Beyond Precision: How Ranges Unlock Better Decisions
Ever present a meticulously crafted forecast, only to be met with a skeptical eyebrow raised at the precise decimal point? Of course, what comes next is a debate over minutiae that really have little impact on the final decision. That’s the overconfidence trap in action, and it’s one we all fall into. But what if, instead of fixating on a single point, we embraced the inherent uncertainty of the future and explored a range of possibilities?
My encounter with this shift in perspective came during a presentation for a new technology investment. My financial analysis boasted an expected savings of $1,651,487.73. The CFO looked me straight in the eye and asked, “Sure about that 73 cents?”
His question struck a chord. My spreadsheet might have spat out that precise figure, but did I truly believe it down to the penny? Of course not. Yet, presenting it as such implied an unfounded level of certainty. That’s when he introduced me to the power of ranges.
Instead of fixating on a single point estimate, the CFO suggested exploring a range of potential outcomes, each with its own probability. This reframed the discussion. Suddenly, the focus shifted from debating individual cents to understanding the broader landscape of possibilities. Now, instead of debating minutiae, we could explore the really important questions like:
- How confident are we that the worst-case scenario won’t be even worse?
- What factors could push results towards the lower or higher end of the range, and how can we manage them?
- What does the size of the range tell us about our overall confidence, and how can we narrow it down?
This wasn’t just about making better predictions; it was about making better decisions. As Daniel Kahneman, the Nobel laureate, aptly put it,
“Overconfidence is the most significant single obstacle to the improvement of human decisions.”
This is where frameworks like Enabling Empowerment’s 7-Step Decision-Making Framework can help. Its 4th step, “Manage Risk and Upside,” directly tackles the overconfidence trap by encouraging us to identify our 90% Confidence Interval for each key decision driver. Imagine a table like this:
Such a table not only sparks productive discussions about potential risks and upsides but also serves as a valuable documentation tool. When revisiting the decision later, we can avoid the “hindsight trap” and clearly recall the assumptions we made.
Embracing ranges doesn’t negate the importance of thorough analysis; it simply adds a layer of realism and flexibility. It’s about acknowledging the inherent uncertainty of the future while still making informed choices. So, the next time you find yourself presenting a forecast, remember that the only thing you know for sure is that your single-point estimate is wrong. Instead, unlock the power of ranges and watch your decisions soar beyond the confines of overconfidence.
Call to action: Ready to ditch the decimal points and embrace the power of ranges? Start by identifying your 90% Confidence Interval for the key drivers of your next big decision. Share your experience in the comments below, and let’s unlock better decisions together!
Learn More About our 7-Step Decision-Making Framework
Are you interested in enhancing your team’s decision-making abilities in the face of complexity and uncertainty? You can watch our webinar, where we provide an overview of the Decision-Making Framework, explore common decision traps, and share best practices.
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Chris Seifert is the founder of Enabling Empowerment and an operations leader with 25+ years of experience managing high-risk, complex manufacturing operations and advising senior executives on strategy, leadership, culture, and execution. Most recently, Chris led Enviva Biomass’s manufacturing operations, first as VP HSEQ and then VP Operations, during a 6-year period in which revenue grew from $450MM to >$1B, plant production increased by >200% through commissioning new assets, integrating acquisitions, and organic growth, while reducing safety incident rates by more than 85% and growing adjusted EBITDA by >250%. As a Partner at Wilson Perumal and Company, Chris founded and grew an Operational Excellence Consulting Practice and became recognized internationally as a leading expert on Operational Excellence (OE), Operational Discipline (OD), and Operational Excellence Management Systems (OEMS). Chris has also served as a Plant Manager for Georgia Pacific and Owens-Corning and as a Supply Officer in the US Navy Nuclear Submarine Force.
