Yes or No? A or B? It’s that simple. How many times have you heard that in a meeting? The compulsion to make every decision a binary choice is perfectly understandable: it simplifies a complex world, encourages individuals to make their minds up and saves time.
In reality, few decisions are actually that simple and creating a binary choice often has unexpected consequences. It was not that simple, for example, in the mid-1990s when American pharmaceutical giant FoxMeyer installed a new electronic resource planning system (ERP) to cut costs by $40m. When the installation started going wrong, managers presented themselves with a binary choice: is this latest glitch a deal-breaker? Yes or no? In that narrow context, the answer was always no. The company then began quoting for contracts as if the cost savings had already materialised. FoxMeyer’s sales topped $5bn in 1995. By August 1996, it had filed for bankruptcy.
It was not that simple either in Washington DC in 1972 when three of Richard Nixon’s senior staff – John Mitchell, Jeb Magruder and Frederick LaRue – authorised Gordon Liddy’s $250,000 scheme to break into Democratic Party headquarters at the Watergate hotel. None of the men liked the plan – for a start, the raid relied on the absolute discretion of ten men – but felt they couldn’t say no to Liddy (who, they suspected, had Nixon’s implicit backing). So reluctantly they said yes. Magruder consoled himself with the thought that it was only a routine burglary, what could possibly go wrong?
In April 2020 British Airways CEO Alex Cruz decided that the airline needed to cut 12,000 jobs if it was to survive the turbulence of the pandemic. The question that ultimately cost Cruz his job was not yes or no, but how? Critics accepted that redundancies were inevitable but questioned the scale. The airline’s policy of forcing thousands of staff to reapply for their jobs and accept a pay cut prompted a select committee of MPs to brand it “a national disgrace”.
The thread that links these binary choices is a phenomenon the Nobel Prize-winning economist Daniel Kahneman calls, What You See Is All There Is (WYSIATI). In his view, we are hard-wired to make a choice based on the information we have – or presented with. As Eric J. McNulty, an expert on leadership says, “In leadership seminars I ask participants whether someone will be a great leader or not based on a photograph. Participants render judgement and articulate reasons, it’s very rare for someone to say ‘I need to know more about this person’.”
In McNulty’s view, the best way not to be forced to choose between two flawed options is to ask another question: what’s missing? In other words, what are we not being told and/or what knowledge has not even been considered. This can make it easier to explore different options and stimulate genuine discussion. As most of us like to agree with our leaders – and to appear decisive in front of our peers – a straight uninformed choice between A and B can lead to groupthink.
The ‘yes or no, A or B’ school of decision-making is also loaded in favour of hard data and against softer, more amorphous factors such as values, reputation and the wider social context businesses now operate in.
BA’s draconian economy drive made financial sense but forcing employees to reapply for their jobs and, in the words of one HR consultant, “holding a gun to their head” to accept inferior terms, during an unprecedented national crisis, was hardly a good look. As BA had been loaned £300m by the Bank of England and was receiving £35m a month to furlough staff, this was one storm that management should have foreseen – and avoided.
Such mistakes exemplify what American businessman Warren Buffett calls the “institutional imperative”, a sheep-like response to power and the status quo within organisations that triumphs over rationality. If you think about Watergate logically, outside the organisational context, the burglary was a serious risk with no tangible reward. At FoxMeyer, the “institutional imperative” effectively killed the company. At BA, once Cruz decreed that survival depended on cost cutting, any counter-argument was bound to sound disloyal.
The other question McNulty recommends asking is: how did we get here? In deconstructing the process – asking what other options were considered and why they were discarded – we may realise that another of Buffett axioms has come into play: “Any business craving of the leader, no matter how foolish, will be quickly supported by detailed strategic studies prepared by his troops.”
In a volatile marketplace, where the pace and scale of change had accelerated markedly even before the pandemic, there is immense pressure to make decisions quickly. Under this pressure, managers are loath to argue that a decision needs more time – or different options could be explored – for fear it makes them look weak and indecisive.
The onus is on CEOs to emphasise that making decisions quickly is good, but making the right decisions is even better. No one wants to look back on a crucial decision and think, as Nixon’s aide Magruder did: “How can I have been so stupid?”