Tame tough decisions

Via Stanford eCorner <stanford-eCorner@stanford.edu> newsletter Published July 31, 2018

“Stanford Engineering Professor Kathleen Eisenhardt has spent her career studying the strategies that firms in fast, chaotic industries rely on to succeed. Decades of research have led her to the discovery that the toughest decisions in business, and life in general, can be made much easier when you can rely on some simple rules.

Here are three strategies from her book ‘Simple Rules: How to Thrive in a Complex World,’ which she wrote with Donald Sull of the MIT Sloan School of Management.

Boundary rules: Identify criteria that must be met in order for you to say yes. Options that don’t meet the requirements can be quickly ruled out. For instance, the book cites a quirky study in Canada where convicted felons were shown photos of houses and asked to pick which ones they would break into. If a car was parked in front, they would pass. That indicated someone was home.

Prioritizing rules: Pinpoint factors that will help you rank different alternatives, especially if they will compete for limited money, time or attention. For example, a company faced with having to decide between two equally qualified candidates may have a rule that the one referred by a current employee gets the job.

Stopping rules: Determine the threshold you will not cross. This is crucial in situations where you could invest your precious resources indefinitely. Take the case of an investor who sells a stock anytime it loses 10 percent of its initial value. The legendary crooner Kenny Rogers sang it best, ‘You’ve got to know when to hold ’em, know when to fold ’em.'”

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