Articles Posted in Thinking

A columnist (Simon London, Fin. Times, Jan. 11, 2006 at 10) draws from a classic book by Edgar Schein (Process Consultation Revisited, Addison-Wesley 1998) the following six methods to make decisions. I have translated them to law departments and listed them in declining order of frequency:

1. “Decision by formal authority.” After a 30-minute discussion on whether to hire a consultant, the general counsel announces, “We will hire one.” The process could be efficient if the GC makes good choices, but the rest of the group might not buy in.

2. “Decision by lack of response.” A direct report to the general counsel suggests an action – “let’s hire another paralegal for immigration work,” perhaps – but nobody at the meeting even comments. Schein, calling such a turn-down a “plop,” notes that “The floors of most group meetings are completely covered by plops.”

A letter to the editor sent by a British business school professor offered this teasing bit: “Several recent software developments, mostly from philosophy and computing groups, support the use of argument diagramming as one means to develop critical thinking,” in Harvard Bus. Rev., Vol. 84, Feb. 2006 at 160.

Argument diagramming also helps a person learn, since “Gains equivalent to those resulting from a complete undergraduate program have been achieved in fewer than 100 hours of class time using argument-mapping techniques. An argument diagram/map uses text boxes to represent claims and arrows or lines to show connections. A complicated agreement would become clearer with the use of software to show the inter-connections. An excellent article from last year by Maralee Harrell (Carnegie Mellon) lists Araugcaria, Argutect, Athena Standard, Inspiration and Reason!Able.

Three points caught my attention in a recent article by Luda Kopeikina, MIT Sloan Mgt. Rev., Vol. 47, No. 2, Winter 2006 at 19. First, she writes: “Effective leaders focus on three components that they can control: the quality of the decision-making process, the quality of data involved in the decision, and the level of internal alignment with the choice.” Translation: a general counsel should understand and practice sound techniques for making decisions. (See my posts of Oct. 19, 2005 about decisions processes and March 18, 2005 about intuition.)

As to the second point, Kopeikina slams consensus decisions: “The best solution comes through debate, not consensus.” A general counsel should encourage spirited discussion, views pressed with passion, but not succumb to the blandishments of “let’s all agree on a course of action.”

“A clear decision can arise only when someone takes responsibility for it.” None of this collective team stuff for her. So – to emphasize the point – general counsel should point the finger at one person, to be accountable for the success of implementing the decision.

Lawyers, like all humans, are much less rational than they think they are. Blame it on our neural circuitry.

Sights and sounds enter the brain at its primitive stem and travel through the limbic system before they reach the more recently-evolved frontal lobes. There we make sense of our world and its stimuli through (presumably) rational thought.

The amygdala, a pecan-shaped organ deep in the brain’s oldest portion, responds most quickly, generally with fear and excitement and a rush of hormones. If it goes crazy and over-reacts to a stimulus, someone has dubbed that “amygdala high-jack.” Stated bluntly, we feel before we think. More bluntly, how we react at instinctive levels shape whether and how we think at all.

My fascination with words overcomes my good judgment, sometimes. (See, for example, my posts of May 20, 2005 on schadenfreud, Oct. 18, 2005 on scheissenbedaurn, Oct. 14, 2005 on “technology,” and Dec. 21, 2005 on spruiking.).

In the realms dear to law department managers, what differences are there between the two languages divided by an ocean?

“Commercial work” means “transactional work”

When leadership groups of law departments convene to decide something, “there is a tendency to seek confirmation of what everyone already knows.” [Open no windows!] There is also a tendency for people to go along with what they perceive to be the evolving consensus – even though they disagree. [Break no glass!] Sometimes referred to as “group think,” the urge to back down and succumb often becomes acute once the general counsel states a view.

An item, Economist, Vol. 378, Jan. 21, 2006 at 16, cited Victoria Medvec at Kellogg business school for two antidotes to peer pressure. Before participants begin to talk, each of them should write down what they think about decisions on the agenda. Second, they should rate the strength of their views on a scale, say, of one to ten. To reach your own conclusions independently and assess how strongly you hold them helps you maintain your position in the face of opposing views.

Prejudice and stereotyping rear ugly heads when people talk about demographic diversity: race, gender, age, national orientation, religion, sexual preference. Diversity measured and promoted that way may completely overlook and even homogenize diversity of how people think.

In law departments, how people think makes far more of a difference in their effectiveness than any physical characteristic. (See my post of Jan. 6, 2006 on demographic and social network diversity.) Cognitive diversity isn’t a Constitutionally-protected category, but it is vitally important.

While the best-known statistics come from large numbers of data points, “normal” distributions (See my post of Oct. 24, 2005 on bell curves.), standard deviations and other tools related to frequency, the branch of statistics known as Bayesian reasoning has application to law departments (Economist, Jan. 7, 2006 at 70). Bayesian statisticians, named after the research of an 18th century clergyman, draw strong inferences from sparse data. Sound like lawyers, right?

The key to successful Bayesian reasoning is having an appropriate “prior,” an “assumption about the way the world works … that can be expressed as a mathematical probability distribution of the frequency with which events of a particular magnitude happen.” The bell-curve, aka Gaussian distribution, most of us recognize, but there are also the Poisson distribution, the Erlanger distribution, the power-law distribution (See my post of July 25, 2005 on power-law frequencies.), and many others.

With the correct prior, even a single piece of data can be used to make meaningful Bayesian predictions. For example, if an experienced in-house litigator has sense of the seasonal flow of lawsuits (a good “prior”), a few cases arriving at one time allows an accurate Bayesian prediction of annual volume.

A decision tree is a graphical representation of the sequence of decisions that must or might be made and each decision’s associated level of uncertainty. “We will decide to move for summary judgment: yes – 70%; no – 30%. We prevail completely on the motion: yes – 40%; no – 60%,” and so on. Each decision point shows as a node, each possible outcome shows as a branch with its uncertainty odds.

“Decision analysis is designed to help managers make rational, consistent decisions in an uncertain environment.” Economic Approaches to Intellectual Property: Policy, Litigation, and Management (NERA Econ. Consulting 2005, at 321). According to the summary of decision analysis, first you state clearly the problem to be addressed, the decisions that must be made, the objective of the decision-making process, the issues that influence the objective, and the sources of uncertainty. Law departments would benefit from the discipline of decision analysis.

Research has shown that humans tend to be overoptimistic on the infrequent, huge decisions we make, and overly loss-averse on our smaller, more routine decisions. This finding comes from an intriguing post by Bruce MacEwen, author of the blog — Adam Smith, Esq. — who comments on an article by McKinsey about behavioral economics and decision making (Dec. 30, 2005). His entire post deserves study, but I want to highlight one particular insight.

Reflect on significant decisions general counsel make. When giving advice on hostile takeovers, class actions, massive settlements, decisions to push the antitrust or litigation envelope, accusations of CEO wrong-doing or other, infrequent but extremely consequential decisions, people tend to over-rate their abilities and to make forecasts that are too rosy.

In counter-intuitive contrast, the garden-variety decisions get dragged down by our familiarity with what can go wrong, the principal-agent imbalance (See my post of Jan. 16, 2006.), and our failure to look at the string of decisions as a portfolio of risks, which tend to balance out. The lesson: take more time on major decisions; trust your instincts and push ahead on common decisions.