Diminishing returns of decision-making

Standard corporate decision\-making processes tend to result in diminishing returns at the high end of the scale. The below graph illustrates my point. (Since I thought about it a lot, then slept on it, it’s probably about 70% correct. According to itself.) 

When faced with a decision, a smart person making a random guess, taking about 10 seconds, would probably result in a success rate of about 20%. Give it a few hours of research and make a decision based on that smart gut, and results will go up to about 60%. Sleeping on it will improve that slightly, because the smart brain may think of some problems. Discussing it in a group of smart people will improve that even more, to around 80% certainty.

You’ll be able to reach 80% certainty in about three days. Any efforts beyond that start showing diminishing returns on the larger time and money investments required.

The question that needs to be answered then is “How much will it cost the business to be wrong?”, and balance that with the costs of continuing down the decision-making path. If being wrong would only cost $100, and discussing it in a group would cost $300 of time, then just sleep on it and implement. Not a big deal if you’re wrong. Naturally, it’s important to keep monitoring the results of the decision, so corrective action can be taken quickly if the decision is wrong. Being wrong is *fine* - as long as you catch the mistake quickly, learn from it, and don’t repeat it.

The decision-making methodology can be represented with a simple formula. If the cost of failure, divided by the chance of success, is less than the cost of the decision-making process itself, then stop talking and start doing.