Article 1

The Landscape of Decision-Making in Human Resources*

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How to make better decisions: an Introduction

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Gerard J. Donnellan, PhD    

A Familiar Scenario

 “I just have a good feeling about this person. He just feels right for that sales job.”  We all make judgments about other people, situations and events based on “intuition”, “gut feeling” or “hunch.  We all use an internal guide in making decisions. 

 

When this intuitive approach becomes the basis for employee selection decisions or other significant decisions in HR practice, we are on more shaky ground. A typical scenario: Several candidates are being screened for positions in a thriving, mid-sized company. Background checks, references, and the technical expertise and educational level of the candidates are similar and all are qualified based on traditional methods.  The interviews gain in significance as deciding factors in the process, since each candidate appears to be “a good fit”. 

The selection team meets to discuss the candidates. They have a good feel about two of the candidates, but are less enthusiastic about the others. As the discussion progresses, with the pressure to “get them in the door”, the group agrees to go with the first 2 candidates.  Six months later one candidate seems to be doing well, fitting right into the organization, bringing much-needed expertise to the team. She seems to be a great match.  The other candidate does not fair as well:  team conflicts have erupted around projects and responsibilities, bad feelings are taking hold, team members are grumbling, and the work is not getting done.  Individuals are already talking about “lateral moves” to other teams, and looking around at “what’s out there.”

Several questions come to mind:

  • What happened and why did one candidate do less well? 
  • Was this a poor fit? Did the HR team miss some crucial bit of information, or misjudge from the interviews?
  • What does this cost in time, money and productivity?
  • How can this process be improved?

Gerard J. Donnellan, Ph.D. is an organizational consulting psychologist. His interests include leadership development and assessment for executive selection, development and coaching.  He is president of Big Leap Performance Solutions (www.big-leap.com) and Director of the Institute for Organizational Consulting Psychology (www.mspp.edu/ocp).      Email: gerryd@big-leap.com 

* Online version appeared: BostonWorks.com (NEHRA link)

December 2004.

©2004 Gerard J. Donnellan

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Filters and Internal Models

Decision-making is inexact. Even well-trained interviewers are influenced by a host of factors, including: 

  • Organizational/systemic factors: such as pressure to get the hiring completed, team dysfunction and poor training. 
  • Environmental factors: such as temperature, time of day, the weather, the season. 

Internal factors:  such as one’s internal decision-making process, and stylistic differences in decision-making, i.e. some are more rational/analytic decision-makers, while others are more “intuitive”, by the gut feel kinds of decision-makers. These internal factors are the most elusive and most difficult to understand and control. Their influence is great, sometimes insidiously undermining good decision-making. We should be concerned about our decisions and how we make them.

Let’s briefly examine some of these hidden, internal influences on our decision-making.

Heuristics:  These are unconscious routines which enable us to cope with the complex layering of decision-making.  For example, we make judgments about a person based on our own past experiences with many different kinds of people. Internal templates, or heuristics, help us to quickly size someone up and decide, “Too fussy” or “No sense of humor”.  Sometimes we are correct and sometimes we are wrong.  Even when faced with our mistakes, we continue to use these same routines until such time that we are forced to modify them. 

These routines do enable us to attend to many complex situations simultaneously. Most times, they are helpful, freeing us to focus our attention elsewhere. The downside to these internal, automatic routines is that we misjudge and do not learn from it.   In attempting to address the issue of the bad hire in the first example, the team relied on generalities about poor team dynamics, and “just a poor fit”, rather than thoughtfully examining all the factors influencing the process.

Biases:  These are outright irrationalities in one’s thinking, disconnected from the real world.   These hardwired types of irrationalities influence one’s decision invisibly, making them extraordinarily dangerous.  Being biased against someone rarely results in good decisions.[1]

Pattern Recognition:  The recognition of patterns is an essential ingredient in the decision-making process.  What most people call “experience” is this accrual of seeing the patterns in situations. With time, this recognition of patterns allows the decision maker to quickly move to conclusions, based on apparent similarities between the new situation (or person) and the internalized template (pattern). The thought, “I know this, I’ve seen it a thousand times”, reinforces the decision. Over-reliance on pattern recognition, however, can sometimes lead to faulty and disastrous consequences, especially in high-stress, pressured situations.[2]

Decision-Making as an Intentional Process

In recent years researchers have turned their attention to the process of and the influences on decision-making.  Several findings have relevance for our discussion here:

