Chip Heath and Olivier Sibony on “Making great decisions”
Here is an excerpt from the transcript of a conversation featured by The McKinsey Quarterly during which Stanford’s Chip Heath and McKinsey’s Olivier Sibony discuss new research, fresh frameworks, and practical tools for decision makers. To read the complete transcript, check out other resources, learn more about McKinsey & Company, and register for Quarterly email alerts, please click here.
Source: Strategy Practice
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Every few years, Stanford University professor Chip Heath and his brother, Dan, a senior fellow at Duke University’s Center for the Advancement of Social Entrepreneurship (CASE), distill decades of academic research into a tool kit for practitioners. The bicoastal brothers offered advice on effective communications in Made to Stick, on change management in Switch, and now, in their new book, Decisive: How to Make Better Choices in Life and Work, on making good decisions. It’s a topic that McKinsey’s Olivier Sibony has been exploring for years in his work with senior leaders of global companies and in a number of influential publications. 1
Chip and Olivier recently sat down to compare notes on what matters most for senior leaders who are trying to boost their decision-making effectiveness. Topics included Heath’s new book, research Sibony and University of Sydney professor Dan Lovallo have under way on the styles of different decision makers, and practical tips that they’ve found make a big difference. The discussion, moderated by McKinsey’s Allen Webb, represents a state-of-the-art tour for senior executives hoping to help their organizations, and themselves, become more effective by benefiting from the core insight of behavioral economics: systematic tendencies to deviate from rationality influence all of our decision making.
The Quarterly: What’s the current state of play in real-world efforts to improve decision processes through behavioral economics?
Olivier Sibony: The point we haven’t conveyed effectively enough is that however aware you are of biases, you won’t necessarily be immune. You should see yourself as the architect of the decision-making process, not as a great decision maker enhanced by the knowledge of your biases.
Chip Heath: The analogy I like is how we handle problems with memory. The solution isn’t to focus harder on remembering; it’s to use a system like a grocery-store list. We’re now in a position to think about the decision-making equivalent of the grocery-store list.
Olivier Sibony: We’re doing ourselves a disservice by calling it a decision-making process, because the word “process,” as you point out in your book—
Chip Heath: — It’s boring.
Olivier Sibony: It immediately conjures up images of bureaucracy and slowness and decisions by committee—all things associated with bad management.
Chip Heath: Early in the history of decision making, people were optimistic about a better process called decision analysis. But nobody ever used it, because very few people have the math chops to fold back probabilities in a three-layer decision tree. The process that we’re advocating runs away from decision analysis and bureaucracy. We wanted some tools that someone could use in five or ten minutes that may not make the decision perfect but will improve it substantially.
Olivier Sibony: There are individual solutions and organizational solutions. Perhaps because we’re a consulting firm, we tend to look for organizational solutions. In an article you wrote long ago, Chip, you quote somebody who asks something like, “If people are so bad at making decisions, how did we make it to the moon?” Your answer was that individuals didn’t make it to the moon; NASA did. 2 That insight has been translated into all sorts of operational decision making. It is the fundamental insight behind work in continuous improvement—for instance, when people are trained to go beyond the superficial, proximate cause of a problem by asking “five whys.”
But we don’t apply that insight when we move from shop floors to boardrooms. Partly, that’s because of a lack of awareness. Partly, it’s because the further up the hierarchy you go, the harder it becomes to say, “My judgment is fallible.” Corporate cultures and incentives reward the kind of decision making where you take risks and show confidence and decisiveness, even if sometimes it’s really overconfidence. Recognizing uncertainty and doubt—it’s not the style many executives have when they get to the top.
Chip Heath: Yes, but we’re never really sure when we’re being overconfident and when we’re being appropriately confident. That’s where we go back to processes.
Olivier Sibony: It’s a lot easier to say, “Let’s build a good process so your direct reports have better recommendations for you” than “Let’s come up with a process for you to be challenged by other people.”
Chip Heath: I love that emphasis: “We’re going to help others get you the right recommendations.” We all tend to believe “I’m not subject to biases.” But we can easily believe that others are. I’m curious about your batting average, Olivier. Suppose you walk into an executive group and start talking about the behavioral research and how they could change their processes to overcome biases. Are a third of the people interested? Five percent?
