Bring More Discipline to Your Decision-Making

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0:20Welcome to HBR on Leadership. These episodes are 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. I'm HBR senior editor and producer Amanda Kersey. When a complex problem at work comes up, it's natural to start wanting to talk about solutions to fix it fast. Slow down though, says Corey Phelps, who's the dean of Penn State's College of business. He says even smart, experienced leaders rush in with all their cognitive biases to their detriment. He hopes you'll be more methodical than that. And in the conversation you're about to hear, he describes a method that brings structure and rigor to problem solving.

1:08Corey Phelps spoke with HBR IdeaCast host Kurt Nickish in 2018, soon after publishing a book he co-authored called Cracked It, how to solve big problems and sell solutions like top strategy consultants. Here's Kurt. Corey, thanks for coming on the show. Thank you for the opportunity to talk. Now, there are probably many, many biases that prevent people from solving big problems well. Absolutely. What are some of the most common or your favorite stumbling blocks? Well, one of my favorites is essentially the problem of jumping to solutions or the challenge of jumping to solutions. Oh, come on, Corey.

1:46That's so much fun. Well, it is, and it's very much a result of how our brains have evolved to process information. But it's my favorite because we all do it. And especially, I would say, it happens in organizations because in organizations, when you layer on these time pressures and you layer on these concerns about efficiency and productivity, It creates enormous, I would say, incentive to say, I don't have time to carefully define and analyze the problem. I got to get a solution. I got to implement it as quick as possible. And the fundamental bias, I think, is illustrated beautifully by Danny Kahneman in his book, Thinking Fast and Slow, is that our minds are essentially hardwired to think fast.

2:33We are able to pay attention to a tiny little bit of information. we can then weave a very coherent story that makes sense to us and then we can use that story to jump very quickly to a solution that we just know will work. And if we just were able to move from that approach of what Kahneman and cognitive psychologists call system one thinking to system two thinking, that is to slow down, be more deliberative, be more structured, we would be able to better understand the problem that we're trying to solve and be more effective and exhaustive with the tools that we want to use to understand the problem before we actually go into solution generation mode.

3:18But complex problems demand different areas of expertise. And often as individuals, we're coming to those problems with one of them. And I wonder if that's often a problem of problem solving, which is that a manager is approaching it from their own expertise. And because of that, they see the problems through a certain way. Is that one of the cognitive biases that stop people from being effective problem solvers? Yeah, that's often referred to as the expertise trap. It basically colors and influences what we pay attention to with respect to a particular problem, and it limits us with respect to the tools that we can bring to bear to solve that problem.

4:01In the world of psychology, there's famous psychologist Abraham Maslow, who's famous for the hierarchy of needs. He's also famous for something that was also known as Maslow's axiom, Maslow's law. It's also called the law of the instrument. And to paraphrase Maslow, he basically said, look, I suppose if the only tool that you have in your toolkit is a hammer, everything looks like a nail. His point is that if you're, for example, a finance expert and your toolkit is the toolkit of, let's say, discounted cash flow analysis for valuation, then you're going to see problems through that very narrow lens.

4:38Now, one of the ways out of this, I think, to your point is collaboration becomes fundamentally important. And collaboration starts with the recognition that I don't have all of the tools, all of the knowledge in me to effectively solve this. So I need to recruit people that can actually help me. That's really interesting. I wonder how much the fact that you have solved a problem before makes you have a bias for that same solution for future problems. Yeah, that's a great question. What you're alluding to is analogical reasoning. And we know that human beings, one of the things that allows us to operate in novel settings is that we can draw on our past experience.

5:21And we do so when it comes to problem solving, oftentimes without being conscious or mentally aware of it. We reach into our memory and we ask ourselves a very simple question. Have I seen a problem like this before? and if it looks familiar to me the tendency then is to say okay well what worked in solving that problem that I faced before and then to say well if it worked in that setting then it should work in this setting so that's reasoning by analogy reasoning by analogy has has a great upside it allows human beings to not become overwhelmed by the tremendous novelty that they face on in their daily lives.

6:02The downside is, is that if we don't truly understand it at sort of a deep level, whether or not the two problems are similar or different, then we can make what cognitive psychologists call surface level analogies. And we can then say, oh, this looks a lot like the problem I faced before. That solution that worked there is going to easily work here. And we try that solution and it fails. And it fails largely because if we dug a little bit deeper, the two problems actually aren't much alike at all in terms of their underlying causes. The starkest example of this, I think, in your book is Ron Johnson, who left Apple to become CEO of JCPenney.

