2 min read

Good Decisions, Bad Outcomes

Its easy to judge the quality of a decision based on an outcome, however, they are not as interrelated as you might think.

You can have a good outcome from a bad decision, and you can have a bad outcome from a good decision. The key is in understanding how external factors influence the outcome.

Examples of this can be demonstrated by real-life examples:

In sports, coaches and players are often judged on the outcome of the game rather than their actual performance. If the team wins, the players and coach are praised for making the right decisions. If they lose, it’s assumed they made bad decisions which led to their loss. When a team scores a goal, was it because they made good decisions or the opposition made bad decisions?

In corporate business, employees are rewarded based on the outcome of their performance reviews rather than their actual performance throughout the year. A good performance review assumes the employee made good decisions to perform well throughout the year. This disregards any help the employee may have received and does not take into account how the KPI or performance agreement was structured, to begin with.

It’s a trap we are all guilty of falling into, also known as outcome bias, although, one you can learn to avoid.

People will become better decision-makers when they expect their decision to be judged by how it was made, not only by how it turned out. — Daniel Kahneman

The first step in avoiding the outcome bias trap is to separate the outcome of a decision from the process of making it. Focusing solely on the outcome will negatively impact your judgement because luck and complexity will always have a role to play. This means evaluating your decision even when the outcome was positive.

Understanding the external factors that influenced your outcome will help you identify any potential flaws in your process. Rather than analysing the outcome of a decision, consider why and how you made the decision. If your methods were rational, it would be okay to make the same decision again even though it did not achieve the desired outcome the first time.