The Key to Snapping Out of Analysis Paralysis

Analysis paralysis runs rampant in our organizations. The mountains of data available to us are a blessing and a curse. You may find you’re constantly doing more analysis but never making a decision. There’s a simple question you can ask to break out of this dynamic.

Making executive-level decisions requires you to exercise judgment. You’ll never have perfect data. Gathering data takes time and effort. While you’re gathering incremental data, the world changes while you wait, and you’ll need more data to reduce those new sources of uncertainty. Your job is to manage the trade-off on risk, certainty, reward, and speed of making the decision.

When you go to gather incremental data, or the members of your team are saying “we need more information,” ask yourself “Does it change the answer?” If that incremental data you’re going to gather won’t change the decision, just make the decision. This simple question can break you out of the data’s grip on your throat.

One situation I was involved in, as far as using data but exercising judgment and speed, was an acquisition. We were looking at buying a business that had a fleet of trucks. Truck maintenance costs were in question because they were a driver of some of the economics of the deal.

I spent a lot of time gathering and analyzing data and discussing that data for what the maintenance costs would be. Ultimately, I baked an assumption into the model. When I discussed that assumption with some senior executives, we got into very fine detail on what those costs would be. The conversation devolved to the level of “When was the last oil change for this truck? How old were the tires on this one vehicle?” I found myself gathering more and more data about every truck in the fleet in order to answer these questions.

When I took a step back and looked at the model, if I changed the value of that number for monthly maintenance costs, it didn’t matter. It didn’t matter if it was $47 or $50 or even $100. It didn’t change the answer! It was still a good deal and the economics still worked. The ROI on the deal at $47/month in maintenance costs was 32%. When I changed it to $50, the ROI dropped to 31.9%. At $100/month, the ROI was still 31.5%. Seriously? We’re going to do weeks of analysis to confirm a differential of a few basis points? I immediately pushed us to make the decision rather than wasting more time in doing that extra analysis.

Make sure when you’re gathering data that you strike that balance between speed and accuracy. Realize there is a cost to that time of doing the incremental analysis. Imagine if we were in a competitive bidding situation for this deal. We might have found ourselves conducting several weeks of extra analysis to answer questions that didn’t matter. In that time, we might have lost the deal to a competitive bid. The cost of that incremental analysis in that case could have been tremendous.

If you’re able to balance analysis with judgment and speed, you’ll make better and faster decisions. Asking “Does this change the answer?” can help snap the team out of its paralysis and move it into action. The next time you feel everyone getting bogged down, see if you can cut through things by asking that question.

To learn more about making and executing decisions, check out our training course Deliberate Decision Making. We’ll teach you how to get the most out of every negotiation you enter. You can also watch my course Executive Decision Making on lynda.com, which includes a free chapter on assessing risks. Watch the course introduction here:

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Photo: data.path Ryoji.Ikeda – 4 by r2hox