It’s hay and harvest time and no doubt the seasonal review and thoughts of next year are mulling in your head as you make daily decisions. I’m sure there are a few annoyances at the top of your list at present: crappy barley prices, tangled crops, unbaled hay, high maintenance lentils and ill-timed rain.
The following information could be worth reading before you throw out your least favourite barley variety, vow never to grow hay again or make any other decisions about the things that annoy you right now.
Good decision making is a habit of highly effective farm businesses.Have you ever noticed some people seem luckier or unluckier than others? Often, the difference lies with decision making.Decision making is difficult when under stress and different personality types make decisions in different ways.
Decision making biases
Biases such as those listed below are mostly made subconsciously but can be avoided with awareness and practice. Self-awareness of tendency towards a bias, helps us adjust the thought process to avoid the bias or at least account for it (Skipper 2011). Equally, being aware of decision making traps of business partners and peers can help process how valid their case is when discussing views.
To improve the odds of making a good decision, it’s worth exploring some common traps for making poor decisions. Hammond et. al. (2006) lists the following biases:
Anchoring: where an initial estimate may anchor or distort all attitudes to more recent, or more accurate estimates. Thinking in the past to decide for the future E.g judging this year’s prices on the previous years.
Escalating commitment (sunk costs): where previous actions are used to justify subsequent actions. E.g harvesting a crop thick with ryegrass because the money already sunk when the better long term action is to make hay or spray out the worst patches).
Perpetuating the status quo: inertia and unwillingness to change or adopt innovative practice. Tactics used to avoid the stress of a difficult and risky decision are procrastination, shifting responsibility for the decision or presenting the status quo as the safest option.
Over-confidence: being over confident and often over-optimistic about possible outcomes. This is a problem if ‘good news only’ is accepted and leads to denial. E.g refusing to take notice of climate indicators if the potential outcome is very unfavourable.
Optimism: making decisions based on delusional optimism rather than rational analysis of possible gains, losses and probabilities. Methods of optimistic decision making include overestimating benefits, underestimating costs, promoting the upside without acknowledging the risks.
Confirming evidence:choosing information that confirms an opinion and ignoring information that contradicts that opinion.
Framing: manipulating the context in which decisions are presented. E.g framing low profits as a need to cut costs which leads to less revenue and less profit despite the cost cutting. If framed as a need to increase revenue the actions and outcomes may have been different.
False consensus: where talkers overcome thinkers and the noisy ones get their way
This snapshot does not cover all the biases but hopefully it creates some awareness of your decision making habits.
Practical things you can do?
- Keep some seed of that pesky barley variety and review its fate after harvest.
- When uncertain about something, think about the size of decision. What are the monetary and non-monetary consequences?
- Don’t sweat the small stuff and take time and consideration over the things that matter the most.
- Check yourself against the common biases and adjust your thinking if need be.
- Save the big decisions for when you are not stressed or tired.
- Keep up the good work and happy harvesting.
P.S I’m saving the influence of gut feeling and intuition on decision making for another day.
References
Hammond, Keeney and Raifa (2006). The Hidden Traps in Decision making Harvard Business Review
Skipper, A (2011). Decision Making In “Australian Institute of Company Directors Course Notes AICD.