Leadership and Making Decisions With Imperfect Information

Summary

Leadership requires making tough decisions with incomplete information and presenting those decisions with confidence, despite the inherent uncertainty and risk of being wrong.

Abstract

The essence of leadership is the ability to make decisions under conditions of imperfect information, a skill that transcends all fields where leadership is required. Leaders often face situations where the data is incomplete, and the time for deliberation is scarce. They must act decisively, accepting that their choices carry a significant probability of failure. Moreover, leaders must convey unwavering certainty in their decisions to inspire confidence in those they lead, even though they operate in a realm of probabilities and potential missteps. The expectation for leaders to project conviction can be at odds with the reality that they, like anyone else, can be wrong. This tension between the need for decisive action and the possibility of error is a fundamental challenge of leadership, one that requires a balance between thoroughness and expediency, as exemplified by President Jimmy Carter's delayed response to the 1979 OPEC oil crisis, which negatively impacted his public support.

Opinions

Leaders must be comfortable making decisions with a 30 to 40 percent chance of failure and cannot be paralyzed by the potential for things not to work out.
Time constraints often force leaders to make quick decisions without the luxury of exhaustive analysis or consensus-building.
Leaders are expected to project complete certainty in their decisions to reassure those they lead, despite the probabilistic nature of decision-making with imperfect information.
The requirement for leaders to act with conviction can conflict with the need for careful consideration, as seen in the criticism President Carter faced for his deliberative approach during the OPEC crisis.
Leadership involves sacrifice, including the risk of being ousted for making unpopular or incorrect decisions.
Criticism of leaders for their decisions is important for accountability but should not deter them from understanding and fulfilling their role's demands.
A leader's job involves learning from both successes and failures, accepting that wrong decisions are an inevitable part of the leadership process.

Leadership and Making Decisions With Imperfect Information

What is a leader’s job? It’s a difficult question to answer in the abstract considering that leadership is required in fields ranging as broadly as business, government, and scientific research to name just a few. But there’s one skill that is required of a leader no matter the context and that’s the ability to make decisions with imperfect information.

“Nothing comes to my desk that is perfectly solvable,” Obama said at one point. Otherwise, someone else would have solved it.

So you wind up dealing with probabilities. Any given decision you make you’ll wind up with a 30 to 40 percent chance that it isn’t going to work. You have to own that and feel comfortable with the way you made the decision. You can’t be paralyzed by the fact that it might not work out.

On top of all of this, after you have made your decision, you need to feign total certainty about it. People being led do not want to think probabilistically.”

There’s two important ideas there. First, there’s the idea that leaders have to make decisions with imperfect information. Often times decisions have to be made quickly. When there’s a run on the bank, a President can’t interview every economist, run models on every scenario, and think for long periods of time. They must act immediately. When a company loses all of its customers’ data a CEO must decide on the crisis communications strategy immediately. Time is a luxury leaders can’t afford.

In 1979 oil prices skyrocketed due to OPEC’s embargo. Americans demanded action from President Jimmy Carter. In order to make the best decision, he retreated to Camp David for 10 days. He read the Bible and invited people that represented the diverse interests of America — business and labor leaders, teachers and preachers, politicians and intellectuals — to share their opinions on what should be done. But his delay worried the country who desperately needed someone to calm their anxiety and suggest solutions. His approval ratings plummeted and by the time he addressed the nation 10 days later very few people were willing to listen. No President has ever repeated the same mistake.

President Carter sought better information. But he sacrificed something that, in retrospect, was far more valuable: expediency.

The second idea is that “You need to feign total certainty.” In other words you need conviction. You can’t say “This might be a bad idea, but I think we should do X.” You can’t couch and qualify your decision. You can’t be afraid to be wrong.

Both of these realities of leadership are uncomfortable. It’s why so few people choose to lead. It’s why leadership is often a sacrifice — after all, sometimes the people will throw you out when you are wrong.

People often criticize leaders for making the wrong decision. And that’s good. President Kennedy and Johnson led America into Vietnam with certainty. President Bush didn’t show hesitation in his decision to wage an illegal war that led to hundreds of thousands of civilian deaths in Iraq. Often times leadership is power; criticism holds that power to account. But that criticism shouldn’t distort a leaders sense of what the job entails.

If you are a leader you will be wrong. Fear, uncertainty, and a desire for everyone’s approval will paralyze you. Your job is to make choices, “feign total certainty about them”, and then learn from each success and failure.