Can intuition yield better decisions?

New research illuminates how managers can combine intuition and experience to make better decisions in moments of high uncertainty

One of the more interesting and yet least understood aspects of managing is intuition's role in decision-making, especially in situations of high uncertainty. With the world seemingly on an inevitable path toward algorithmic management based on the logic of analytics, big data, and artificial intelligence, it remains true that most leaders today make critical decisions through "fuzzy" cognitive processes. It is in this setting that intuition typically operates. Recent research published by Douglas C. West (King's College London), Oguz A. Acar (Cass), and Albert Caruana (Malta), provides valuable insight into this aspect of management performance.

Their study set out to understand how we make decisions not using data or analytics but through experience and intuition. They start by defining intuition as "a fast nonconscious thought process that leads to an outcome." The authors note that when they operate non-analytically, most people combine their intuition with cognitive processes called heuristics, a term coined in the 1950s by Nobel-prize-winning economist and cognitive psychologist Herbert Simon. He suggested that while people strive to make rational choices, human judgment is subject to mental and situational limitations that can prevent them from always making the most rational choice. As a result, people develop methods to make decisions in those situations. These mental shortcuts are heuristics.

With the above definition in mind, imagine a spectrum in which, at one end, we have a fully analytical manager who bases all decisions solely on rigorous logic and, whenever possible, data. Now imagine a manager at the other end of the spectrum who makes every decision based solely on impulsive reactions with no analysis of any kind. Most people exist somewhere between these two extremes, with decisions often based on explicit or implicit heuristics developed over time (or learned from others). While this state may seem sub-optimal to a purely logical decision-maker, one of the intriguing aspects of management heuristics is that studies have shown they often outperform purely analytical decision-making, especially by experienced managers who tend to use only a limited number of heuristic processes.