Decision-making is a critical component of leadership. It’s a skill that continuously needs to be sharpened to lead in an increasingly complex and uncertain business environment. In this exclusive interview, we speak with risk & decision analysis expert Mona Riabacke on the intricacies of decision-making in business, overcoming the top challenges in decision-making, what a good decision looks like, and more.
Mona Riabacke, PhD in Risk & Decision Analysis, has a background as a researcher both in Sweden and internationally. She also worked as a consultant and project manager before starting Riabacke & Co. together with her husband in 2011. She gives speeches, holds workshops, and runs the popular business podcast Beslutspodden. In 2013, her book, Beslutspyramiden – Stegen till bättre beslut, was released and has been published in several languages.
What was the inspiration behind your book, Beslutspyramiden – Stegen till bättre beslut (Freestyle Decision Making – Surfing the Wave of Information)?
I wrote the book together with my husband and we both have PhDs in Risk & Decision Analysis. After we finished, we started giving speeches about decision-making. I often get the impression that people believe that this knowledge is only beneficial if you’re a business leader.
We are all leaders of ourselves in one sense, and there is basic knowledge that we can all benefit from when it comes to decision-making. Most books on the market were quite complex and only appealed to managers and business leaders. So, we wanted to write about this topic that we believe is extremely important for everyone in a fashion that is easily accessible.
A PhD thesis in Sweden is read by a handful of people at best and that’s not how the modern world commonly accesses knowledge. We spent a lot of time thinking about how to present this knowledge in a way that could be read by anyone. When we published our book, one of our daughters who was 9 or 10 at the time read it. Each section is around three pages and has many images so it’s easy to read. Many people have said it’s a good book to read while commuting to work too.
What is the most common question you get when it comes to decision-making?
The most common question is “How do we make the best decisions?”
Everyone wants a universal method that applies to all decisions. But I relate that to going to a physician and just asking, “What’s the best medicine for me?” without letting the physician examine me first. Decision-making is more complex than just having one universal rule. We want quick fixes that will make us better decision-makers, but it’s not that easy.
I think it’s important to ask yourself what your most important decisions are. For those decisions, why are you making them and what do you want to optimize? Also, depending on who’s making the decision, the context is important. For example, is the decision profit-related? Do you need to make the decision quickly? What criteria do you need to prioritize?
What is the hardest part about decision-making?
Many decisions are one-time decisions. The context and the decision itself are not the same if you could go back and do it again. The world changes all the time so we can’t go back and replicate the decision to see whether another option would have been better.
This brings the question of what a good decision is. Many people instinctively think a good decision leads to profit or good results. A good decision is one where you are as aware as possible of what you’re doing and why, and you have a method to go about it. It’s easier to know what information you need and who to ask for expert advice. However, people often start at the wrong end. They start with alternatives and analyze them. It’s important to be aware of what you’re doing because most of our decisions are made at a subconscious level.
Emotions also affect how we perceive things. We don’t have an objective view of the world. We don’t see the world as it is, we see the world as we ourselves are. Depending on my education, my experiences, and my needs, I will look at the world from one point of view, and you look at it from another. Combining different perspectives is good when you want to make a more competent, objective decision.
Is the process of combining different perspectives challenging in a business context?
It can be. Many leaders I’ve interviewed said that a number of decisions they face are very complex. The most common method to make complex decisions is to gather people with different perspectives and views. But they also say trying to combine different perspectives is harder than making a decision with people who think the same way you do. In the end, the result is more rational because you have different views. Also, it’s important to be clear about what roles people have in the decision-making process. For example, be clear If their role in the group is to be experts, and whose responsibility it is to make the final decision.
Decision-making in business is a balancing act of being data-driven and instinctive. Is one more important than the other?
It depends on the decision. Data can be very useful, especially in sales and studying people’s behaviors. However, you may not have all the data to make certain decisions. Depending on how important the decision is, perhaps you have to look at some data but also use your experience. The world is constantly changing and there’s a lot of uncertainty, so we can never be 100% sure. That’s why we have to rely on our gut as well. The combination of being data-driven and instinctive is effective.
In my research, I also found that the more complex the decision, the more we rely on our hunch. You must understand yourself better because we all have biases when we make decisions. For instance, if you don’t like uncertainty, you might subconsciously avoid all the alternatives where there’s a lot of uncertainty. Understanding your strengths and weaknesses, and having self-awareness are important.
Do you find that male and female leaders approach decision-making differently?
It’s hard to distinguish between male and female decision-making. There’s no approach that applies to everyone. However, when faced with hard decisions, my impression is that women often care more about being judged than men do. They consider how people will accept their decisions and what they think to a greater extent. Many women feel that they are questioned more than male leaders, or risk being questioned.
Generally, men are perceived as bigger risk-takers, and women as more risk-averse, but I’m not sure this is correct. There are several studies of the risk behavior of men and women, often in gambling situations, but how accurate this is in reality is hard to say. I think it’s more of a stereotype, but we seem to react a bit differently under stress and pressure and therefore, again, I think we need both. Personally, I think many women have a broader view when they approach decisions and often take the feelings of others into consideration, especially if it’s a hard decision that not everyone will be happy with.
However, going back to group decisions, combining people with different perspectives is the best approach regardless of gender. But we need to look at facts at the same time. There are much fewer women in leadership positions compared to men. Why is that? The question is quite complex, but I think many women feel they have to make sacrifices they’re not happy with. But there’s also a shift in how today’s women see themselves compared to women in my generation. So, I hope to see more female leaders in the future.
*The interview answers have been edited for length and clarity.