Olivier Simony: If we tell the story like that, it’s zero. But exactly as you just suggested, a lot of executives are open to discussing how their teams could help them make better decisions. So we will say, for example, “Let’s talk about what works and what doesn’t work in your strategic-planning process.” We don’t talk about biases, because no one wants to be told they’re biased; it’s a word with horrible, negative connotations. Instead, we observe that people typically make predictable mistakes in their planning process—for instance, getting anchored on last year’s numbers. That’s OK because we are identifying best practices. We end up embedding this thinking into processes that generate better strategic plans, R&D choices, or M&A decisions.
Chip Heath: The process changes don’t have to be very big. Ohio State University professor Paul Nutt spent a career studying strategic decisions in businesses and nonprofits and government organizations. The number of alternatives that leadership teams consider in 70 percent of all important strategic decisions is exactly one. Yet there’s evidence that if you get a second alternative, your decisions improve dramatically.
One study at a medium-size technology firm investigated a group of leaders who had made a set of decisions ten years prior. They were asked to assess how many of those decisions turned out really well, and the percentage of “hits” was six times higher when the team considered two alternatives rather than just one.
Notes
1 See, for example, Dan Lovallo and Olivier Sibony, “The case for behavioral strategy,” mckinseyquarterly.com, March 2010; and Daniel Kahneman, Dan Lovallo, and Olivier Sibony, “Before you make that big decision,” Harvard Business Review, June 2011, Volume 89, Number 6, pp. 50–60.
2 See Chip Heath, Richard Larrick, and Joshua Klayman, “Cognitive repairs: How organizational practices can compensate for individual shortcomings,” Research in Organizational Behavior, 1998, Volume 20, pp. 1–37.
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To read the complete transcript of this conversation, please click here.
This discussion was moderated by Allen Webb, editor in chief of McKinsey Quarterly, who is based in McKinsey’s Seattle office.
Lee LeFever: An interview by Bob Morris
Lee LeFever is the founder of Common Craft and author of The Art of Explanation- Making Your Ideas, Products and Services Easier to Understand. In 2007 he saw an opportunity to explain technology using short animated videos. Starting with the video RSS in Plain English, he and Common Craft produced a series of videos and created a visual style that has inspired communicators around the world. Today, videos that use paper cut-outs and a whiteboard are known as “Common Craft Style” and are often made by students as classroom projects.
Since 2007 his company has worked with the world’s most respected brands, inspired the explainer video industry and earned over 50 million online views. The video Common Craft produced with Dropbox.com has resided on the company’s home page for over three years and generated 30 million views.
Today his focus is helping others become better explainers through the book and Common Craft Membership, which offers ready-made videos, cut-outs and know-how. He lives in Seattle, WA with his wife and business partner Sachi and their dog Bosco, a fine swimmer.
Here is an excerpt from my interview of him. To read the complete interview, please click here.
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Morris: Before discussing The Art of Explanation, a few general questions. First, who has had the greatest influence on your personal growth? How so?
LeFever: This is very clear to me. It is my wife, Sachi. She is a constant source of motivation and perspective. She has taught me the meaning of excellence and helped me see small ways I can improve every day. We mold and teach each other in every part of our lives.
Morris: Years ago, was there a turning point (if not an epiphany) that set you on the career course you continue to follow? Please explain.
LeFever: Yes, I can remember a specific instance when I saw the problem that I would spend years trying to solve. I was at a small conference in Silicon Valley in 2004 and a tech CEO was speaking to a group of 50 people. The CEO mentioned RSS, the technology that makes it easy to subscribe to a website. When a gentleman asked “What is RSS?” the CEO replied with an answer I’ll never forget: “It’s an XML-based content syndication format.” His answer was technically correct and mostly incomprehensible. It was at this point that I saw the explanation problem for the first time. The big thing limiting the adoption of RSS was not necessarily design, price or availability, but explanation. The technologists were doing the explaining and doing it poorly. I thought I could do better.
Morris: What do you know now about the business world that you wish you knew when you when to work full-time for the first time? Why?
LeFever: There’s a quote I’ve heard that I think about sometimes. It goes something like “Don’t spend your time working on someone else’s dreams – go work on your own.”
Morris: The greatest leaders throughout history (with rare exception) were great storytellers. What do you make of that?
LeFever: I accept it as truth, but I have a twist on it. Storytelling is a general term that has broad meaning and value. But stories do not, by default, solve problems or make things easy to understand. I think great leaders are often great explainers who use storytelling as one means of making their communication more interesting and understandable.
