Decision making under uncertainty means choosing while the picture is still incomplete, which describes most of the decisions a leadership team is paid to take. The optimum is the 80 per cent solution on time: enough information to act, taken while acting still changes the outcome. Two failures sit either side of it, waiting for a certainty that never arrives and rushing on assumptions nobody has checked. Both are habits, and habits can be trained.
Why is deciding under uncertainty so hard?
Every decision that matters is taken with less information than the decider would ideally want. The budget is set before the actual demand for the year is known; the plan is approved before it is clear what strategy competitors have chosen. If the information available was complete the decision would be a simple calculation, and relatively easy to take.
And yet, timely decisions need to be made. Choosing the right moment is a challenge in itself, given that there is no indication to show when uncertainty has eroded to a manageable level. The picture fills in gradually, and there is always a convincing argument to be made for waiting another week for clarity, while the price of delay continues to rise. We described that cost gradient in our piece on horizon scanning: change met early is a decision, met late a dilemma. Decision making in uncertain times is as much about choosing the right moment as it is about making the right call.
Decision paralysis is an easy and comfortable trap to fall into, not least because an over-careful approach can look like diligence. Another study gets commissioned, another stakeholder consultation is planned, another review. Uncertainty presents an opportunity for advantage, on the battlefield and in the boardroom; waiting for certainty cedes that advantage.
A pause to think is not the same thing. The confidence to stop, check the intent behind the task and consider the second-order effects before acting is a mark of a trained decider; platoon commanders in contact are taught to take a moment in cover to stop and organise their thoughts as soon as they can, before giving orders.
Intentional techniques like this guard against the opposite failure, the rush: a decision taken quickly, based on flawed assumptions and without due consideration of risks. One half of the skill set required for quick, effective decisions is practice. The other half is situational awareness: knowing what is happening around you, what it means, and where it might go next. Decisions made in a rush might get the first of those three, but without the time to consider the other two.
Flawed assumptions are a real challenge in corporate decision making: a plan which rests on the belief that the market will keep growing or that a supplier will keep delivering is founded on hope.
What is the 80 per cent solution?
Between the two failures sits the optimum, for which the army has a shorthand. The 80 per cent solution is the decision made on enough information, in time for it still to matter. Colin Powell put numbers on it in his memoir: act when you have somewhere between 40 and 70 per cent of the information you would like, because below that you are guessing and above it you have waited too long. The exact figure matters less than the shape of the rule.
Eisenhower’s decision to launch the Normandy landings is a good example. On 4 June 1944 he postponed the invasion due to a poor weather forecast. On 5 June his meteorologists offered perhaps thirty-six hours of tolerable weather, with the next usable tide a fortnight away. He went, and wrote a note that evening accepting sole responsibility if the landings failed. The decision was taken well short of certainty, on time, and with the risk of failure understood, accepted and owned.
Can decision making under uncertainty be trained?
Yes, though as our article on what good decision making training looks like argues, the important part of this training is practice, rather than instruction. Learning to recognise the moment at which the 80 per cent solution can be reached is a skill that develops through experience and reflection. We use decision making scenarios for this: information arrives incomplete and out of order, and the clock is ticking. A proper debrief records what was decided, when, on what information, and what the team would have done with ten more minutes or ten fewer. Over a series of exercises the team learns where its own threshold sits, and develops the confidence to act decisively at the optimal moment.
Most decisions taken by senior leadership teams happen under conditions of uncertainty; those that are not are unlikely to be difficult or important. Getting them right and in good time takes practice, which is what our decision support work is built around.
Frequently asked questions
What is decision making under uncertainty?
Choosing a course of action while the information that would make the choice obvious is incomplete, unreliable or still arriving. It is the normal condition for leadership decisions, and the skill lies in judging when enough is known to act.
What is decision paralysis?
The failure to decide because the decider is waiting for a certainty that is not going to arrive. In leadership teams it usually looks like diligence: more analysis, more consultation, another cycle.
What is the 80 per cent solution?
A decision taken on most of the available information, in time for it still to change the outcome. Colin Powell’s version is to act with between 40 and 70 per cent of the information you would like. The rule has a floor, below which acting is a guess, and a ceiling, above which waiting is the error.
How do you train decision making under uncertainty?
Through scenario exercises in which information is incomplete, time is short and an opponent is working against the plan, followed by a debrief that scores when the decision was taken and on what. Repetition builds the habit; a single session shows the team where it stands.