6:45Can you talk about that a little bit and what that episode for the company says about this? So Ron Johnson had been hired away from Target in the United States by Steve Jobs to help create Apple stores. Apple stores is, as many people know, the most successful physical retailer on the planet, measured by, for example, sales per square foot or per square meter. He's got the golden touch. He's created this tremendously successful retail format for Apple. So the day that it was announced that Ron Johnson was going to step into the CEO role at JCPenney, the stock price of JCPenney went up by almost 18%.

7:25So clearly, he was viewed as the savior. Johnson moves very, very quickly. Within a few months, he announces that he has a strategic plan, and it basically comes in three parts. Part number one is he's going to eliminate discount pricing. JCPenney had been a very aggressive sales promoter. The second piece of it is he's going to completely change how they organize merchandise. It's no longer going to be organized by function. So menswear, housewares, those sorts of things. It's going to be organized by boutiques. So there's going to be a Levi's boutique, a Martha Stewart boutique, a Joe Fresh boutique, and so on.

8:04And they would drop the JCPenney name. They would call it JCP. And he rolls this out over the course of about 12 months across the entire chain of over 1 ,100 stores. And what this tells us, he's so confident in his solution, his strategic transformation, that he doesn't think it's worth it to test this out on one or two pilot stores. Yeah, he was quoted as saying, at Apple, we didn't test anything. We didn't test, yes. What worked at Apple, he assumed, would work at JCPenney. And the critical thing that I think he missed is that JCPenney customers are very different from Apple Store customers.

8:45In fact, JCPenney customers love the discount. They love the thrill of hunting for a deal. Which seems so fundamental to business, right? Understanding your customer. Correct. It's just kind of shocking, I guess, to hear the story. It is shocking, especially when you consider that Ron Johnson had spent his entire career in retail. So this is someone that had faced, had seen problems in retailers for decades, for over three decades by the time that he got to JCPenney. So you would expect someone with that degree of experience in that industry wouldn't make that leap of, well, what worked at Apple stores is going to work at JCPenney stores.

9:27But in fact, that's exactly what happened. In your book, you essentially suggest four steps that you recommend people use. Tell us about the four steps then. So in the book, we describe what we call the 4S method. So four stages, each of which starts with the letter S. So the first stage is state the problem. Stating the problem is fundamentally about defining what the problem is that you are attempting to solve. And you probably would say don't hurry over that first step. Or the other three are going to be kind of pointless. Yeah, that's exactly the point of laying out the 4Ss, which is there's a tremendous amount of desire even amongst senior executives to want to get in and fix the problem.

10:10In other words, what's the trouble? What are the symptoms? What would define success? What are the constraints that we would be operating under? Who owns the problem? And then who are the key stakeholders? Oftentimes that step is skipped over and we go right into I've got a hypothesis about what I think the solution is, and I'm so obsessed with getting this thing fixed quickly, I'm not going to bother to analyze it particularly well or test the validity of my assumptions. I'm going to go right into implementation mode. The second step, what we call structure the problem, is once you have defined the problem, you need to then start to identify what are the potential causes of that problem.

10:52So there are different tools that we talk about in the book that you can structure a problem for analysis. Once you've structured the problem for analysis and you've conducted the analysis, that helps you identify what are the underlying causes that are contributing to it, which will then inform the third stage, which is generating solutions for the problem and then testing and evaluating those solutions. Is the danger that that third step, generating solutions, is the step that people spend the most time on or have the most fun with? Yeah. The danger is that's naturally what people gravitate towards.

11:29So we want to skip over the first two, state and structure. As soon as you said it, I was like, let's talk about that more. Yeah. And we want to jump right into solutioning because people love to talk about their ideas that are going to fix the problem. Yeah. That's actually a useful way to frame a discussion about solutions. We could or we might do this because it opens up possibilities for experimentation. confrontation. The problem is that when we often talk about what we could do, we have very little understanding of what the problem is that we're trying to solve and what are the underlying causes of that problem.

12:04Because as you said, solution generation is fun. Look, the classic example is brainstorming. Let's get a bunch of people in a room and let's talk about the ideas on how to fix this thing. And again, be deliberate, be disciplined, do those first stages, the first two stages, state and structure before you get into the solution generation phase. Yeah. The other thing that often happens there is just the lack of awareness of just the costs of the different solutions, how much time or what they would actually take to do. Yeah. And again, I'll go back to that example I used of brainstorming where it's fun to get a group of people together and talk about our ideas and how to fix the problem.

12:46There's a couple challenges of that. One is what often happens when we do that is we tend to censor the solutions that we come up with. In other words, we ask ourselves, if I say this idea, are people going to think I'm crazy? Are people going to say that's stupid? That'll never work. We can't do that in our organization. It's going to be too expensive. It's going to take too much time. We don't have the resources to do it. So brainstorming downside is we self-censor. So that's where you need to have deep insight into your organization in terms of, A, what's going to be feasible, B, what's going to be desirable on the part of the people that actually have the problem who you're trying to solve the problem for, and C, from a business standpoint, is it going to be financially attractive for us?

