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“We Speak Your Language”Retained Executive Search Recruitment Outsourcing Leadership Consulting

Making Better Decisions as a HR Leader

MTSHRM-September 2017

“We Speak Your Language”

“We Speak Your Language”“We Speak Your Language”


Decisions

• How?• Why?• When?


Making decisions…


Brain teaser: Please consider Linda, a 31-year-old woman, single and bright. When she was a student, in high school and in college too, she was deeply involved in social justice issues, and also participated in environmental protests. Which is more probable about Linda’s occupation today?

a) Linda works as a TV reporter;b) Linda is a bank teller;c) Linda is a bank teller, and she’s very active in the environ-mental movement.

Quick, what’s your answer? a) or b) or c)?And, in what precise order?


HR leaders and Decision Making

• Strategic issues– Global issues (Local vs. Global; Make vs. Buy)– Employment vs outsourcing– Talent acquisition

• Internal vs external

• Tactical issues– Increase workforce vs overtime– Talent depth vs Talent breadth


Traditional decision making1. Create a constructive environment.2. Investigate the situation in detail.3. Generate good alternatives.4. Explore your options.5. Select the best solution.6. Evaluate your plan.7. Communicate your decision, and take

action.


But the problem is this…


Fill in the blank

• SO_P

–Why did you answer this way?


Our decisions are often biased

• We have two ways of thinking– System 1-thinking fast– System 2-thinking slow

• System one is more intuitive and quick• System two is deliberative and involves

effortFrom “Thinking Fast and Slow” by Daniel Kahneman


One more example

• What is 2 x 2?

• What is 12 x 14?


System 1 vs. System 2• System 1 thinking is practically effortless• System 2 requires effort and will interfere with

other processes

– Here is an example


Our decisions are influenced-Heuristics

• Priming (environmental impact)• Cognitive ease (familiarity)• Confirmation bias (seeing what we want)• Halo effect (WYSIATI)• Prospect Theory• Loss Aversion• Small Probabilities


Cognitive ease• Cognitive ease makes us feel more favorable

toward things that are familiar, easy to understand, and easy to see or read.

• We feel less favorable toward what is unfamiliar, difficult to understand, or difficult to see or read


Confirmation bias

• Confirmation bias causes us to selectively notice and pay attention to what confirms our beliefs and to ignore what doesn’t.– Example: Gun control


Halo effect• When we consider someone to be a good

person, we find it easier to excuse or ignore behavior that is inconsistent with being a good person. – Good people can do no wrong. – On the other hand, if we consider someone to be a bad

person, we find it hard to accept that he or she has any positive qualities. Bad people can do no good.


Recency vs Quality• The brain is wired to notice change over stasis

– New email– Text– Social media post

• Our brain gives more power to recent information

• Too much information can lead to no decision


Prospect theory

• Certainty– People have a strong preference for certainty and

are willing to sacrifice income to achieve more certainty. For example, if option A is a guaranteed win of $1,000, and option B is an 80 percent chance of winning $1,400 but a 20 percent chance of winning nothing, people tend to prefer option A.


Loss aversion• People tend to give losses more weight than

gains — they’re loss averse. So, if you gain $100 and lose $80, it may be considered a net loss in terms of satisfaction, even though you came out $20 ahead, because you’ll tend to focus on how much you lost, not on how much you gained.


Small probabilities

• People tend to under-react to low-probability events. So, you may completely discount the probability of losing all your wealth if the probability is very small. This tendency can result in people making super-risky choices.


System 1 vs. System 2SYSTEM 1 SYSTEM 2

Subconscious values, drives,beliefs that influence our “gutreactions.”

Articulates judgments, makeschoices, endorses or rationalizesideas and feelings

Jumps to conclusions regardingcausality.

Makes up stories to eitherconfirm or deny thoseconclusions.

Operates effortlessly. Requires conscious effort toengage.

Can be wrong but is more oftenright.

Can be wrong or rightdepending on how hard itworks.

Influenced by heuristics. Examines those heuristicswhen so inclined.


Consider this• You can hire two talent acquisition specialists

at a fully loaded cost of $80K per person/year• You can outsource talent acquisition at a cost

of $130K per year

Which project is more attractive to you?• Why?• What affected your decision?


Situations for discussion1. Your firm has the choice of the three

proposals below for a new HRIS system installation

i. Proposal A has a projected cost of $500K, and the probability of success is 40%

ii. Proposal B has a projected cost of $1200K, and the probability of success is 75%

Which option would you choose? Why?


Discussion

Form groups of 3 and discuss the following:• Which of the issues

discussed interrupts your decision making most?– What will you do about

this?

• Priming (environmental impact)

• Cognitive ease (familiarity)• Confirmation bias (seeing

what we want)• Halo effect (WYSIATI)• Prospect Theory• Loss Aversion• Small Probabilities


Thank you

Dan RyanRyan Search & Consulting

[email protected]@ryansearch

615 656 3535 office615 202 0883 mobile

mailto:[email protected]

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