Gut instincts or advice – which should you trust?

If you’ve been in business or leadership for a while, you might think you have pretty good instincts when it comes to making tough calls on strategic decisions.

 

Your ‘gut feel’, or intuition as it’s otherwise known, has served you well in the past, so you have no issue with drawing on it again when the need arises.

But the question is, should you?

Probably not, according to a ground-breaking study of leadership by the Centre for Workplace Leadership.

The two-year study of 2703 companies and more than 8000 employees found that Australian executives rely too much on gut instinct and far more than their international counterparts – and to the detriment of their businesses, with more than 40% of companies underperforming.

The study also found that few senior leaders seek advice from external sources, such as associations, consultants, experts or other leaders, leaving their organisations vulnerable to poor decision-making.

In addition, more than 60% of executives rarely or never seek outside advice about future strategic options for their business.

Does intuition still have a place?

The study raises another obvious question – should you scrap your reliance on gut feel altogether?

Again, probably not.

Your gut instinct or intuition still has an important role to play in strategic decision making, despite the findings of the survey. But rather than being the sole basis for a course of action, it should instead be your starting point when framing a situation or business decision.

While you might feel you know what you want to do, or what the right course of action would be, your initial response should be the catalyst for seeking further information and advice.

American psychologist, Gary Klein says that if you’re acting on something purely because that is what your gut feeling is telling you, you should never trust it.

“You need to take your gut feeling as an important data point, but then you have to consciously and deliberately evaluate it, to see if it makes sense in this context. You need strategies that help rule things out,” Gary says.

The best leaders will take an idea, opportunity or a conversation, and go away and formulate a plan drawing on the resources around them to inform their decision making.

Of course, it’s not always going to be that simple. There are situations when the time is of the essence and there just isn’t the time to run as many numbers as you want.

In these situations, accomplished psychologist and Nobel Laureate Daniel Kahneman concedes that you have to trust your intuition. However, his general view is you should never take your intuitions at face value.

Experience, not instinct

Innovative or inspiring leaders, such as Richard Branson, are often held up as successful examples of intuitive business decision-making.

In truth, much of the intuition these leaders display is actually based on experience rather than pure ‘gut feel’.

While there’s a close relationship between experience and intuition, making decisions based on similar situations from the past are likely to have a degree of rigour, as opposed to purely making a decision because it ‘feels’ like the right thing to do.

Daniel Kahneman warns about the risks of experts using intuition, except when they’re dealing with something they have a lot of experience with in the past.

“Surgeons, for example, do many operations of a given kind, and they learn what problems they’re going to encounter. But when problems are unique, or fairly unique, then I would be less trusting of intuition,” he says.

Check your ego

An underlying driver of strategic decisions made on instinct, even if many leaders wouldn’t admit it, is ego.

Confidence in leadership is extremely important. In fact, it’s essential. But it needs to be paired with intelligence, particularly when it comes to a big business decision.

“Overconfidence is a powerful source of illusions, primarily determined by the quality and coherence of the story that you can construct, not by its validity,” says Daniel Kahneman.

“If people can construct a simple and coherent story, they will feel confident regardless of how well grounded it is in reality.

“In strategic decisions, I’d be really concerned about overconfidence. There are often entire aspects of the problem that you can’t see—for example, am I ignoring what competitors might do? An executive might have a very strong intuition that a given product has promise, without considering the probability that a rival is already ahead in developing the same product.”

Value of external advice

One of the best methods of weighing up large, strategic decisions is to seek external business advice, from a business advisor or industry colleague.

The benefit of taking this approach is the third party you consult with won’t be emotionally tied to the decision, meaning effectively, you’ll get an independent and objective view.

But beyond this, they’re likely to bring the additional experience of witnessing similar scenarios in other organisations and potentially guiding those businesses through the situation. This experience will be invaluable in informing the course of action you should take.

For small businesses, in particular, seeking external business advice is crucial. Many smaller operations won’t have access to a Chief Financial Officer, a Board of Directors or advisory board to consult with when big decisions need to be made, so having someone to consult with can be hugely valuable.

Take-away message

There’s still a place for gut feel in business, but check your ego at the door, draw on your experience and seek further information to back-up your initial instincts.

It’s likely that the ability to back yourself and trust your instincts has enabled you to become a successful leader. But while you may not realise it, it’s been underpinned by your extensive experience and having the right people around you to act as a sounding board.

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