PI and Decision-Making
Published by PI Worldwide
An integral part of business is making decisions: every person inside an organization must make decisions every day in order to do his or her job. Of course, there are vast differences in the kinds of decisions people make. Today's discussion focuses on risk and its impact on decisions.
The A:D relationship measures risk tolerance, among other things. In other words, it measures how much risk someone will accept when making decisions. What rides along with this is someone's perception of risk, which is different for different people. Risk-takers inherently perceive less risk. They see taking action as simply trying something; if it fails, they try again, no problem. Non risk-takers perceive more risk in general: they view mistakes as problems to avoid through preparation and following established standards.
Some of the implications of this are:
- Risk-takers will take action in ambiguous situations.
- Risk-takers will make their own path, often ignoring (or actively defying) precedents or proven methods.
- Risk-takers are flexible; if they walk into a situation that's different than what they expected, they adapt and try something new.
- Non risk-takers will take action only when they feel the ambiguity has been resolved.
- Non risk-takers will make a plan to follow so they can minimize the chances of making mistakes.
- Non risk-takers will follow established precedents and can be counted on to do things by the book.
Of course, the world isn't quite so neatly divided; there are many degrees of risk tolerance that can be read in the A:D relationship. The basic rule is this: the Higher the A goes in relation to the D, the more risk tolerant that person is. The intensity of risk tolerance increases the greater the spread between A and D, and is emphasized with High A, Low D. That intensity decreases when they're both on the same side of the Norm, or when the spread between them is less.
Naturally, the converse is also true: the Lower the A goes in relation to the D, the more that person works to control risks.
This opens up a question: what's the impact when A = D? As discussed earlier, when A = D, there are equal amounts of opposing drives. The impact on decision-making is a "push-pull" dynamic: these people are torn between taking the risk (A) and mitigating the risk (D). Since each drive is present in the equal amounts, neither side "wins out," and they will be indecisive in the face of decisions they perceive as risky. Within their areas of expertise, these people make quick decisions based on experience and facts. They will thoroughly analyze, and often avoid, decisions related to things with which they are less familiar and, therefore, less able to predict and control the accompanying risks.