation to challenge assumptions that relate to experiences in the past through which these assumptions have been formed. It needs to still make sense in the situation now.

When one is under time pressure for a decision, often a gut instinct is all you have to go on. However, don’t fall into the trap of believing that one can be confident in relying on instinct in less pressing situations. At best, ones intuition will guide a decision in terms of the negative rather than the positive, that ‘something just doesn’t feel right here’.
So are there any guidelines around when to rely on ones gut feeling. According to Klein there are two:

When there is a certain predictability to a situation that supports the valid use of intuition
When decision makers can get feedback on their judgments

In spite of these constraints, many instances of business intuitions and expertise are going to tell the executive something useful, and should not be discounted.

Daniel Kahneman is more wary of so called experts’ intuition, except when it relates to something with which they have had a lot of experience with. For instance, surgeons learn to recognize indicators that point to potential problems. However when problems are less common, then trusting intuition can be more than foolhardy, it can be lethal to the patient.

One must also be wary of ‘leaky gut’ - when ones justified use of intuition in one area of expertise wrongly leads one to believe they are confident in relying on intuition in other areas. Intuition has boundaries, and executives need to be aware of where those boundaries lie for them personally. The past economic turmoil provided numerous examples of where CEO’s made hasty decisions based on intuition that was borne from previous downturns. Their false confidence in applying the same tactics to keep them out of trouble this time was based on assumptions that the conditions were the same as last time. Nothing could have been further from reality. Lehman Brothers come to mind?

There is a fine line between confidence and overconfidence in one’s own judgement. And recruitment selection processes appear to endorse over-confidence, favouring those executives that are willing to take a risk on judgement alone. Such decisive personalities are viewed as great leaders. Leaders who tread this path need to be cautious, and be willing to act as their own devil’s advocate, constantly challenging their own assumptions and monitoring the impact of their decisions and not be afraid to ‘make corrections’ after the fact. Nothing is more transparent than a so-called leader pretending to know about something they don’t. Trust and respect fall away very quickly.

One possible resolution to avoiding this mistake is adopting a simple pre-decision process that may or may not incorporate a mental checklist of some kind. A personal due diligence that may include items such as - what assumptions am I relying on, how might these assumptions not apply to this situation, who am I being influenced by and what assumptions are they making that may not be visible to me etc. This helps to balance out the risk taking with error avoidance. Avoid making premature estimates when quantifying inputs to decisions - you may just fall into the trap of making everything else fit to validate your first cut at validating your decision. Gather whatever reliable information available as soon as possible and mentally caution yourself not to disregard any data that just happens to contradict or not support your initial gut feeling. Continue validating previous estimates whenever new data and/or new opinions enters the mix. It is very hard to overcome one’s own bias, so adopting some sort of rigorous process to keep yourself in check will help to avoid making premature decisions that may result in costly errors. At the very least, one can then feel confident that the decision was made using the best possible information available at the time.

Read the full article here