Leadership Solutions from Read Solutions Group: Gut Decision or Rational Analysis

Saturday, September 01, 2007

Gut Decision or Rational Analysis

The debate rages over whether gut reaction or rational analysis is the key to effective decision-making. Over on BrainBased Business, Dr Ellen Weber highlights various recent discussions on Why Gut Reactions Work Without Rational Support, specifically citing the work of Dr. Gigerenzer, director of the Max Planck Institute of Human Development in Berlin. In discussing the support for his perspective, he notes the role of intuition, of hunches, in scientific research.

On the flip side of the argument, we might want to give credence to the work of Harvard Business School professor Max H. Bazerman, author of Judgment in Managerial Decision Making. In an article in Harvard Management Update May 2007, he explains why intuition can be fallible in a high-stakes decision. Scientific test of intuition show a heavy influence of various cognitive biases - in particular, overconfidence, "anchoring" judgments to a piece of information that may or may not be relevant, and a tendency to overweight recent or "vivid" data.

Setting aside the question of whether the analysis themselves are being done objectively, perhaps the question is better presented as what are the relative roles of intuition and rational analysis in a decision? Does it depend on the "stakes" of the decision as suggested by Bazerman? In either case, when rational analysis and intuition disagree, then what? Using both rational analysis and intuition provide you with a tremendous amount of information. When the conclusions disagree, you have even more information at your disposal. Where are your biases? Are they pointing to incorrect assumptions in the analysis? Are they suggesting an inconsistency in your objectives? Rather than dismiss one over the other, a disagreement calls for serious reflection and perhaps the need for additional support.

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