Sunday, June 22, 2008

Opinions Over Facts for Effective Decision Making

How do you make more effective decisions?  Do you start with the facts?  To make effective decisions, you first start with opinions.  You gather facts based on what's relevant.  You then test opinions against reality.   In The Essential Drucker: The Best of Sixty Years of Peter Drucker's Essential Writings on Management, Peter F. Drucker writes about making more effective decisions.

Decisions are Judgements
Drucker writes that a decision is a judgment:

A decision is a judgement.  It is a choice between alternatives.  It is rarely a choice between right and wrong.  It is at best a choice between “almost right” and “probably wrong” – but much more often a choice between two courses of action neither of which is probably more right than the other. 

Executives Who Make Effective Decisions Don’t Start With the Facts
Drucker writes that effective decisions start with opinions:

Most books on decision-making tell the reader: First find the facts.  But executives who make effective decisions know that one does not start with the facts.  One starts with opinions.  These are, of course, nothing but untested hypotheses and, as such, worthless unless tested against reality.  To determine what is a fact requires first a decision of the criteria of relevance, especially on appropriate measurement.  This is the hinge of the effective decision, and usually its most controversial aspect.

No One Has Ever Failed to Find the Facts They are Looking For
Drucker writes that there are no facts unless you first know what's relevant:

To get the facts first is impossible.  There are no facts unless one has a criterion of relevance.  Events by themselves are not facts.  People inevitably start out with an opinion; to ask them to search for the facts first is even undesirable.  They will simply do what everyone is far too prone to do anyhow; look for the facts that fit the conclusion they have already reached.  And no one has ever failed to find the facts he is looking for.  The good statistician knows this and distrusts all figures – he either knows the fellow who found them or he does not know him; in either case he is suspicious.

Opinion Comes First
Drucker writes that we start out with untested hypotheses:

The only rigorous method, the only one that enables us to test an opinion against reality, is based on the clear recognition that opinion comes first – and this is the way it should be.  Then no one can fail to see that we start out with untested hypotheses – in decision-making as in science the only starting point.  We know what to do with hypotheses – once does not argue them; one tests them.  One finds out which hypotheses are tenable, and therefore worthy of serious consideration, and which are eliminated by the first test against observable experience.

Test an Opinion Against Reality
Drucker writes that effective people test their opinions against reality:

The effective person encourages opinions.  But he insists that the people who voice them also think through what it is that the “experiment” – that is, the testing of the opinion against reality – would have to show.  The effective person, therefore asks, What do we have to know to test the validity of this hypothesis?  What would the facts have to be to make this opinion tenable?  And he makes it a habit – in himself and in the people with whom he works – to think through and spell out what needs to be looked at, studied, and tested.  He insists that people who voice an opinion also take responsibility for defining what factual findings can be expected and should be looked for.

Key Take Aways
Here's my key take aways:

  • Know that decisions are judgments
  • Start with opinions over facts
  • Know the criteria of what's relevant
  • Test your opinions against reality

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2 comments:

Barbara Swafford said...

Hi J.D.

This statement made me laugh "They will simply do what everyone is far too prone to do anyhow; look for the facts that fit the conclusion they have already reached."

This is often the case. We find facts to fit our beliefs, but we fail to put them to the test.

J.D. Meier said...

Hey Barbara -

Oh so true. I was so happy to see this spelled out. I really like the shift from pretending we haven't made up our minds, to testing the conclusions we've reached.