The Secret to Making Difficult Decisions

HANNAH BATES: Welcome to HBR on Leadership, case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock the best in those around you. Management decisions almost always involve uncertainty. But what if you just can’t get the facts you need? Or if your colleagues disagree about what you should decide? Harvard Business School professor Joseph Badaracco  calls these gray area problems. He offers a framework for addressing these problems in his book, Managing in the Gray: Five Timeless Questions for Resolving Your Toughest Problems at Work. In this episode, you’ll learn which questions to ask yourself and when to ask them, as you work through your own gray area problems. You’ll also learn how to balance your business acumen with the needs of your organization and your human instincts. This episode originally aired on HBR IdeaCast in September 2016. Here it is.

SARAH GREEN CARMICHAEL: Welcome to the HBR idea cast from Harvard Business Review. I’m Sarah Green Carmichael. Today I’m talking with Joseph Badaracco, Professor at Harvard Business School and author of the new book Managing in the Gray. Joe, thank you so much for coming in.

JOSEPH BADARACCO: Great to be here, Sarah.

SARAH GREEN CARMICHAEL: So when you talk about managing in the gray and managing gray area decisions, what do you mean by that? Is this sort of a lesser of two evils type choice? Or a situation where the answer is not clear? Or is the question more is there a sort of obvious right choice, but it’s more about do you have the fortitude to take that path?

JOSEPH BADARACCO: Good question. It’s basically a situation where the problem, or the issues, or whatever they are in front of you are profoundly unclear. So they may look like lesser of two evils, but sometimes you’re not sure what to count as evil. In other words, there’s always uncertainty in management decisions, of course. But here a lot of basic facts are just missing. And you can’t get a hold of them. And sometimes, you don’t know how to frame the problem either. If you can frame a problem, say it’s a marketing problem or something, you put in a box. And you often know how to deal with it.

And then the other side is that people you work with look at the same situation and they disagree about what ought to be done. So it’s hard to be really precise about what a gray area is. But most people know what I’m talking about. They’ve been in them.

SARAH GREEN CARMICHAEL: Yes, yes. Well, and you have a great line in the book that I think helps speak to the type of problem and the general approach. Which is when you face a gray area problem at work, you should work through it as a manager and resolve it as a human being. I really liked that line. How did you distill it down to that sentence?

JOSEPH BADARACCO: Well, my unconscious mind gets credit for that. I literally remember where I was in a room in our home when that occurred to me. And my wife was nearby, and she’d read some of what I had written. And I tried that out on her, and she said, I really like that. So I went and wrote it down. But the reason I’ve used it is that it captures two important elements of facing gray area situations.

First, you have to approach them as a manager. And this means you work with other people, you’ve got the best information you can, use big data if you’ve got that, use analytics if you’ve got that. Get expert advice. Look at options with other people, work the process. Be a good manager. And sometimes, you get an answer. It will be pretty clear, very clear, what you ought to do. But if it isn’t, and it’s gray, then you’ve got to make the decision. And you can’t rely on analytics or frameworks. You make that judgment call as who you are. And then you live with it afterwards. As a manager, you’re held accountable. As a human being, you prefer to look back and say, I got more of them right than wrong.

SARAH GREEN CARMICHAEL: Yeah, well so even though you say you can’t rely on a framework, your book does present something of a framework. It’s a series of five timeless questions that are drawn from western philosophical traditions, and have resonances in eastern traditions that will help managers work through these situations. I’d like to run through some of those questions if we can.

So the first one is very much clearly in the zone of manager. What are the net net consequences? I thought that the example you had in this chapter of Malden Mills was really interesting. Because I think that’s a story some people may remember, some people may not be familiar with it. But maybe we should just start here by telling the story. And then we can see how the net net consequences played out.

JOSEPH BADARACCO: Sure. Well Malden Mills was basically the last big New England textile manufacturer. They make Polartec, which a lot of people will know about. They had a terrible fire about 20 years ago. It destroyed most of the operation. The owner, son of the founder, Aaron Feuerstein, decided apparently on the spot, almost immediately after the fire, that he would use the insurance money to rebuild everything with the latest technology. And he did this partly because he had a real commitment to his workers and the communities they worked in.

It turned out, however in hindsight which is of course 20/20, that he really should have stepped back in more analytical, more objective look at a range of options and a range of future scenarios. And he might have seen what turned out to be the case, really tough times ahead. If you’re a textile manufacturer in America or New England, and he might have had to close down some parts of the operation, which would have been painful given his commitments to workers and communities. But he might have been able to save the rest with some combination of rethinking strategy and restructuring the business. He didn’t take that, at least as I interpret things from press accounts. He didn’t take that objective view. And didn’t really look at the net net consequences.

What I say in the book is that what you ought to do is a simple decision tree. Here’s different scenarios, here’s what we’ll do, here is the likelihood that these scenarios will occur. And you test your plan against these possible futures. That didn’t seem to happen.

SARAH GREEN CARMICHAEL: Yeah, it seems in the book you really hammer home on this idea of thinking broadly and deeply and coming up with more options in those kinds of situations. Which you can see how in the Malden Mills story, he clearly thought he was doing the right thing. It’s just the long term net net right thing may have been something else.

