participants in the Stanford LEAD Program

Decision Making

What makes a decision a good decision? Since chance or luck almost always has a hand in determining what happens after we make a decision, making a good decision doesn’t necessarily guarantee a good outcome. Similarly, obtaining a good outcome doesn’t prove that a good decision was made.

Roughly speaking a good decision is one that is more likely than the alternative courses of action to lead to a good outcome. Good decision making is all about following a disciplined process that helps select the course of action that is most likely to lead to a good outcome.

We face many different types of decisions daily. Some decisions are of little consequence, such as What should I wear today? or Which restaurant should I go to? In others, such as Should I buy a house? or Should I accept a new job offer?, the stakes are much higher.

In addition to varying in the importance of their consequences, decisions also vary with respect to the type of information needed, how the outcomes are evaluated and measured, and the nature of the risks involved. Many important business decisions involve elements that are readily quantifiable — for example, How should we set the price for our product to maximize our profits? or How much of a particular product should we produce? We have quantitative information we can use to make these decisions, and most of the important risk factors can be identified and can similarly be quantified, at least in approximate ways. At the other end of the spectrum, there are decisions that must be made based mainly on subjective information. For many of these types of decisions, the risks are less quantifiable because of the nature of the uncertainties involved (including “unknown unknowns”). Consider the decision: Who should be hired as our firm’s new CEO? Of course, many important decisions lie somewhere in between the purely quantifiable and objective and the purely subjective. If a company is thinking about making an acquisition, for example, the decision must take into account quantifiable measures such as potential cost savings, but should also consider how a large cultural disconnect between the two organizations might affect the success of the merger.

The fact that we are human adds considerably to the challenges of making good decisions. From voluminous research we know that we all are subject to various cognitive biases that can adversely influence our decision making, most often without our even being aware of it.

How can I make good decisions in all of these different types of situations?

In this course, you will learn tools and frameworks to help guide your decision making so that you can make (or become more likely to make) good decisions when faced with different types of decisions. Unfortunately, because of the role lady luck plays, we can make no promises about the outcomes of your decisions.

Course Introduction

Kaltura

In this course, you will:

  • Explore how good decision making involves carefully defining the objectives and aggressively identifying different ways to meet these objectives.
  • Apply some of the insights from using these tools and approaches to decisions that are less quantifiable.
  • Think critically about the value of information and the value of flexibility.
  • Explore cognitive biases that influence our decision making.
  • Develop principled ways of approaching decision making as an individual and in a group setting.

Course Faculty

Contact

Marineh Lalikian
Director, Stanford LEAD Online Business Program Executive Education