Whether in business or just in everyday life, we make decisions that are right as well as wrong . . . . sometimes. We also make a decision but at the wrong time, as well.

Whether we’re Presidents or floor supervisors we commit needless mistakes.  Some of them are:

•  Underestimating how long it will take to complete a task
• Disregard or discount information that reveals a flaw in our planning
• Fail to take advantage of company payback that are in our best interests

To propose rewiring our brains and selectively unbutton the patterns that lead to such mistakes would be very difficult.  There is another choice. . . . modify the setting in which decisions are made so that more probable decisions lead to solid results.

Business leaders can accomplish this by acting as designers. The approach involves five steps:

1. Discover the methodical errors in decision making that can take place
2. Settle on whether behavior issues are at the center of the bad decisions in question
3. Identify the exact fundamental causes
4. Revamp the decision-making framework to alleviate the negative impacts of biases and insufficient incentive
5. Meticulously examination the solution.

Discover the methodical errors in decision making that can take place

Define the problem . . . not every business problem should be addressed using behavioral economics apparatus. Therefore, prior to applying them, managers should decide whether:

Human behavior is at the heart of the problem: Asking a non-scientist to develop a chemical formula, for example. Or, asking people to act in a ways that is divergent to their own best wellbeing.

Settle on whether behavior issues are at the center of the bad decisions in question

There are two main causes of poor decision making: inadequate incentive and cognitive biases. To determine which is causing the challenging behavior, companies should ask two questions:

1. Is the problem caused by people’s failure to take any action at all? If so, the cause is lack of motivation/incentive.
2. Are people taking action but in a way that introduces systematic errors into the decision-making procedure? If so, the problem is rooted in cognitive biases.

Identify the exact fundamental causes

Once management has ascertained the primary source of an matter, companies can begin to design solutions. One such action is to utilize first choice architecture concepts. The objective here is to improve people’s decisions by carefully structuring how information and options are presented to them. In this way, organizations can bump employees in a certain direction without taking away their freedom to make decisions for themselves.

Adjustments to the choice environment can drive big improvements at low or even no cost. Included would be:

• Varying the order in which alternatives are presented.
• Varying the wording used to describe them
• Adjusting the procedure by which they are selected
• Carefully choosing the defaults

Revamp the decision-making framework to alleviate the negative impacts of biases and insufficient incentive

The semi-final step is to thoroughly test the proposed solution to determine whether it will accomplish its objectives. Obviously, testing will help management avoid expensive mistakes and provide insights that lead to even improved solutions. Tests have three key elements:

1. Identifies the preferred result
2. Identifies possible solutions and focuses on one
3. Introduces the change in some areas of the organization . . . . the “treatment group” and not in the “control group”

Meticulously examination the solution.

Divide teams into two groups . . . . Randomization helps assure that any differences in outcome between the two groups can be attributed to the change.