JOSEPH BADARACCO: Well, here’s where we come back to the mantra, work through these problems as a manager. And I think it’s important to be aware of your initial intuitions. You might be on to something. They might be biased or incomplete. Be aware of them, and then put them to the side. And then work with other people in what I just described. Scenarios, the risks, what you’re likely to do. Work through that as objectively as you can. I use the example in the book of why computers often beat the best human chess players. Computers look analytically at all the possibilities. And we human beings have our preferences from the beginning. And those, you’ve got to try to get beyond them.

SARAH GREEN CARMICHAEL: Yeah. And then I think one way that you encourage people to do that is with the second question, which is what are my core obligations. So tell me a little bit about maybe sticking with the Malden Mills story, how might that have played out?

JOSEPH BADARACCO: Well, the problem with talking about core duties or core obligations is that most people, if they stop and think, will realize they’ve got lots of them. And if you’re a manager, like Feurstein was, you’ve got shareholders, banks, employees. You can go down the list. This was a family company. He felt some obligation to his legacy of his family and so forth. You know, if you’re a parent, if you’re a police officer, there’s duties that come with the job. So how do you figure out what’s core? What goes to the front of the line? Which duties are in effect, you’re juggling a lot of balls. And there’s a couple of them that are red balls that you just don’t want to drop.

What I propose in the book is that you stop and use what has been called for centuries your moral imagination. And try to put yourself in the shoes of the people who will be affected by the decision, especially the most vulnerable people in those situations. And ask yourself, what would you want to happen? What regard would you want paid to you? What would you really care about? I quote Hillel the Elder, the ancient Hebrew philosopher who said it was his version of the golden rule, not do unto others. But he said ask what would be hateful if you were in a particular situation. And that way you may get a clearer sense of some boundaries on things you really don’t want to do.

And I think in the case of Malden Mills, and reading into the story with hindsight, that Feuerstein may have realized that he didn’t want to be anywhere close to a situation where almost everybody would get laid off. And the business would go bankrupt, as it did. And I think if he saw that as a central core obligation, he might have looked at some other options. History might be somewhat different.

SARAH GREEN CARMICHAEL: Yeah. I mean what is interesting to me is that we have talked about two of the five questions. We haven’t even gotten yet to practicalities. But that’s the third question. Is what will work in the real world? And I just found it so interesting that this came in the middle. It’s not what comes at the end, it’s not where you start. Why did you put this question of what will work in the real world in the middle of this process?

JOSEPH BADARACCO: Well, it sort of serves as a balancing mechanism, or even a corrective to the first two questions, which have kind of an idealistic element to them. We want to do the best we can for everybody affected net net. I want to be faithful to the core obligations in this situation. That’s lovely. The third question is actually Machiavelli’s question. And the emphasis is what will work in the world as it is? And that’s a world where there could be surprises, good and bad. There is lots of self-interest. And there’s just a lot of dumb random stuff that happens. And you need to be resilient. And you need a plan that’s resilient in a world like that. So it comes in the middle. Lest, we veer off too strongly in a unrealistic or idealistic direction.

You said there was a loose framework and there is. But the questions aren’t supposed to be used as an algorithm. You use them all together, they balance and correct each other. And that’s why this one is where it is.

SARAH GREEN CARMICHAEL: That makes sense. The last couple of questions are back to more of a philosophical side, I would say. This is where you get to being resolving as a human, like we said at the beginning. Who are we? And then finally, what can I live with?

JOSEPH BADARACCO: Yeah, well who are we is partly philosophical. But it’s also saying, look, you’re not an isolated individual when you make these decisions if you’re a manager. If you’re working with other people, typically in a business there are certain values or commitments. I distinguish between fundamental or core commitments and all the standard stuff you see on the mission on the wall of the mission statements. And the core ones are the ones that people really struggle to get right. When push comes to shove, these are the things that really define who the people are in an organization. There’s often stories that circulate and tell you what those are.

So you’ve got to look for a way out of a gray area that seems to be consistent with those fundamental values in the organization. You can imagine these first four questions as a funnel. You may reject some things because they don’t work on the net net basis. Some may not meet core obligations. Some may not work. Some may be outside the realm of your organization’s values. And that’s great, because you’ve narrowed your options. And sometimes you may have an answer at this point. But if it’s really gray, then you’ve got to decide that’s the last question. What can I live with? And there I give some suggestions for how to step back, rely on your intuition but make sure your intuition is tempered and guided and shaped by the considerations in these other questions. And then the funny thing, Sarah, is that what’s the right answer to a gray area problem? It’s what you decide it is.

You don’t find the answer. You create it if you’re a manager by making a decision. You say, here’s what we’re going to do. This is why. This is what I’ll do, this is what you’ll do, this is how we’ll benchmark. And that’s how these things are ultimately resolved. By somebody’s judgment. But it’s tempered judgment, tempered intuition. After they’ve worked through it first as a manager, then asked these fundamental questions that have been around forever. But at the end of the day, it’s somebody’s call. They live with it as a professional, as an employee, and as a person.

