Episode #112: Is Gut Feel a Thing?

Episode #112 transcript

Marty:

Hey there, and welcome to episode 112 of the No Bullshit Leadership podcast. This week's episode: "Is Gut Feel a Thing?" Now we get an enormous number of questions on making better decisions, but we haven't really addressed it directly since way back in Episode 20. And that feels like a long time ago. Back in those days, the podcast was just starting to take off. I think we had just over 1400 downloads the week that episode was released, so we're well overdue to get some of those concepts out to our expanding global audience. Decision making is also at the forefront of my mind at the moment, since we've just completed the final module from our September cohort of Leadership Beyond the Theory, which is of course, "Make Great Decisions". So this week in Q&A format, Em and I are going to go back through the stack of questions from our podcast listeners on decision making and pick out a couple that we think are most useful in these uncertain times. Joining me after a long absence in front of the mic is the other half of your CEO mentor, Em, who normally produces the podcast and actually handles the dark art of digital marketing.

Em:

The dark art of digital marketing. I like that!

Marty:

Best I could come up with... So anyhow, Em look, it's a while since we last did a Q&A, and we've put out some pretty cool content recently. Now I'm getting a bunch of feedback on the last few episodes in particular. So we had a "Servant Leadership", "Getting in the Arena" and "The Leadership Meeting Cadence". Now all of these stimulated a huge amount of comment from different people on our channels. What are you seeing?

Em:

Yeah, I think last week's episode is one of our most popular that we've had in a while - the one about getting your leadership meeting cadence right. It was hugely popular. I've had everyone from brand new leaders right up to CEOs of some pretty big organisations get in touch and say how useful the episode and the free downloadable was from episode 111. So if you haven't listened to that one yet, I really recommend adding it to your list. People are also loving the Stockdale Paradox episode from a few weeks ago. The one about resilience, faith, and optimism, which I think is very timely. So it's well worth checking that one out as well.

Marty:

Yeah, God, we we're putting so many other I've forgotten about that one. That's a great episode. So, um, so Em what questions have you dug out for me this week?

Em:

All right. I've got two great questions. The first one is from Olivia. Olivia asks: "When you talk about making great decisions, you mentioned the need for speed while balancing that by getting as much high quality data as possible to consider. With all the data you use, is there any place in the decision making process for gut feel?" I love this question.

Marty:

Yeah, it's a great question because we use a whole range of data inputs when we're making decisions. Some of them are quantitative and some of them are qualitative and we've got to be really careful about how much weight we put on each. But I think when we talk about gut feel, it's probably better described as judgement and experience. Research tells us that people make almost every decision based on gut feel and emotion, and then they go looking for data to support that decision. So there's certainly a precedent for this concept of gut-feel. But what we've got to realise is we're constantly taking in information. We use all of our five senses and a lot more than just our brains. Great leadership requires an integrated approach that combines head, heart and gut. And so getting these things aligned, and understanding all of the information we can read from all of those sources is critical to being a really good decision maker.

For example, we're constantly reading people's tone and body language. We're picking up on nonverbal and visual cues. We use our experience and judgement to assess the reliability of any information we get from whatever source, and we're continually calibrating different sources of information to find consistency, patterns and exceptions. So let's collectively call all of that "gut feel". Now, one of the important things is we need to understand the efficacy of any data that's presented. And quite often we'll ascribe a disproportionate level of value to data that is quantitative, even if it's not that accurate. So we put a high level of weight on the numbers, but what we have to do is look at the assumptions behind the data. Now, a classic example is you see a business case for an investment that might come to you, and it might be a described with a Net Present Value that's done to the nearest thousand dollars, but the assumptions sitting behind it might be so loose that you could have ranges of hundreds of thousands of dollars in the potential outcomes, depending on what assumptions come true. So you've just got to understand what's behind it and ascribe that level of accuracy, and no more.

Em:

Marty, we talk a lot about speed over accuracy when it comes to decision making. In fact, we have a whole lesson in Leadership Beyond the Theory about it. This is pretty tricky to apply when you're swamped with data, how can you move forward fast?

Marty:

Well, I think speed is really, really critical because it creates momentum. And so you'll know that my view of the world is speed over accuracy every day and twice on Sundays. And if you're going to work fast and you're going to move quickly through all the inputs you've got, in order to make a decision, then you've got to make sure that all of the elements, in a holistic sense, are factored in. Confidence in decision making comes basically from exploring as many sources of information as possible and not placing a disproportionate reliance on one or two data points. A one dimensional source of information for a decision is super, super dangerous, but often we'll accept that if it confirms our worldview. So if we think a certain decision should go a certain way, and we find a piece of data that supports that we're much more likely to take that as being an accurate source of data than we would otherwise.

