Making intelligent decisions amid a crisis

The state finance minister of Germany’s Hesse region was found dead last March 28. According to a Bloomberg report, he appeared to have killed himself based on authorities’’ report, and the state governor suggested that he was in despair over the fallout from the coronavirus disease 2019 (Covid-19) crisis. As of March 30, Germany had 4,450 cases of Covid-19.

In Arizona, an emergency management director resigned because of frustration over the state’s Covid-19 response. As of March 30, the state had more than 900 Covid-19 cases. In the Philippines, Health Secretary Francisco Duque 3rd admitted last March 11 that the declaration of a state of public health emergency should have come much earlier and that he should have declared it himself. The country has more than 2,000 confirmed cases now.

These are just some examples of thinking and decision-making under stress. Everyone reacts differently to stressful situations – from resignation and poor decisions to the extreme of taking one’s life.

Research shows that when we face a crisis, our mental state moves from one of restful and straight thought processes, toward increased worry, anxiety and anger. Anger is becoming more intense among individuals under stress, as evidenced by finding fault in others – from China causing the virus, to the city mayor not distributing relief goods, to the government not doing this and that.

These changes in our emotional state can be overwhelming and cause strong emotions in leaders and ordinary people, which blur one’s thought process and decision-making in everyday situations.

How do we react under pressure and what can we do to improve our judgements and decisions? The answer lies in understanding where stress comes from. We get stressed when we don’t know what to do in crisis situations that are under time and resource constraints.

One behavioral manifestation of stress is worrying. This reduces our thinking power by using up valuable mental resources, resulting in less thinking capacity to solve problems in crisis situations. Similar to how computers slow down when there’s multiple open applications, our mental processing capacity is reduced when we worry about our family, our business, our employees and our money.

A way to help us think straight in times of crisis is understanding and using mental models.

These are frameworks that help us how we understand the world. “Not only do they shape what we think and how we understand but they shape the connections and opportunities that we see,” according to think-tank Farnam Street. “Mental models are how we simplify complexity, why we consider some things more relevant than others and how we reason.”

One such mental model is systems thinking. This is a holistic approach to analysis that focuses on the way that a system’s constituent parts interrelate and how systems work over time and within the context of larger systems.

Since crisis situations encourage “narrow” thinking, i.e. concentrating on priority information that may lead to missing the bigger picture, systems thinking considers the different components of the system and balancing the processes within the system. A reinforcing process leads to the increase of some system component. If reinforcement is unchecked by a balancing process, it eventually leads to collapse.

This is how countries are struggling to balance the need for hospitals, supplies, health care workers, jobs and business, and food for the poor. Focusing on one part of the system, like how prolonging a business-as-usual environment leads to more possible infections, which leads to bigger damages to business. That’s why attention to feedback and agility in adjusting the decisions are an essential component of system thinking, where decision-makers need to understand the potential impact of the different system components.

Another way to make intelligent decisions is to be aware of and to avoid confirmation bias and group think. Even when decision-makers do try and consider the bigger picture, when faced under time pressure, there is a tendency just to select the facts and information that support or confirm initial interpretations and conclusions.

I’ve seen this with business executives before the enhanced community quarantine (ECQ) in Luzon, where they listened to the advice of some “experts” who said that Covid-19 will die down in mid-March because of the summer season, which just confirmed their false hopes of continuing business-as-usual, but leaving out the real risks that were looming.

This is where the decision-maker should make use of diversity of thought, i.e. having advisers and team members with diverse backgrounds, to ensure balanced and well-thought-of decisions in times of crisis. The decision-maker should be deliberate in choosing the advice of the “opposite view” to see to it that all the effects of the different parts of the system are exhausted.

Another mental model that decision-makers can use is probabilistic thinking. “Probabilistic thinking is essentially trying to estimate, using some tools of math and logic, the likelihood of any specific outcome coming to pass,” as defined by Farnam Street. “In a world where each moment is determined by an infinitely complex set of factors, probabilistic thinking helps us identify the most likely outcomes.”

This is useful when the whole system is mapped out, i.e. community, business, citizens, hospitals and so on, and estimating the probability of occurrence of an event when you reinforce on of the system components. For example, what’s the probability that the ECQ will be extended for another month; then from there the business person can make better decisions.

While all of the aforementioned tools make use of logic and reason to think straight, it’s all but impossible to take emotion fully out of crisis decision-making – and even then, there could be a backlash against “cold,” heartless judgements. That’s why a combination of reason, logic and diversity of thinking will ensure a well-balanced decision-making process in the face of this crisis.

 

The author is the chief executive officer of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is also the chairman of the ICT Committee of the Financial Executives Institute of the Philippines (Finex). He is also the country representative of the Institute of Change and Transformation Professionals Asia and fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA program of De La Salle University. The author may be emailed at rey.lugtu@hungryworkhorse.com.

Source: https://www.manilatimes.net/2020/04/03/business/columnists-business/making-intelligent-decisions-amid-a-crisis/709026/

Leave a Comment