When left brain is not enough

When it comes to pushing your limits, along with analytical thinking, you have to do the `right stuff’, says Phil Rosenzweig

Good decision making has always been an integral part of leadership and management, but often marred by the fear of risk.

Phil Rosenzweig , Professor of strategy and international business at IMD, Switzerland and the author of Left Brain, Right Stuff: How Leaders Make Winning Decisions, talks about the value of doing right things at the right time:

You believe that in the realm of decision making, a critical distinction should always be made. What is it?

A distinction that is important, but often overlooked, is whether the decision is about something you can directly influence or not. Much of the work done by cognitive psychologists in the last 25 years is based on experiments where subjects make judgments about things they cannot influence, or choose between options that they cannot alter. That’s fine for understanding the basic mechanics of human cognition–but in real life, we don’t only make judgments about things that we can’t influence, and we don’t simply make choices from options that are presented to us. Very often, we can influence or change those things. As a result, the lessons we have taken from Cognitive Psychology should be amended somewhat.

For decades, researchers have told us that we have a pervasive tendency to overestimate our control over things; but recent research overturns that idea. Please explain.

Berkeley School of Business Psychologist Don Moore and his colleagues recently ran several studies and concluded that people do not consistently overestimate their level of control: instead, they have an imperfect understanding of how much control they can exert. When control is low they tend to overestimate it, and when it is high they tend to underestimate it. Rather than suffering from a pervasive illusion of control, it is more accurate to say that people can and do err in both directions. This finding is highly significant.

Research also indicates that we tend to be overconfident in many areas of life. But you have found that when we have some control over an outcome, a high degree of confidence is a good thing. Please explain.

As indicated, we can control many activities in life. For example, how well we do our jobs, how we perform on an exam, or how much effort we put into cooking a meal or playing an instrument. All of these things depend very much on the actions we take, the effort we extend, and our mindset. For these sorts of tasks, the more common error is not an illusion of excessive control, but the reverse: a failure to recognize how much control we really have.

Nobody says to you, “Karen, do you want to put together a good issue of Rotman Management or not?“ It’s the same for me: I have to teach my classes well. We’re not just choosing whether to do these things well. And in these situations, I have found that an element of positive thinking and a high level of confidence can help us do better. That is not the case for things over which we truly have no control. For instance, what’s the weather going to be like tomorrow? Will the S&P 500 go up or down next week? You and I are not in a position to change those outcomes, so having high–or even slightly elevated–confidence is not useful.

Also, when you ask somebody about something that is relatively difficult to do, they actually tend not to overestimate their abilities; in fact, they often underestimate them. So, the idea that people are consistently prone to overconfidence turns out not to be correct.

Tell us a bit about how `absolute performance’ vs.`relative performance’ fits into the picture.

Decision making has often been studied without any regard to competition. Yet in many fields, performance is best understood as relative: in business, politics, sports and more, many of the most important decisions are made with an eye to rivalry: the aim isn’t just to do well, but to do better than others.That’s why the second key to making great decisions is to recognize whether you’re trying to do well, or if you need to out-do rivals. When you combine the ability to exert control with the need to outperform rivals, suddenly it’s not just possible to influence outcomes–it’s often necessary.

The good news is, improvements in absolute performance can affect relative success.In a business environment where technologies can change suddenly, consumer preferences shift from one week to the next and rivals can emerge from anywhere, there is incessant pressure to find ways of doing bet ter, whether be it through innovative new products and services or simply better execution. Only by taking chances and pushing the envelope can companies hope to stay ahead of rivals. When performance is relative–which it always is in business–one thing is assured: playing it safe will almost guarantee failure.

You argue that some situations demand left-brain thinking and `right-stuff’.Please explain.

As indicated, many of the experiments in Cognitive Psychology have examined `no control’ choices in lab settings. These lessons are still very germane for a wide range of decisions, including consumer choice, most investment decisions, and some public policy decisions. However, when you combine the ability to influence the outcome with a desire to outperform rivals, you’re in a very different setting: this is the quadrant where strategic thinking is required, and for that you need a combination of left brain thinking and what I refer to as `right stuff’. Let me explain.

The research shows that we suffer from a wide range of thinking biases–and that we should be aware of them and try to proactively remove them. That calls for deliberate, detached thinking, which I summarise with the term `left brain’. However, in situations where you can shape the outcome, left brain thinking is simply not enough. You also have to stretch the boundaries, push the envelope, and boldly go where you have never gone before. That’s what I mean by the `right stuff’. Going beyond what has been done before does not mean being reckless: it calls for a combination of careful analysis and management of risk (left brain) with the willingness to take a step into the unknown (right stuff).

How should managers think about control when it comes to making decisions?

The essence of management is to exercise control and influence events. Of course, managers cannot have complete control over outcomes–any more than a doctor has total control over a patient’s health. They are buffeted by events outside of their control: macroeconomic factors, changes in technology, actions of rivals, etc. Yet, as indicated, it is a mistake to conclude that managers suffer from a pervasive illusion of control, and that they should temper what they think they can accomplish. I have found that the greater danger is the exact opposite: managers will underestimate the extent of control they have. Very often, they can achieve more, influence more and bring about more change than they imagine is possible. CD

Source: Economic Times

Date: 21st  August 2015

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