There's probably two really good examples I want to give. Right. The first one is when we were doing a very, very large deal for the sale of a mine. Now we didn't own it, but we were brokering this deal. And the counterparty that was purchasing the mine had a financial backer sitting behind them that was critical to the deal and that we had to strike an arrangement with. And, on paper, everything looked perfect. It looked fantastic. And they had the financial backing. They had the capacity, they had everything in place that was going to make this deal work. But there were just a few red flags. As we were going through the negotiations, we realised that their senior negotiators lacked a certain amount of authority and that they would go out of the negotiating room and then be overruled by the chief executive, who wasn't actually in the room.

And this led to things like a re-trading of terms. So things that were agreed in the room were then reversed or changed outside of the room. Um, the negotiating team was fairly evasive around some of the critical value drivers. And they always seemed to be looking for clawbacks. So they'd agree something that presented a certain value proposition to each party. And then they'd come back later and say, but we're going to put this caveat and we're going to take this condition out and we're going to do these things that sort of changed the shape of what we negotiated. So I had to go to the chairman and actually explain that even though this looked like the perfect deal on paper, my gut told me that these people weren't the best counterparts we could have worked with. And so in that case, I got the backing of the board and we actually didn't go ahead with that deal. So that's, that's an interesting way of applying gut-feel when everything looks good on paper, but you can just sense that if you had to live with that longterm, it would be a problem.

Em:

Marty, is that something that you develop over time?

Marty:

Yeah, totally. It's, as I said, judgement and experience and, um, you know, we all know that expression that, um, "good judgement comes from experience, and experience comes from bad judgement". So you learn over time by making mistakes and going through different situations, and working out what they mean, putting them into context and reading those patterns, what you can expect and you get to pick them much, faster, much easier as time goes on.

Em:

Yeah. True.

Marty:

Another quick example I want to give is that the older I get, the more I rely on my gut feel to make decisions. And I'll tell you why. When I used to make decisions as a younger person, I would rely on the hard data and place a hell of a lot of weight on it. And if I had a gut feel that said, "Hmm, I'm not sure about this, maybe something's missing. Maybe something's not right." then I would ignore that. I'd push it to the side and say, "...but the data tells me I'm okay." And that was how I used to operate.

And over time I learned that every time I did that, every time I had a gut feel that I ignored, it would end in tears. Something would happen that would demonstrate to me that it wasn't necessarily the best decision I could have taken. And so I learned over time to become much, much more intuitive in terms of listening to what my gut was telling me and listening to those senses, because that's my body reacting to the things I'm reading in the environment that I can't necessarily quantify or put my finger on, but I'm still reading and finding very important.

So a great example is hiring people. As I got further down my career, I found that this is a very imprecise science. I put as much diligence as I could around that process, including: psych, aptitude, and emotional intelligence testing - a whole suite of testing for senior roles - interviews, reference checks... All of that stuff done really, really diligently. But regardless of what that told me, if my gut said to me "there's something wrong", I would not hire that person, if my gut wasn't aligned with all the data I could see. Now, you might say that I'm using the Ouija Board a little bit there, but that's it. That's really how I found what worked for me. And it served me well.

Em:

Yeah. I think that whole segment that we've just gone through is going to be incredibly helpful for people, not just Olivia. And that's why I picked this question. Gut feel is something that we probably don't focus on very much in leadership. So I'm really glad that we got to cover this.

Next question is from Tim. Tim said, "After listening to Episode 98 on effective delegation, I've been trying hard to let go of control over the decisions my people are making. In doing so, I find that I have to sometimes reverse a poor decision that's been made by one of my people, is this normal?”

Marty:

Ah, Tim. I want you to know it's completely normal... but it's not GOOD. So, so you want to avoid ever having to reverse a decision because that has some implications to it, right? The first thing is, for the individual who's made the decision, it really dilutes their accountability. So you can't hold them accountable for a decision that you've then overridden. It really demotivates an individual, that you've let them go and make a decision, and then you've told them: "That decision isn't good enough - I want to do something different". Really it's just another form of micromanaging. And if you do override a decision, you've got a totally changed tack, so there'll be some communication involved. You'll have to explain. It's really hard to do this and not to embarrass the poor person who made that bad decision. So you've really got to think about the implications of reversing it.

And ultimately the amount of governance you put over the top of any decision-making process is a function of two things: risk and materiality. So it doesn't matter if a very minor decision isn't right. You know you'll get through it. It'll give your people some experience, they'll learn that there are better decisions to make... there are better ways they could have gone about it... But ultimately no harm, no foul. We're all happy. You can't afford a bad decision that creates a much more material impact. So for example, a decision that affects a lot of customers, or it doesn't meet regulatory requirements that affect your licence to operate, or a bad decision on a really high value financial investment. You can't afford to make those.