13:32So applying, again, a set of discipline criteria that help you choose amongst those ideas for potential solutions. Then the last stage of the process, which is selling, because it's rare in any organization that someone or the group of people that come up with a solution actually have the power and the resources to implement it. So that means they're going to have to persuade other people to buy into it and want to help. Design thinking is another really different method, essentially for solving problems or coming up with solutions that just aren't arrived at through usual problem solving or usual decision-making processes.

14:18I'm just wondering how design thinking comes to play when you're also outlining these disciplined methods for stating and solving problems. For us, it's about choosing the right approach. You know what the potential causes of a problem are, you just don't know which ones are operating in the particular problem you're trying to solve. And what that means is that you've got a theory. And this is largely the world of strategy consultants. Strategy consultants have theories. They have, if you hear them speak, deep understanding of different types of organizational problems. And what they bring is an analytic toolkit that says, first, we're going to identify all the possible problems, all the possible causes, I should say, of this problem.

15:06We're going to figure out which ones are operating, and we're going to use that to come up with a solution. Then you've got problems that you have no idea what the causes are. You're in a world of unknown unknowns, or unk unks, as the operations management people call them. Whoa, that's terrible. In other words, you don't have a theory. So the question is, how do you begin? Well, this is where design thinking can be quite valuable. Design thinking says, first off, let's find out who are the human beings, the people that are actually experiencing this problem. And let's go out and let's talk to them.

15:42Let's observe them. Let's immerse ourselves in their experience. And let's start to develop an understanding of the causes of the problem from their perspective. So rather than go into it and say, I have a theory, let's go the design thinking route and let's actually, based upon interactions with users or customers, let's actually develop a theory. And then we'll use our new understanding, our new insight into the causes of the problem to move into the solution generation phase. Problem solving, we know that that's something that employers look for when they're recruiting people. it is one of those phrases that you know i'm sure somebody out there has has the title at a company chief problem solver instead of ceo right so um it's it's almost one of those phrases that's so overused it can lose its meaning and yeah um if you are being hired or you're trying to make a case for being on a team that's tackling a problem like how do you make a compelling case that you are a good problem solver?

16:47How can you actually show it? Well, it's a great question. And then I have two answers to this question. So one is, look, at the end of the day, the proof is in the pudding. In other words, can you point to successful solutions that you've come up with solutions that have actually been effective in solving a problem? So that's one. The second thing is, can you actually articulate how you approach problem solving? In other words, do you follow a method or are you reinventing the wheel every time you solve a problem? Is it an ad hoc approach? And I think this issue really comes to a head when it comes to the world of strategy consulting firms when they recruit.

17:28For example, McKinsey, you've got the McKinsey problem solving test, which is again, a test that's actually trying to elicit the extent to which people are good, applicants are good at solving problems. And then you've got the case interview. And in the case interview, what they're looking at is, do you have a mastery over certain tools? But what they're really looking at is, are you actually following a logical process to solve this problem? Because again, what they're interested in is finding, to your point, people that are going to be good at solving complex organizational problems. So they're trying to get some evidence that they can demonstrate that they're good at it and some evidence that they actually follow a deliberate process.

18:09So even if you're not interviewing at a consulting firm, that's a good approach. Show your thinking. Show your process. Absolutely. Show the questions you ask. Yeah. And to your point earlier, at least if we look at what recruiters of MBA students are saying these days, they're saying, for example, according to the FT's recent survey, they're saying that we want people with really good problem-solving skills. And by the same token, we find that that's a skill that's difficult for us to recruit for. And that reinforces our interest in this area because the fundamental idea for the book is to give people a method.

18:45We're trying to equip not just MBA students, but everybody that's going to face complex problems with a toolkit to solve them better.

18:58That was Corey Phelps, who is the dean of Penn State's College of Business. speaking with HBR IdeaCast host Kurt Nickish. HBR on Leadership will be back next Wednesday with another handpicked conversation from Harvard Business Review. If this episode helped you, share it with your friends and colleagues and follow the show on Apple Podcasts, Spotify, or wherever you listen to podcasts. While you're there, consider leaving us a review. And when you're ready for more podcasts, articles, case studies, books, and videos with the world's top business and management experts, find it all at hbr.org. This episode was produced by Mary Du and me, Amanda Kersey.

19:46On Leadership's team includes Maureen Hoke, Rob Eckhart, Erica Trexler, Ramsey Kabaz, Anne Bartholomew, and Nicole Smith. Music is by Coma Media.

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