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Decision-Making
What Is a “Good” Decision?
We often confuse the decision-making process with its outcomes, but shouldn't.
Posted July 9, 2017 Reviewed by Ekua Hagan
“The risk of a wrong decision is preferable to the terror of indecision.” – Maimonides
We make decisions all the time, in professional and personal situations. It is natural, then, that we should wonder whether a decision that we made was a good one and whether we could have done better.
What exactly is a “good” decision? On the surface at least, the answer may seem obvious. However, in reality, it is deceptively difficult to pin down exactly what a good decision is.
I wrote a book about pricing decisions recently, so let me use an example from there. Consider the case when a business manager makes a decision to change prices. When the manager is asked what they consider to be a good pricing decision, they will often say a good pricing decision is one that “increases my company’s sales” or one that “earns my company the highest amount of profit.” When the business environment is challenging, they may assert that a good pricing decision is one “that allows my company to survive severe conditions and live to fight another day.”
The same is true of personal decisions. Imagine that my wife and I want to go on a summer vacation. We go through a decision process to choose various details of the vacation (where to go, when, how, etc.). What would we consider to be a good decision for our vacation? Most people would say that a good vacation decision is one that leads us to have a fabulous experience and the most enjoyment for a reasonable amount of money.
The problem with all these answers is that they ignore the process of making the decision entirely and pay attention only to the decision’s outcomes. Ignoring the decision-making process in favor of outcomes is problematic for at least two reasons.
It is difficult (or even impossible) to determine all the decision’s outcomes.
When making decisions, the person decides at a one-time point, and the decision’s results occur later on, sometimes after weeks, months, or even years. In fact, for most decisions, the outcomes occur over an indeterminate length of time.
Returning to my vacation decision, let’s say that after considering other options carefully, and also thinking about the trip’s logistics, we decide to go on a driving tour of the Grand Canyon from our home in Houston. We will only know whether the vacation was a success after it is over. And even then, whether we had the most fun possible and got the most value for our money when compared to other trips we could have taken will always remain a mystery.
Similarly, when a company cuts prices, it takes weeks or months to assess whether its sales increased enough to earn a greater profit than before. The company may never be able to know how many of its increased sales were new sales because of the price cut and how many were simply customers stocking up because they were getting a product at a deal. The main point here is that it is very hard to pin down the outcomes of most decisions.
Decision outcomes are driven by many factors that the decision-maker simply cannot control.
There is a second, equally significant problem with using outcomes to judge whether a decision is a good one: the effects of uncontrollable factors. After a decision is made, and before its outcomes occur, numerous factors outside the individual’s control could exert an influence. Such effects could be positive or negative and may have little to do with how the decision-making process.
After making a very careful decision after weighing the pros and cons of different options, we set out for our Grand Canyon vacation. Unfortunately, almost immediately, we ran into bad weather on the road, and it continued to get worse. Roads were flooded, and there were numerous accidents causing traffic nightmares. Eventually, because of the time lost, we were never able to reach the Grand Canyon and had to turn back midway without ever witnessing its majesty. There’s no way we could’ve predicted the inclement weather beforehand or how it would turn a fun vacation into a week-long nightmare. In this case, our decision’s outcome was disastrous, yet I would argue that it was not the fault of our decision-making process.
To ascertain whether a decision is good or not, the focus should be on the decision-making process, not on outcomes.
Whether it is the military, medicine, or industry, decision-making experts have warned against relying on outcomes when evaluating a decision’s quality and judging whether the decision was a good one. In medical decision making, for instance, physicians are taught the concept of making an “informed decision” when helping patients to choose between different treatment options. An informed medical decision is one where all the available information about the various options is gathered and weighted, and the final choice includes a consideration of the patient’s and the physician’s values.
Notice that in this definition of an informed decision, nothing is said about the patient’s health outcomes. This omission acknowledges that numerous factors are outside the patient’s and the physician’s control, and have nothing to do with the decision process, that can still affect the patient’s health outcome. Under these circumstances, the best that the patient and physician can do is put their heads together and make an informed decision, and then implement it. The outcomes will take care of themselves.
This is an imperative point that is equally valid for all decisions, not just medical ones. Based on the emphasis on process, here’s my definition of a good decision:
A good decision is one that is made deliberately and thoughtfully, considers and includes all relevant factors, is consistent with the individual’s philosophy and values, and can be explained clearly to significant others.
Do you agree with this definition?
In future posts, I shall write more about how to make good decisions and the effects of the decision-making process on outcomes.
My book, How to Price Effectively: A Guide for Managers & Entrepreneurs, is now available either as a free PDF or for purchase from Amazon.
