When To Trust Your Intuition In Making Business Decisions

Trust your gut.

It’s common advice. Every day you rely on your instincts to help you make decisions in your personal and professional lives. Often, if you have experience, self-confidence and success, you believe you know what to do. While those feelings can lead you in the right direction, they can also lead you astray. So, when should you trust your intuition to make the best decisions?

“On the one hand, following your instincts and being the sort of person whose gut feeling is worth something is what defines a great business leader,” says Olivier Sibony, strategy professor at HEC Paris, author and former Senior Partner at McKinsey. “On the other hand, you can make mistakes as a result of cognitive and behavioral biases, and a lot of people would tell you to be careful, aware and analytical.”

When intuition is valuable

Intuition is your experience. It’s your ability to recognize situations that you’ve encountered before and to identify patterns based on those experiences.

Intuition is only valuable once you understand how to apply it.

“For your intuition to be worth anything, it needs to be reminiscent of something that you actually understand and from which you can draw lessons,” says Sibony. “There is no point in recognizing a situation if the same causes are not going to lead to the same consequences.”

According to Daniel Kahneman and Gary Klein, two leading scholars on intuition who wrote “Conditions for Intuitive Expertise: A Failure to Disagree,” the circumstances under which a business executive can trust his or her intuition are well defined: when the environment is regular, the same causes produce the same effects and the leader has had sufficient practice and feedback in order to understand what works and what doesn’t.

“The people you have hired have been successful or unsuccessful for all kinds of reasons that have nothing to do with what you spotted in the interview.” Olivier Sibony, Strategy Professor at HEC Paris

When to use intuition in business

While entrepreneurs, CEOs and other business executives are prone to trust their instincts, it may not be the best way for them to make the really important decisions. The main reason is strategic business decisions tend to play out in an unpredictable, competitive environment where the same decisions will not yield the same results.

It’s the difference, for example, between hiring and evaluating the performance of employees in the same entry-level position and those in various positions. “You probably think that you are a good judge of character and that you have learned from your mistakes at hiring people, but actually it’s very hard to learn anything in a situation like that because each case is different,” says Sibony. “The people you have hired have been successful or unsuccessful for all kinds of reasons that have nothing to do with what you spotted in the interview.”

And yet everyone believes intuition is indispensible. While a first impression may tell the interviewer whether or not the candidate will be a great fit, that impression is misleading because it has more to do with biases and likes. The truth is the conditions for intuitive expertise are rarely met in an interview situation and in this case, intuition should be discounted.

Before making a decision

The challenge is that the voice of intuition speaks as loudly and clearly in situations where it is incompetent as it does in situations where it is well informed. Calibrating how much to trust your intuition has nothing to do with the subjective strength of that intuition. An overconfident intuition can tell you a decision is right when it’s wrong. And you can have only a moderately strong intuition in a situation where you should listen to it because it is based on your expertise.

“When we rely on the intuition of others, we tend to associate a high-degree of expressed confidence with credibility,” says Sibony. “We trust someone who is very self confident more than someone who is less confident. But if we consider that our own intuition should not be based on how strongly we feel but on how competent we truly are, we should apply that same rule to other experts.”

“The voice of intuition speaks as loudly and clearly in situations where it is incompetent as it does in situations where it is well informed.” Olivier Sibony, Strategy Professor at HEC Paris

Before trusting your gut or someone else’s on a difficult decision, you should assess the reliability of the intuition and evaluate the person who is experiencing the intuition and the environment in which that person operates. You can do this by asking these two critical questions:

  • How predictable is the environment in which you are operating?
  • Have you made this decision many times before with good enough feedback?

If the answers are yes and yes, go ahead and trust your gut.

Improving the quality of your decisions

Sibony oversees the YPO HEC Paris Program: Advanced Decision-Making for Leaders, which has been created for YPO members and key associates seeking business and personal outcomes through improved decision making.

The program introduces theory and techniques to identify and limit a core set of biases in decisions, raises the level of quantitative and probabilistic literacy and introduces approaches to the design of decision-making processes individually, in teams and in organizations. During this time, participants will build a repertoire of decision-making approaches as well as gain insight into how to use those tools in different types of situations in their personal and business journeys.

“Decision making is a discipline in its own right, much like finance and marketing, that comes with its own pitfalls, recipes, tools and techniques that need to be mastered,” says Sibony. “Business leaders in particular need to take risks and to be confident. It is especially important for them to be mindful of the traps and the pitfalls of overconfidence and to be cognizant of the circumstances of when to trust your intuition.”

For program and registration questions about YPO’s HEC Paris: Advanced Decision-Making Program for Leaders, 2-4 October 2019, contact learning@ypo.org.

YPO is the premier global leadership organization for more than 27,000 chief executives in over 130 countries and the global platform for them to engage, learn and grow. YPO members harness the knowledge, influence and trust of the world’s most influential and innovative business leaders to inspire business, personal, family and community impact. Today, YPO member-run companies, diversified among industries and types of businesses, employ more than 22 million people globally and generate USD9 trillion in annual revenues.