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Understanding Decision Fatigue and the Implications on a Start-up

Nate Lentz
February 2, 2017

The New York Times recently republished a very interesting 2011 article “Do You Suffer From Decision Fatigue”, which describes academic research into the impact of decision fatigue on the quality of decisions.  Click on the link and read it because it may change how and when you make critical decisions.  Some of the takeaways include:

– As people make decisions, they become tired from the act of making the decision.  While assessing options and implementing a decision after it is made takes energy, the act of decision making itself is by far more taxing.

– As people are asked to make more decisions, they will increasingly lean toward status quo or no decision versus continuing to make decisions.  Or they will go along with recommendations of others versus making their own decision.

– If you are already tired – at the end of a long day – the energy you can commit to decisions is much lower and your speed to decision fatigue is much higher

– Decision making burns glucose at unexpected levels.  Taking breaks and replenishing glucose can take away much of one’s decision fatigue and can reset the clock for a period of decision effectiveness.

The article talks about members of an Israeli parole board who were assessed on their decisions to parole similar convicts having been convicted of similar crimes.  It turned out that convicts in similar situations had a 70% likelihood of parole early in the morning and just 10% near the end of the day.  Percentages after breaks and after lunch also spiked but rates prior to lunch were quite low.  Across a broad number of cases, these behaviors became predictable and were attributable only to time of day, length of time since the last break, and time since the last nourishment.

At Osage we think a great deal about decision bias and trying to remove as much bias as possible from the investment decisions that we make.  The writings of Kahneman and Tversky have become widely read and respected with regard to decision bias and we integrate these lessons in what we do.  But decision fatigue may also play a role in many of our critical decisions in ways that we may never be fully aware.  This made us also think about the thousands of decisions the leaders of our portfolio companies make and that their customers make and how decision fatigue might affect business success.

How does decision fatigue relate to start-ups:

Think about sales meetings: We don’t control what has happened during the day to the potential buyer of our software solution but unfortunately for us, this could be as critical as to what she thinks about your product.  So, when you can, schedule meetings or critical sales calls in the morning.  If the meeting is in person, bring a universally liked snack or two – dark chocolate squares, a five pound bag of M&Ms for a big group, vegetables and hummus – for afternoon meetings.  So many sales processes end with no decision.  How many of those fell victim to decision fatigue versus other corporate priorities?

Think about lead conversion:  A lot of analysis has been done about how lead conversion improves with speed of response.  Call in the first few minutes of someone filling out a form online and their conversion rate can be 4x higher than average.  Reaching out to people who fill out a form on weekends, early mornings, or late evenings have proven to be even higher.  There is a reason why a person who expresses interest in a product while surfing the web on a Sunday afternoon has a meaningfully higher conversion rate – their decision fatigue is low and the interest is high.  Getting back to them while they are in this state can accelerate sales cycles.

Think about management meetings at your company: Scheduling meetings in the morning versus afternoon may make a lot of sense.  Not making too many decisions in one meeting may be critical.  If you want to get something approved with little discussion, put it at the end of a long meeting agenda and make a strong recommendation.  Haven’t you noticed that people spend a lot of time discussing things early on an agenda but rarely take as much time to discuss things late in a meeting?  And remember, food for the meeting room could also be critical.

Think about when you make important choices as a leader: As a decision maker, be careful of quickly agreeing with someone else’s recommendation or simply putting off the decision.  Are you really supporting this person and their preferred path, or are you tired?  Take a look at your calendar and think about the day – are you more taxed than you think?

Think about hiring: How many interviews should you do at a time?  When do you stop listening?  I know that I have behaved like that parole board when I have been forced to do a ten session slate of interviews in a day with few breaks.  Sometimes it’s hard to listen or engage, and making no decision by simply passing on the candidate becomes the default as fatigue increases.  How many great candidates get rejected because the interviewer is simply fried from the process?  I was reminded of this recently when I was screening several hundred resumes from an MBA program resume book.  With decision fatigue in mind, best practice likely would have a person do this in thirty minute intervals and have a limited number of review sessions each day – and even better, to get several people to score each resume while putting each reviewer’s resumes in different order to make sure the same people were not given early preferential views by each reviewer.  No wonder people whose names are at the beginning of the alphabet seem to see more success.

Decision fatigue – be aware of it.  When you are in a position to make important decisions, ask yourself if you are mentally in the right place to be taking such an action.  If not – take a break, have a snack, maybe even sleep on it.   You won’t regret it.