Em:

Marty, speaking about micromanagement, I just want to bring up our old friend "Challenge, Coach, Confront". How can leaders best coach their people through decisions without micromanaging? Because I feel like it's a really fine line.

Marty:

Yeah, Em, it is. And this is a real subtlety in the coaching process. So, ideally you want people to make decisions for themselves when they're accountable. And when they come and ask your advice, it's very, very difficult to resist the temptation to take a little bit of control and say, "if I were you, I'd do this", or "look, here are your options but, you know, I'm thinking this looks like a good option", right? You're basically telling them what to do, and that dilutes their accountability just a little bit.

Now everyone's different in this regard, every person you lead is going to be different from the next person. Some people will need a little bit of support and guidance during the decisions they're making. And some will need a hell of a lot, but they're all different. We did do an episode on this, which I thought was really useful - it was Episode 63, "Reading the Play", and this is about Situational Leadership Theory. Now this theory basically says the amount of support you have to give to people in doing their roles depends entirely upon the maturity and capability of that individual. And everyone's different. Some require a lot, some require a little bit, and your style should adapt to that, but you want to be coaching people so they can make good decisions themselves. The subtlety, as I said, is working out how to do this without overly imposing your will on them. And they have to be able to fail safely. They have to be able to make decisions along the way so that they can learn as time goes on.

Em:

So, are you saying that we should never intervene if we see a leader making a poor decision?

Marty:

No. Look, never say never. It's not to say that you should never intervene. And sometimes you'll be able to see a car crash developing in slow motion that you will want to stop. After the collision, it's too late to prevent the collision. And that's what we call a post-mortem. So you want to get in there in advance and make sure a decision doesn't go to a place where you can't live with it.

Now, the classic example that I like to use is little Johnny crossing the road. They're always called little Johnny... I don't know why! You're crossing a busy road, four lane highway with a two year old. And you're standing there holding little Johnny's hand, waiting to cross. Now, if little Johnny breaks free from your grip and tries to run out, you don't handle that by giving Johnny some coaching and mentoring at that point - that's not the time to enter into a Socratic line of questioning to help him discover the pros and cons of running out in a moving traffic, right? That's not the time to do that. That's the time to grab Johnny by anything you can reach - the shirt, the arm, the hair - rip him back in and yell at him to shock him, because that's what he needs at that point in time. He needs to know that what he did is unacceptable in any way, shape or form, and that you've had to intervene because you couldn't live with the consequences. They would have been too dire to see little Johnny get hit by a car.

So that's sort of a little metaphor to talk about why it's important that sometimes, if it's a really material decision, you will have to put your hand on the levers a little bit more firmly than you'd ideally like to. But I guess back to Tim's question, you know - what, if you do have to intervene? Well, communication is really everything, but you've got to expect it to be ugly if you're reversing a decision. In order to reverse it, to think it's a decision you should reverse, it has to be a material impact. It has to be one of those car crashes. And the way you override it has to be rational, but you've got to work out how to help the decision maker save face. And that's not always easy.

Another thing a good leader would do is to take her share of the blame for not paying close enough attention to the decision in the first place, and not appropriately supporting the decision maker. So if I ever found myself in a situation where I had to overrule someone's decision and reverse it and do something different, I would say: "Hey, look guys, this is on me. I should have been closer to this. And the fact that I'm having to change tack now means that I took my eye off the ball, because this decision was so critical that I should have had a handle on it. So Hey my bad." Right? And that will ameliorate the embarrassment for the decision maker that you're overriding. And it'll also give you a genuine ability to be transparent with your people and say, "Hey, I've made this mistake as well. It's not just the accountable decision maker. It's me too.”

Em:

Awesome. Marty. That was really insightful. I hope that helped, Tim. I think that's it. Marty, why don't you wrap up the episode?

Marty:

Fantastic. Thanks Em. All right, so that brings us to the end of Episode, 112. Thank you so much for joining us. And remember at Your CEO Mentor, our purpose is "to improve the quality of leaders globally". So please share this episode with your network as that's how we reach even more leaders.

Em:

And guys, you know, I'm going to say it. If you haven't subscribed or rated the podcast, please take a minute to do that now - it would mean so much to us. Thanks for having me on again. Marty. Great chat. I will talk to you soon, no doubt!

Marty:

Yeah. Thanks, Em. I'll look forward to next week's episode: "Making a Role your Own". Until then, I know you'll take every opportunity you can to be a No Bullsh!t Leader.

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