Value Based Decision Making

You can have anything you want; you just can’t have everything you want. So, you’re going to have to make choices. But how?

Managing our lives, our careers, and our businesses requires navigating an ever-branching tree of choices and decisions — many trivial, some monumental. The quality of those decisions can make the difference between disappointment and getting what we want, a successful business vs. one that struggles.

Inherent in the very act of making a choice is being confronted with the reality that we can’t have everything. Choosing one thing often means letting another go, at least in part. So how do we identify a good tradeoff?

Every decision is a struggle between emotion and reason. The fact is, if you don’t arm yourself with information to reason with, emotions are likely to dominate your thinking. When that happens, we tend to “react” vs. making thoughtful decisions.

So how can we consistently make good choices — choices that maximize the things we value most? The answer lies in identifying the things you value, the relative worth of those things, and making informed tradeoffs between them.

If You Don’t Know What You Want, Anything Will Do

It all begins with knowing what your goals are. To put it another way, figure out what you value, and then seek to maximize those values. Think of them as your “dimensions of value”. If we only valued one thing, decisions would be easy — always make the choice that maximizes the likelihood of that outcome. But reality is seldom that simple. To complicate matters further, the things we value are often at odds with each other.

It could be as simple as running late for an appointment and choosing to speed because you value being on time, but you also value safety and speeding means giving some of that up.

Maybe, instead, you’re trying to find a way to cut IT costs and figure out what you can give up to achieve it. But you’re also trying to increase security, and that takes investment.

Regardless of the decision you’re faced with, you need to take a step back and get straight what matters most to you or your business. Without that, you may as well just roll dice and hope for the best.

What’s The Worth Of The Things You Value?

It’s not enough to know what your dimensions of value are, you some way to measure the worth of each. It’s human nature to make decisions in favor of things we can readily measure when weighing them against things we can’t. I’ve watched IT departments make terrible decisions because the only thing they understood well was what everything cost. How many times in your own career have you been asked to get three bids and choose the cheapest one? If the cost of something is all you know, you’re setting yourself up to make decisions based solely on cost, while missing other potentially important attributes.

Unfortunately, many of the things we value are tough to quantify the worth of. Take reputation, for example. How do you measure the worth of that? How many dollars should you spend to improve your reputation? Yet, for most businesses, reputation is as critical as revenue.

To make good choices we need to truly understand the worth or importance of the things we value and that only comes with careful consideration and hard work.

So How Do You Trade One Value Off For Another? (Hint: The Answer is Fungibility)

It’s not enough to know the worth of the things we value. We need to understand the relative worth so we can trade them off against each other to achieve our goals. Of course, things would be easier if everything we valued had a price tag attached.

When you understand the relative worth of things, they become fungible. In other words, you have a clear understanding of how they balance against each other. Armed with the relative worth of what you value, you can start to make informed decisions like: what’s a reasonable amount to spend on your security program to avoid a loss in reputation from a privacy breach?

Going back to the example of speeding vs. safety, it turns out that on an hour-long trip, increasing your speed by as little as 5 mph — while only shaving 4 minutes off your arrival time — will more than double your risk of an accident (Kloeden et al, 2002). Armed with an understanding of the exchange of values, would you make a different choice? Either way, it would now be an informed one.

Don’t know where to begin? Start by listing out the things that are important to you this quarter. For example, your Product/Engineering org may be focused on: Tech Debt, Feature Development, Operating Costs, Training, and Security. Next, force-rank them from most to least worth (in this case relative to your IT strategy for the quarter). Now, assign a relative point value to each that totals up to 100.

• Security 40
• Feature Development 30
• Training 15
• Operating Costs 10
• Tech Debt 5

Trying to decide where to add staff? Where to cut and what projects to invest in? You now have a visual guide to the things you value this quarter and how they relate relative to their strategic worth, and you’re on your way to making higher quality, value-based decisions.