In the field of decision making, intuition is often seen as the antithesis of rationality. This essay, however, will outline why intuition is not in opposition to a purely rational approach despite the appearance thereof. After all, time and time again we see stories of success in business that were only possible because an individual trusted their intuition. First, value of intuition is explored, then it is juxtaposed with the erroneous application of intuition and the formation of quick judgements in general, specifically due to cognitive or statistical biases. Further, the balance of each is discussed in the context of strategy and crisis management.
Intuition is a useful tool for making decisions about the future, when statistical or analytical knowledge is not available. Intuition is not a guess; it is judgement or thought that often comes in the form of a feeling, derived from past experience and/or study (Herbert, 1987). It appears as the antithesis of reason because he who intuits cannot state for sure why they came to the particular conclusion. Hence, there is reluctance to trust intuition no matter the experience of the decision maker. This reluctance to trust intuition is due to the narrative bias. We tend to believe something is more likely to be true if an explanation is supplied, even if that explanation is severely flawed (Kahneman, 2011). To minimise this bias it is best to look at each possible solution based on its merits.
Steve Jobs is the paragon of intuitive decision making in business. According to Walter Isaacson, Steve Jobs said “Intuition is a very powerful thing, more powerful than intellect, in my opinion. That’s had a big impact on my work.” (2011). As we now know, this intuition of Jobs’ lead him to creating the most valuable company in the world. By thinking intuitively and trusting himself, Jobs was able to connect dots in a way that made the future look different. He envisioned the iPhone instead of a slightly faster flip phone. Jobs was able to do this because of his knowledge of preexisting trends and technologies, however, only creative intuition was able to cause the leap into the future, out of the past.
Although intuition can be powerful for finding insight into the future, if insufficient information is supplied it can lead to gross misjudgements. So, a more reasoned and deliberate approach should be applied to judgements of the present or past, since information is available. This should always be conducted with cognitive and statistical biases in mind. Two biases that are pertinent to managerial decisions are the selection bias and the halo effect. Lately, Amazon has received some bad press regarding the alleged hostile work environment as stated by ex-employees (Kantor & Streitfeld, 2015). However, when reviewing such a case, the Amazon managerial staff must ensure the reports are accurate and meaningful accounts. Perhaps it’s true Amazon demands a lot from its employees, however for the more conscientious, it’s potentially a more fulfilling place to work than elsewhere. It’s possible these reports are just a case of the loud minority. Those who give accounts on Amazon’s culture are potentially those that could not handle the high expectations. This is selection bias. It is not obvious immediately that selection bias could be occurring and so granted any possibility of this bias’s presence, one should seek disconfirming evidence. The halo effect is a cognitive bias responsible for the misattribution of certain visible qualities of a person, such as appearance and posture, to invisible qualities such as intelligence and work-ethic. For example, people who are more good-looking appear more intelligent and empathetic. As a manager, this bias is particularly relevant when hiring. To avoid the halo effect while interviewing, one should plan for interviewing in advance by choosing approximately 6 independent traits that can be deduced from asking factual questions. Before the interview takes place, one should write out what answers would warrant a score of 1-5 for each trait. The total being the candidate’s score (Kahneman, 2011). This way the interviewee is being assessed purely on objective measures set beforehand.
The balance of intuition and rational deduction is of utmost importance in both corporate strategy and crisis management. When implementing corporate strategy an apt application of intuition and logical reasoning would be to begin with what everyone intuits the best strategy is and then mull over the possibilities of biases and gaps present in each of the strategies put forward. Because strategising is future thinking, a greater weight should be placed on intuition, since there is no way analysis of the past can give an accurate prediction of the future. Having discussed within the strategy group, the strategy decided upon can then be effected. In the case of crisis management, a thorough, rational approach should be taken in advance of any crisis. Intuition should be avoided in the planning stages because intuition often acts on only small pieces of information. When planning for a crisis, no missed variable can be afforded. This planning includes designating individuals with the appropriate experience and skills to be in charge of the process. In creating a crisis management team, the members have the sole responsibility to learn about and nullify potential crises. In this way, they both practice rationality, and, through experiential wisdom, gain intuition specific to corporate crises. This intuition becomes important when combatting an actual crisis. It is inevitable that an added variable which could not be foreseen in the event of a crisis will arise. In these cases it is best to act on intuition for occurrences that are not covered in the plan, for delaying action (in order to analyse for the best action) is a decision itself, and is the most likely to do the most damage.
The decisions and therefore actions an organisation takes, become the organisation, it’s culture and everything it produces. Whether planning for positive outcomes with strategy or for emergencies with crisis management, it is in an organisation’s best interests to have a model of decision making that works. When making decisions, it is necessary to apply intuition and logical reasoning together, in a way that they can compliment one another. Intuition can be an acute tool of foresight, as is the case of Steve Jobs. However, one should always have cognitive biases in mind to hastily eliminate any thoughts that show large signs of bias and hence incorrectness.
References
Isaacson, W. (2011). The genius of Jobs. The New York Times, 29.
Kahneman, D. (2011). Thinking, fast and slow. Macmillan.
Kantor, J., & Streitfeld, D. (2015). Inside Amazon: Wrestling Big Ideas in a Bruising Workplace. Nytimes.com. Retrieved 14 August 2017, from https://www.nytimes.com/2015/08/16/technology/inside-amazon-wrestling-big-ideas-in-a-bruising-workplace.html
Simon, H. (1987). Making Management Decisions: The Role of Intuition and Emotion. The Academy of Management Executive (1987-1989), 1(1), 57-64. Retrieved from http://www.jstor.org.ezp.lib.unimelb.edu.au/stable/4164720
