To achieve big success, you often have to take a big risk.
Unfortunately, that’s where many people tend to clench up. They base their decisions on fears, outside pressures or uninformed gut instincts. Or they make no decision at all—a choice which in itself can be disastrous.
Kellogg Professor Keith Murnighan has seen the fallout from such decisions. Years of teaching and research on risk management have taught him that there is a better way. He serves up this new approach in his book, The Art of High-Stakes Decision Making: Tough Calls in a Speed-Driven World (John Wiley & Sons Inc.).
The book, coauthored by John Mowen, a marketing professor at Oklahoma State University, was available in bookstores in October 2002. The book is structured around dozens of stories of high-stakes decision making. One highlights a young entrepreneur who must decide whether to accept venture capital and expand his business more quickly than he is comfortable doing. Another highlights a doctor making life-or-death decisions for a patient away from a hospital.
Murnighan draws parallels between these on-the-job decisions and the ones that occur in personal life: for example, whether to get married, buy a house or have a child. “Everybody makes high-stakes decisions, but most people only make them intermittently,” says Murnighan, the Harold H. Hines Jr. Distinguished Professor of Risk Management.
What makes these decisions so difficult is that there is usually no clear-cut right answer—except, perhaps, in hindsight. Often, the information available on the choice is ambiguous, the values it raises are in conflict and outside experts disagree on the best course of action. And the heat is usually on to make the decision immediately.
That’s when decision makers should follow “SCRIPTS”—the approach advocated by Murnighan in the book:
1. Search for signals of threats and opportunities
2. Find the Causes and generate possible solutions
3. Evaluate the Risks
4. Apply Intuition and emotion
5. Consider different Perspectives
6. Consider Time
7. Solve the problem
Murnighan outlines each of the steps in greater detail in his book. The underlying goal is to gain a handle on the surge of emotions that tend to accompany important decisions. “People are not rational decision-makers,” he says. “They tend to base their decisions on their feelings.”
To avoid this, Murnighan highlights two key points from his book.
If possible, do not make the decision right away. “People feel more time pressure than necessary,” Murnighan says. “Step back and relax. You usually have lots of options, and there are people you might want to consult to get more options. You usually don’t need to react immediately.”
Structure the decision. One way to do that is to jot down the key issues involved. “If you don’t write your thoughts down, information can spin over and over in your head,” Murnighan says. “Ben Franklin recommended making a list of pros and cons, and crossing one off from each column each day. A little bit of structure goes a long, long way.”
Murnighan’s hopes for the book are ambitious: that readers learn its lessons so well that the next time they face a high-stakes decision, they will apply the steps intuitively. Their skill in doing so will improve other areas of their lives too.
“If you can make your high-stakes decisions very well, you can make your low-stakes decisions very well,” Murnighan says. “The converse is not necessarily true.”