Morris: In recent years, there has been criticism, sometimes severe criticism of M.B.A. programs, even those offered by the most prestigious business schools. In your opinion, in which area is there the great need for immediate improvement? Any suggestions?
LeFever: Communication. From my perspective, there is a single thread that runs through nearly every part of professional life – the ability to communicate clearly. Without it, one can accomplish very little.
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To read the complete interview, please click here.
Lee cordially invites you to check out the resources at these websites:
Watch Common Craft videos here.
Find The Art of Explanation at its Amazon page here.
Lee’s personal website is here.
Getting the Basics Right (Like Communication, and Team Building) – It is Still, and Always, Hard To Do
Getting the steps right is proving brutally hard, even if you know them.
Atul Gawande, The Checklist Manifesto
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This week, I am presenting synopses of Made to Stick by Chip and Dan Heath and Tribal Leadership: Leveraging Natural Groups to Build a Thriving Organization, both to law enforcement professionals. (And my colleague Karl Krayer is presenting another book on communication at the same gathering).
Why?
Because, these professionals, like so many others in practically every arena, deal with these two problems:
#1 – how to build, and maintain, effective teams.
#2 – how to communicate, clearly and effectively, to everyone on the team (and to those outside the team).
The more I speak, the more I listen, the more I “consult,” the more I realize this challenge. It is not a new challenge, it is not a modern challenge. It is an old challenge.
We don’t get the basics right.
Team building, communication – these are basics. And after countless books and training seminars on both, we still have unclear communication and ineffective, dysfunctional teams.
My counsel to you – keep working on both of these. Pay attention to your team members. Pay careful attention to your spoken and written communications. Do you listen, and encourage, and include, and support each one of your team members? Are your e-mails clear – do you put your sentences together effectively? Do you speak clearly?
Build Teams. Communicate clearly and effectively. These are two of the basics we just have to get right.
Overload! A book review by Bob Morris
Overload! How Too Much Information Is Hazardous to Your Organization
Jonathan B. Spira
John Wiley & Sons (2011)
How and why more information usually means less information has impact
Chip and Dan Heath are the co-authors of two brilliant books, Made to Stick and Switch. In the first, they explain (as its subtitle suggests) “why some ideas survive and others die.” In his book, Overload!, Jonathan B. Spira addresses a much larger issue: Why too much information is “hazardous” to an organization’s health and also to the health of many among its workforce. As he explains, “Information Overload is killing us. It is death by a thousand paper cuts in the form of e-mail messages, documents, and interruptions…While there is relatively little we can do about Information Overload, we don’t have to grin and bear it. What does help reduce Information Overload and lessen its impact is 1.) raising awareness and 2.) presenting context and history as to why the problem is occurring.”
He goes on to observe, “Raising awareness helps because most people are simply unaware of the root causes of Information Overload, such as poor search techniques, unnecessarily copying dozens if not hundreds of colleagues on an e-mail, or calling someone two minutes after sending an e-mail simply to tell the recipient of its presence. Providing context and history puts things into perspective.” Spira organizes his material within two Parts: “How We got Here” and then “”Where We Are and What We Can Do.”
My own rather extensive experience supports Spira’s assertion that Information Overload is both the result of several serious problems that are its root causes, and, is itself the root cause of countless other serious problems. For example, in an organization in which senior management has determined that collaboration must be increased and improved, people will be under severe pressure be become much more involved in communication and cooperation between and among associates. This will create an Information Overload that, in turn, consumes time and energy that should have been allocated elsewhere.
I presume to offer four suggestions to those who read this brief commentary. First, decide whether or not you and/or your organization now suffers from Information Overload. If so, pin down precisely what the most serious problem is (e.g. too many non-essential emails to send and/or read, too many non-essential reports to complete or read). Next, carefully check Spira’s coverage of that specific problem in the book. Finally, read Part I and then only the material relevant to the most serious in Part II. All or even most of the problems cannot be solved simultaneously.
I have no quarrel with any of his advice but do think he calls prey to the perils of Information Overload his book was intended to reduce. The more information, insights, and recommendations he provides throughout the 21 (count `em, 21) chapters within 237 pages, the less impact his most important ideas have. I think a much different format that includes reader-friendly devices such as checklists, self-diagnostic exercises, and end-of-chapter summaries of key points would have better served his purposes. One man’s opinions.
