Reference no: EM133147813
Read the article provided on decision-making errors and complete the activities:
1. List the decision-making errors.
2. Ways to avoid those mistakes.
Four mistakes in decision making
Every day, you have to take certain actions, choose certain tactics and navigate through a plethora of other choices. Here are four of the most common decision-making mistakes.
Perpetuating unimportant decisions
Research from the University of Florida has shown why people get stuck with unimportant decisions. It turns out that they associate important decisions with complexity (!), so sometimes unimportant decisions are overemphasised. Especially when the decision initially looks like it will be very simple.
The more we put off making a decision, the more we unconsciously think it is important. The result is a vicious circle: the more you delay a decision, the more important it is, and the more important it is, the more you delay. A simple and effective way to solve the problem is to set a time limit within which the decision has to be made.
Ignoring sunk costs
One of the most common problems in decision making is the failure to recognise sunk costs. Sunk costs are resources that you have already lost as a result of a wrong decision and that cannot be recovered. Say you invest in new order picking equipment and soon realise that it will not improve your efficiency.
Of course, nobody likes to take a loss, but most people hope that if they invest a little more in what they already have, the problems will go away. Unfortunately, that is the main problem - you cannot turn a bad investment into a good one. As the famous investor Warren Buffett said, "If you fall into a hole, get out of it instead of making it deeper."
Drowning in information overload
The business world places a tremendous value on information, and for good reason. Data and information can help you make smarter decisions. But too much of a good thing can overload the human brain, leading to "paralysis by analysis". In addition, the information you have may be inaccurate, or you may exaggerate data that is in line with your expectations but not necessarily realistic.
The more we postpone a decision, the more we unconsciously think it is important. The result is a vicious circle: the more you delay a decision, the more important it is, and the more important it is, the more you delay.
First, make sure the information you have is the information you need. Understand that when entering a new market, a sales histogram is hardly helpful - it tells you where you have been, not where you will be. Secondly, don't overload yourself with too much information. Select a few critical criteria and factors that will guide your decision.
The "decide or die" mentality
We live in a noisy world and it's easy to over-exaggerate almost everything: a meeting, an investment, a business decision. The truth is that very rarely will you have to make a "life and death" decision. And if you do, you will have made a lot of wrong decisions before then.
Understand that every decision is temporary. Circumstances change, so a particular decision will also have to be changed in the future. You may lose some time and money, but if it adds value, it may be more worthwhile. You want your business to thrive in the long term, so instead of changing direction with every decision, have a 'big picture' and be consistent with it.