  • Decision-making is a process. A genuine, good decision cannot be forced or be made to happen. It can be guided, influenced and moved along, without doing harm to the resulting decision.  “Let’s just get this over with and move on.” signifies that the process is already influenced by something not acknowledged by the decision-making team. It would be the time to stop and pay attention to what might be causing the pressure in the room at that moment, rather than force a poorly-made decision.
  • Experience, training and education help. These can have enormous impact in helping HR professionals make good decisions across a range of situations.  In well-run, successful organizations, OD and Leadership Development programs include concentration on and training in decision-making. 
  • Knowledge is the key.  Self-knowledge is THE key to better decision-making.  Knowledge about one’s own irrational biases and internal templates can have enormous impact on the quality of one’s decisions. What is learned in a low-risk decision-making environment, and reinforced by experience at that level, serves as a substantial base for more complex, higher risk decision-making (see below).
  • There are great variations in decision-making styles. Rooted in our personal, internalized routines, heuristics, we tend to be either more analytical decision-makers (planned) or more intuitive types (reactive).  Both types together are complementary and each brings something to the process, thereby broadening and enriching the decision-making landscape.  Whichever personal style one has, the aim is to make sound, informed decisions, less influenced by biases and heuristic distortions.
  • Team work can correct for biases and other influences. Well-functioning teams can have enormous positive impact on good decision-making, as the team can help correct other, unseen influences affecting the decision.
  • Managerial and executive-level hiring decisions have a greater likelihood of failure than mid-level and lower hires.  Much of this is attributed to the unseen influences in the process, particularly more internal, personal pressures on those involved in the process.  Competing agendas of the members of the team, in combination with personal, internal competing agendas, influence decisions in complex, unrecognized ways.

 “Highly complex and important decisions are the most prone to distortion because they tend to involve the most assumptions…The higher the stakes, the higher the risk of being caught in a psychological trap.”   Hammond, Keeney, Raiffa. HBR, 1998.

 Figure 1 (below) illustrates the relationship between the effects of unseen influences and the level of complexity of the decision. The combined effect of a more complex decision, like managerial/executive, with the pressure from internal influencers, makes these high risk decisions and thereby more susceptible to error.

In this vein, higher-level decision-making demands not just more experience, but greater self-knowledge about one’s own internal pushes and pulls, knowledge of the process, and substantive understanding of the importance of other sources of input, including others involved in the selection process, results of objective testing, and the use of competency models combined with other sources of information about the candidate.  Conversely, with less complex decisions, internal heuristics should have less impact, as the decision should be guided by more objective criteria, such as job requirements, education and professional experience.  Clearly, as one moves from low to highly complex decisions, an array of pressures impinge on the process, such as political/organizational issues and the role of money, to name a few. The impact of these non-objective influences should not be underestimated.

Decision-Making Matrix

Figure 1

Next Steps

There are several implications for HR to be drawn from this approach to understanding the decision-making process.

  • Only by attending to the process, not relying on shortcuts or easy fixes, will the process improve.
  • Those involved in the process, the team, can improve the process for each other and the team by acting as sounding boards, doing multiple interviews of candidates and creating a forum for offering constructive help to each other.
  • By utilizing the suggestions of the “what to do list” (below), a thoughtful, legitimate and not-too-cumbersome template for the entire selection process can be created.  

The suggestions offered here are meant to be a starting point for a reasoned, substantive understanding about decision-making.  As HR evolves as a profession, decision-making and problem solving skills play an increasingly prominent role for professional growth and need to be nurtured. 

           

    Addressing the problem:  What to do?

·    Training in decision-making

·     Use of behavioral interviewing techniques

·    Utilizing Metrics: Using personality and skill-based          testing

·     Using structured interviewing techniques

·     Using multiple interviewers

·    Using a team consultation model

References

Klein, G. Sources of Power: How People make Decisions.  Cambridge, MIT Press. 1998. 

Hammond, J.S., Keeney, R., Raiffa, H.  The Hidden Traps in Decision Making.  Harvard Business Review, September 1998 

Garvin, D.A. and Roberto, M. What You Don’t Know about Making Decisions. Harvard Business Review, September 2001. 108-116 

Hayashi, A. When to Trust Your Gut.  Harvard Business Review. February 2001, 59-65.

[1] Hammond, Keeney and Raiffa (Harvard Business Review, 1998) suggest a range of biases which affect the decision-making process. This is an excellent resource for a more thorough look at these unseen influences in decision-making. 

[2] Klein (1998) provides a thorough and compelling accounting of the consequences of over-reliance on pattern-recognition in high-pressure and emergency situations.


Article 2


Leadership Assessment: The Behavioral Side of Succession Planning In the Family Business

Gerard J. Donnellan, PhD

 The grim outlook for a family business surviving into the third generation is well-documented. Succession planning in family business often is a frustrating, ill-defined and drawn-out process.  At its worst, fractures give way to a contentious, politicized battle, waged on the emotionally-charged soil of age-old family issues. The old, “You always got more than I did!” gets hurled back and forth.[1] Of course, it need not be that way. One additional component to the succession-planning process can have a positive and real impact on both the process and the outcome. This article, the first of three in a series, focuses on an approach utilizing professional tests and interviews to assess potential leaders of the business.

