Why we systematically make wrong decisions

leadership Jul 23, 2020

In the last 10 weeks, I have had 3 potential customers who have put off their own investments to better serve the performance of their sales team. The most important reason: the current uncertainty due to the consequences of COVID-19. 

I find this fascinating. After all, we are not talking about amounts that hit the company's cash reserves: The monthly salaries far exceed the one-off investments. And especially in sales, the probable ROI is significant (usually a few additional sales or a higher price here and there is enough for a factor of 1:10).

My point is this: it has long been scientifically proven in various studies (Daniel Kahneman and others) that we make highly irrational decisions, even when we believe we are rational: we weigh direct losses significantly higher than probable gains, even if these losses are irrelevant to our well-being.

This is precisely why too many companies and teams are stagnating: they tend to value even manageable risks more heavily than the often significantly greater opportunities. I call this "trapped in mediocrity."

Here are three ideas on how your team and you can break the proverbial deadlock more often and make better decisions:
  1. Think in terms of results. Too often we only think about what lies immediately ahead (often even in strategy discussions). Most people - even CEOs - find it difficult to work out the desired results. I know this because I start every engagement with a crucial question: "What do you want to be different afterwards?” Most people find it extremely difficult to find the answer because they have not trained themselves to do so.
  2. Evaluate non-action. We intuitively think that doing nothing costs us nothing. Hardly anything could be further from the truth. The cost of not acting is usually significantly higher than the cost of acting, even if mistakes occur (and they will). For example, one of the biggest wastes is not investing in the ongoing development of your team.
  3. Expect positive effects. As a sparring partner of top leaders, I always point out the enormous effect that the radiance of one's own expectations has on the team. If you have doubts about the benefits or uncertainties (see point 1), your people will feel the same. Conversely, a clearly articulated positive expectation on the team can move real mountains. 

Conclusion: Most companies and teams have huge opportunities - if they start thinking differently. If you want to take yourself or your management team to a new level, get in touch for a strategy session. Click here for more information.


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