That said, I commend Jonathan Spira on the quality of content and the scope and depth of his analysis of serious problems that cause or result from Information Overload. I now urge him to consider an Overload! Fieldbook (with a workbook format), one that correlates with this book’s sequence of subjects but also enables people to interact with the material by completing exercises that accomplish two important objectives: They help the respondent to define the nature and extent of a given problem — in its context — within her or his own situation and/or organization; also, they emphasize the most important points, thus facilitating, indeed expediting frequent review of both those points and responses later.
As I said, one man’s opinions.
Clear; Simple; Concrete; Unexpected; Credible; Story; To the Point – Communicating 101
Do you have any idea how much time is wasted trying to figure out just what that other person is trying to say to you? Do you have any idea how much time is wasted by that other person trying to figure out what you are trying to say?
Unclear messages, whether verbal or written, are massive time wasters. They create uncertainty, tentativeness, confusion… If you have something to say, you do everyone a favor if you say it clearly: get to the point – get it said!
This is the message behind the Heath brothers’ principles of communication, in which they suggest that all speakers/writers communicate using principles such as simplicity and concreteness.
Here is the way they put it in their book, Made to Stick: Why Some Ideas Survive and Others Die.
Had John F. Kennedy been a CEO, he would have said: ”Our mission is to become the international leader in the space industry through maximum team-centered innovation and strategically targeted aerospace initiatives.”
Here’s what he actually said:
“I believe this nation should commit itself, to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.”
Simple? Yes. Unexpected? Yes. Concrete? Amazingly so. Credible? The goal seemed like science fiction, but the source was credible. Emotional? Yes. Story? In miniature.
The moon mission was a classic case of a communicator’s dodging the Curse of Knowledge. It was a brilliant and beautiful idea – a single idea that motivated the actions of millions of people for a decade.
2 Ways to Guarantee a Failed Presentation
(note: I live in multiple worlds. I read and present synopses of business books, and other nonfiction books; I speak and consult; and I teach speech, and study speech pretty seriously. This is a post from that part of my life).
Every failed presentation fails in one of two ways: the presentation had little or nothing worthwhile to say, or, even if the content was worthwhile, then it was delivered very, very poorly.
Would you like to deliver successful presentations? It is simple (not easy – just simple) – just have something really worthwhile and useful to say, and then say it very, very well.
That’s it. Every other tip (and step and piece of advice) simply elaborates on these two.
If you want the academic terms for these two elements, they go all the way back to Aristotle’s canons. He had five (invention; arrangement; style; memory; delivery — read about all five here), but I think these two really are the whole ball game:
Invention: invention involves finding something to say. HAVE SOMETHING TO SAY!
Delivery: Delivery concerns itself with how something is said. SAY IT VERY WELL!
The Invention Part requires a host of elements: good, genuine, deep preparation; checking out opposing viewpoints and deciding why your view is correct and the other views are incorrect. Have more to say than the time allotted, thus forcing you to edit effectively; fill your time with great and useful content. Choose the most effective order for your main points, the right illustrations, the best stories, the right words. Follow the principles set forth in such books as Made to Stick by the Heath brothers and Words that Work by Frank Luntz. (see this earlier blog post for a summary of the key content from these two excellent books). And be sure to select the best possible topic – one that you care deeply about, one that really does matter to your specific audience, one that is born of this time and these circumstances, one that is manageable in the time allotted.
And don’t forget the techniques of the great speakers. Use repetition – a lot of repetition – on purpose. In a written essay, repetition can be your enemy. In a presentation, repetition can be your friend. Try your best to use parallel structure, especially with your main points. Don’t have too many main points!
And start in a way that compels the audience to pay attention. And end in a way that sends them forth with a clear understanding of “what next? – now that I’ve heard this presentation, I know the what’s next!”
In other words, before you ever get up to speak, you’ve got your work cut out for you. It takes a lot of serious, focused preparation to have something worthwhile to say.
The Delivery Part requires a lot of practice (rehearsal) with deliberate practice/work on specific elements. Start with your posture. Then your voice. Then your eye contact. Then your gestures.
When you actually deliver your presentation, make sure these things happen:
• come across as knowledgeable, but not arrogant
• come close to electrifying the room with your energy
• be perceived as deeply caring about this topic, and these people
• genuinely connect with this audience
Whatever else, don’t fail. Succeed. Have something to say, and say it very well.