 Why introduce another step?   Tipping the balance

At some point in the life of the business, you are faced with a question such as, “Who is next in line to assume leadership of the business? Should it be cousin Bob, sister Mary or Frank, the current non-family COO?”  The move to a merit-based leadership is significant for both the family and the business. It is a major developmental transition, one which, by necessity, you confront, as the company grows both in revenues and complexity.

 Objective assessment of potential business leaders

 One family, for example, was caught between the generational imperative, that the “next in line” should lead the company, and the business imperative: the once-small business was now large and needed professional management in order to thrive and grow. There was no organizational “place” to sort the family issues from the business issues.  The weight of the family culture, the long shadow cast by the founders[2] and the emotional pulls and competing agendas of the several generations left little room for rational, unbiased consideration of the potential leadership.  What to do?

 Get Objective:  Assessing the Leaders  

Why get an objective assessment?   

  1. Construct Firm footing  for Wise Decision-making
  2. Provide an Objective, Non-Partisan  Look at candidate      
  3. Link Leadership Skills to Business Growth

   Leadership assessment should be tied to the overall goals of the succession-planning process. Some considerations about the planning process include:

§         It should be crafted with input from all major players and with their active support

§         It needs to be objective, thorough and based on rational discussion.

§         A succession-plan needs to be intentional, with a clearly defined action timeline (see Vinci [3]).

 The process     

       Leadership assessment for family businesses involves several ingredients.  

  1. The assessor, a qualified professional experienced in working with family businesses, develops an assessment package consisting of tests and structured interviews, which are appropriate for the task.  The choice of instruments (tests) is important, as the assessment is only as efficacious as the quality of the test and the assessor. 

  1. Assessment Procedures 

                These include:

§         In-depth interviews: history of the family, the business, behavioral events and individual biographical history interviews.

§         Comprehensive personality profiles, a risk factors inventory, measures of cognitive ability and a 360º feedback survey.

 It is important that the assessment be viewed by all the stakeholders as a significant piece, although but one of several pieces in the puzzle.  The aim is to provide useful and specific information to decision-makers about the skills, qualities and competencies the candidates bring to the table. The support of all concerned is essential to the success of the assessment process. 

  1. The assessment should address the areas depicted in figure 1. Each component of the mix provides valuable information about the candidate and should be part of a thorough assessment. 

§         Personality: Does this person have personal attributes essential for success as the leader? ( Such as being well-adjusted, ambitious, sociable, a person of great integrity) 

§         Cognitive Factors: How well and how quickly does this person understand and deal with complex business issues? Does this person thrive on and welcome complex issues or wilt under pressure?  Does this person have the intellectual horsepower to lead the organization with vision?[4]

§         Organization/Team: Does this person know how to guide a team and leverage the strengths of the team to business goals?

§         Family:  What is the family culture, norms and history which could impinge on this person performing in the job?  What are the business implications?

§         Risk Factors: How does this person handle substantial stress and how will that affect on-the-job performance? What are possible derailers and how threatening are they?

§         Leadership/Job Fit:  What is the person’s history as leader, what have been the challenges and is he/she a good fit for the demands of the leader of this business? 

  1. Communication

When the assessment is completed, the assessor would provide feedback to all stakeholders:  the candidate(s), the succession planning committee, and possibly the Board and the advisors and consultants to the family business. Besides specific feedback, the assessment process would suggest considerations for development of the senior leaders and the senior leadership team, such as executive coaching, seminars, team development and other programs.  

The delicacy of the process and the fact that this is a family, suggest the need for great diplomacy and some caution at this juncture. 

Next steps: Some Tips

§         Is this kind of assessment right for you and your business?

§         What are the risks and benefits?

§         Are you committed to investing in the future through this process?

§         Be professional: this is a business, not an sporting event

§         Be careful: old feelings, motives, resentments and other “stuff” are triggered in this process. Consider setting up a Family Council as a forum to address these issues, while providing linkage between the family and the business.

§         Use your consultants and trusted advisors to help guide you – they should have the best interests of the family and the business at heart. 

As a significant member of the family business system you have the opportunity to add a dimension to an already challenging process by providing information, objective knowledge and professional input which is directly connected to the goals of the family, the ownership and the business itself.  The investment of time and resources in the leadership assessment process provides rationality, fact-based objectivity and a measure of unbiased clear-headedness when these may be sorely lacking.  

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 [1] See Ruma’s: Fourth Generation and Some Lessons Learned. FBQ, Summer 2005

[2] Davis, P. and Harveston, P.D. “In the Founder’s Shadow: Conflict in the Family Firm.” Family Business Review, XII, 4, 1999. 311-323.

 [3]  Vinci, R.A.  “Easing Family Succession”, Family Business Quarterly, Spring 2005.

[4] See Hiring for Smarts. Harvard Business Review, November, 2005.