SARAH GREEN CARMICHAEL: What if it’s not your call? What if you are part of a team of senior leaders and ultimately the CEO or the head of the organization is going to make the call. And yet, you feel strongly that that person is going to make the wrong call. What are your options in that situation if you do this for yourself? Realize the answer you’d come to. And it’s very different than the one your boss is choosing.

JOSEPH BADARACCO: Two things. First, you would hope that there would be meetings held by the person who’s going to make the decision where people can honestly put their concerns on the table. And the book gives some guidance for how to structure meetings in that direction. So you hope you’ve had a chance to express your convictions honestly. And you hope they’ve been heard. Now, if you think the person making the decision is really headed in the wrong direction, you may want to just try to cross paths with them at the water cooler, knock on their door, send them an email and say look, could I have five minutes. After that, I think you’ve done all you can. Unless you think they’re doing something that is highly unethical, illegal, and it’ll put them on 60 Minutes. Then, you’ve got another set of considerations. But if it’s just a gray area and it’s not your call, all you can do is give your best guidance.

SARAH GREEN CARMICHAEL: You mentioned 60 Minutes and I think for a lot of people they do sometimes reduce or collapse this whole process into a sort of well, how would we feel if this ended up on 60 Minutes? Or what would it look like on the front page of the New York Times? What is your reaction when people use that rule of thumb?

JOSEPH BADARACCO: You know, I think that’s a good test. I think it picks up on all the net net consequences. Because we live in this world where media is ubiquitous. I think it certainly points towards what’s practical. It raises in the background the question of, let’s say you were on 60 Minutes. And the 60 Minutes stars was interrogating you. And they’ve only got this little box showing. They don’t even show your forehead. And the bright lights are on. What would you say to explain why we did it and why I did it? So I think it’s a good test. That said, there’s an old saying that today’s newspaper wraps tomorrow’s fish. And the world moves on. So at the end of the day, you’ve got to do something that will work for you and your organization. And not something that is going to work well in the paper or on the internet tomorrow. It’s a very important consideration, but it shouldn’t be decisive.

SARAH GREEN CARMICHAEL: Yeah, well the Malden Mills story did play very well in the media at the time.

JOSEPH BADARACCO: Yes. He was a hero, he was invited to one of President Clinton’s State of the Union addresses. He got a lot of honorary degrees. I think in terms of his motives, his aspirations, he deserved them. But I think he could have been more pragmatic. I think he could have answered a couple of questions a little differently with more time, more patience, and maybe some better conversations and meetings with people in the firm.

SARAH GREEN CARMICHAEL: Yeah, I wonder if there is a situation where you go through this process, you do your best, you make the wrong call. Is there a way to own up to that or to then make a different call? Obviously, leaders have to be decisive. You have to live with your decisions. But what would your advice be to someone who’s that in, I made this decision, I think it was the wrong call. How do I explain that to people? What would you tell that person?

JOSEPH BADARACCO: Well, first you’ve got to make sure you’ve made the wrong call. So you have to approach these things, again, as a manager. You’ve got to get the best data. Your judgement may tell you gee, I’ve made the wrong call. The next question is, can we just modify the path we’re on? Now in the old days, if you built a big factory and put the wrong equipment in there, you were stuck for a while. It was like a big cannon ball attached to your leg by a chain. Nowadays, with flexible supply chains, there’s a lot more fluidity in organizations. So often you can say we need to recalibrate. This is what a lot of entrepreneurial firms did. They call it pivoting. And they’ve got some assets, they’ve got some opportunities they rethink and recast. That’s great.

But if you just made a mistake, it’s a bad mistake. You can’t fix it. I think the best thing to do is to fess up to it. First of all, people in the organization will most cases know you made a mistake. Your boss may well know you made a mistake. Everybody makes mistakes. You put it on the table, try to learn from it, do the best you can. Now, it’s easy to sit here and distinguish as I’m about to between two types of mistakes, type A and type B. Type B you can recover from and learn from. Type A are much more serious, cataclysmic, you don’t recover. I don’t know what kind of insurance policy you have against those, except what I’ve described before. The best process as a manager, the best process as a human being, make a decision and cross your fingers. Hope it works and do everything you can to make it work. But we only control so much.

SARAH GREEN CARMICHAEL: Well Joe, this has been really helpful and reassuring in many ways.

JOSEPH BADARACCO: Glad to hear that.

SARAH GREEN CARMICHAEL: Thank you so much for coming in and talking to us today.

JOSEPH BADARACCO: You’re welcome, Sarah. Nice talking with you.

HANNAH BATES: That was Harvard Business School professor Joseph Badaracco in conversation with Sarah Green Carmichael on the HBR IdeaCast. He’s the author of the book Managing in the Gray: Five Timeless Questions for Resolving Your Toughest Problems at Work.  We’ll be back next Wednesday with another hand-picked conversation about leadership from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. We’re a production of the Harvard Business Review. If you want more articles, case studies, books, and videos like this, find it all at HBR.org. This episode was produced by Anne Saini and me, Hannah Bates. Ian Fox is our editor. Music by Coma Media. Special thanks to Maureen Hoch, Adi Ignatius, Karen Player, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.