The Disappearing University Education and the Rise of the Trade School Education — a serious, festering problem (w/reading suggestions)
It’s tough for college graduates out there, thus it is tough for current college students. What should today’s student major in? In today’s NY Times, one of the top e-mailed articles wrestles with this question: CAREER U. — Making College ‘Relevant’ by Kate Zerniuke.
After discussing the decline of/loss of philosophy majors, and the ascendancy of business majors, here is a key excerpt:
There’s evidence, though, that employers also don’t want students specializing too soon. The Association of American Colleges and Universities recently asked employers who hire at least 25 percent of their workforce from two- or four-year colleges what they want institutions to teach. The answers did not suggest a narrow focus. Instead, 89 percent said they wanted more emphasis on “the ability to effectively communicate orally and in writing,” 81 percent asked for better “critical thinking and analytical reasoning skills” and 70 percent were looking for “the ability to innovate and be creative.”
“It’s not about what you should major in, but that no matter what you major in, you need good writing skills and good speaking skills,” says Debra Humphreys, a vice president at the association.
Here’s my opinion. I understand that people need jobs, and that the jobs are tougher to get with a humanities/philosophy/English degree. But I have heard my share of mediocre presentations, read my share of mediocre business writings, and seen my share of ethical lapses. The humanities matter. And I think that business will rediscover a need for such thinking/training. And for those who did not take enough of such subjects, they have some remedial work to do. And, yes, I know that it is tough to do this with a “catch-up” approach. (I wrote about this earlier, based on an article from Harper’s: Dehumanized — A Cause for Alarm in Education, and in the World of Business Books).
You can’t read a book or two to make up for lost years of foundational learning. But, let’s use the paragraph above as providing to set an agenda for some reading in 2010. Here are some suggestions:
If you need to work on: Then you might want to read: “the ability to effectively communicate orally and in writing,” Words that Work by Frank Luntz; and Made to Stick by Chip Heath and Dan Heath “critical thinking and analytical reasoning skills” Big Think Strategy: How to Leverage Bold Ideas and Leave Small Thinking Behind by Bernd H. Schmitt; and The Opposable Mind: How Successful Leaders Win Through Integrative Thinking by Roger L. Martin. “the ability to innovate and be creative.” The Creative Habit: Learn It and Use It for Life by Twyla Tharp and The Art of Innovation (Lessons in Creativity from IDEO, America’s Leading Design Firm) by Tom Kelley
This is a subject worth following.
Here’s A Four Step Process For Effective Communication
I have posted earlier about some excellent communication advice from the Heath brothers (Made to Stick), and from Frank Luntz. (Words that Work). They each have terrific suggestions for effective communication strategies.
But if you are like me, you can always use a few reminders. And I am constantly wrestling with just how a person can learn to communicate clearly. Part of this comes from one of the arenas of my life – I teach speech as a member of the adjunct faculty in the Dallas County Community College system. And so I try to explain/demonstrate/teach the basics to entry level college students. This is not as easy as it sounds.
Here’s my current summary to a four step process for an effective communication encounter/message/presentation:
1) Get their attention.
All effective communication starts with an effective “hook,” an engaging way to get your audience to say, “Yes, this is something I want to hear and understand.” Fail at this step, and nothing else you say will be heard at all.2) Have something important/worthwhile/useful to say.
If you do not have anything worth hearing/reading, it is best to keep your mouth shut and your pen still. We are all overwhelmed with too many messages. So, if you want me to pay attention to your message, please make it worth my time. I do not have any time to waste on any message that is not teaching me/challenging me/helping me. Have something to say that is worth saying!3) Say it very well, very clearly.
In a verbal presentation, this includes such issues as organization and enunciation. A good, effective organization (here are my main points; here are action items for you to implement; here is information you can use… the list is long, the possibilities many) makes it easier for the recipient of your message to grasp what you have in mind. Remember, no hassles! If someone has to strain to understand your message, you have failed to begin with.4) Conclude with a very clear next step.
Call this what you want: a call to action, a request for a decision, the closing of the deal. But effective communication always ends with, “and this is what you can/should do next, now that you have heard and understood this message.” Or, in infomercial/advertising speak, “call now!”
Remember these four, practice them with increasing skill, and you will get your message across. Ignore them, and you might discover that nobody is listening.







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