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Data and Intuition: Good Decisions Need Both – Harvard Business Publishing


 

Today’s most successful organizations leverage data when making high-impact business decisions. In fact, a recent survey of more than 1,000 senior executives revealed that data-driven organizations are three times more likely to report significant improvements in decision making compared to other firms that leverage data less.[i]

Effective data gathering and analysis helps decision makers verify, understand, and quantify complex issues that need rational and insightful solutions. But we can’t always rely on data alone to paint the full picture. This is especially true when the issues at hand are ambiguous or abstract. That’s when the ability to bring in our intuition—finely honed instincts based on expertise, experience, and good judgement—becomes critical to decision making.

Intuition is often seen as the opposite of reason. And when we cast things in this binary way, we often define intuition as a yardstick that has no place in the age of science and data. But recent research from Laura Huang, an associate professor of business administration at Harvard Business School, reveals that gut feelings can in fact be useful, especially in highly uncertain circumstances where further data gathering won’t sway the decision maker one way or the other.[ii]

At its best, intuition is a powerful form of pattern recognition—something human brains are wired to do. But when not managed well, pattern recognition and trusting one’s gut may lead to bias and incomplete or overly simplistic thinking, both of which are detrimental to making sound decisions.

When it comes to data and intuition, we too often favor one over the other. But in today’s highly dynamic and complex business world, better results happen when decision makers combine the best of each. Here’s how to do that.

 

Use intuition to make data-driven decisions quickly

2.5 quintillion. That’s how many bytes of data humanity generates each day.[iii] This means organizations are empowered more than ever to use data to their advantage. But while companies have invested in data tools, much of the data that’s fed into these systems is low quality and uninterpretable,[iv] and sometimes, even when the data is healthy, there’s simply far too much of it to quantify and interpret into real insights and business results.

As a result, we may find ourselves delaying decision making, or putting off decisions altogether. However, when we rely on our intuition, we can cut through the noise and move forward without the crippling (and sometimes conflicting) evidence. According to Huang’s research, this is when gut feelings can lead us to make better decisions:

“In several studies I’ve conducted over the past eight years looking at high-stakes decisions, such as surgeons making life-or-death emergency room decisions, or early-stage investors deciding how to allocate millions of dollars in startup capital, I found that the role of gut feel is often to inspire a leader to make a call, particularly when the decision is risky.”

—Laura Huang, associate professor of business administration at Harvard Business School

Gerd Gigerenzer, a psychologist at the Max Planck Institute for Human Development in Berlin, drew similar conclusions through his research. In working with top executives at large German firms, he finds that when they’re “buried under data,” the numbers don’t tell them what to do. Intuition, he says, “is a form of unconscious intelligence that is as needed as conscious intelligence.”

While attention to raw numbers and metrics is clearly useful, it can provide a narrow understanding of the issues at hand. When decision makers feel stuck in data, instead of overthinking, they should try listening to their gut. It just might help make the right call.

 

Don’t ignore data just because it’s hard to quantify

Even the most difficult-to-measure concepts can contain valuable insights. But sometimes, we shy away from data that takes effort to quantify. For instance, qualitative data, like customer satisfaction or employee morale, may be hard to measure and analyze, but this information can be just as useful as quantitative data in making a persuasive argument toward a decision.

An example of this is Google’s well-known people analytics initiatives, Project Oxygen. Through this initiative, Google compared data from over 10,000 performance reviews—which included substantial sections of qualitative data—to employee retention rates. Google then used the data to determine common high-performing manager behaviors and created training programs to develop these leadership capabilities. As a result of their efforts, the median favorability scores for managers jumped from 83 percent to 88 percent.[vi]

Furthermore, decision makers can often get “data tunnel vision” when looking at their own numbers for a long time, which can make analyzing data difficult. That’s why it’s important to maintain some objectivity by gathering data from past activities, other industries, or relevant research to compare and develop insights.

An example of this might be a marketer who is analyzing their advertising campaign. Faced with an assortment of metrics—cost-per-click on a digital promotion, monthly return on ad spend—they need to make an informed decision on how to allocate ad dollars. So the marketer could research industry metrics and other campaign trends to analyze and compare performance.

As organizations use data to their advantage, there’s a growing need for people across all levels and functions to become or work alongside data experts in order to combine knowledge sets. This way, intuition and data can “talk” to each other, so to speak. Important to note here: When blending data and gut feel, intuition is more reliable if decision makers have extensive experience and expertise with the decision topic.

 

How to respond when data and intuition conflict

We’ve all been there: that moment when the data is telling us one thing, but our gut is telling us another. It can be a frustrating experience, especially if we’re not sure which to trust. Traditionally, we’ve been taught to push through these uncomfortable feelings so we can quickly make a decision and move on, but we can actually learn something from emotions if we pay a little more attention to them[vii]:

“Naming our feelings can help create a little space between our emotions and our actions. Gaining that distance allows us to examine the emotion, and to acknowledge feeling it, without letting the emotion drive the decision, replacing our conscious thought and agency.”

—Cheryl Strauss Einhorn, author of “Emotions Aren’t the Enemy of Good Decision Making” in Harvard Business Review

In moments like these, decision makers might name what they’re feeling and dig deeper into why that might be. Here’s how this might play out:

  • “The data looks good, but I’m feeling anxious and fearful. Could my gut be sensing a potential risk that the numbers aren’t showing?”
  • “The data is telling me something I didn’t think it would, and I’m feeling frustrated. Might I be resistant to let go of my original hypothesis?”
  • “Now that the data is in, I’m feeling a sense of discomfort. Could there be a reason to distrust the data? Or could I be realizing that this decision is rooted in a bigger issue than I first thought?”

By taking the time to analyze both the data and our own intuition, we can often arrive at a clearer understanding of the best course of action. This allows us to make more informed decisions that consider both the hard facts and the intangible factors at play.

 

Closing

In today’s highly dynamic business world, many decisions are too complex to rely on metrics or gut feelings alone. The best leaders and decision makers use both data and intuition to their advantage. To learn more about how organizations can enhance their decision-making skills, download the full paper: Who Is Really Making the Decisions in Your Organization — and How?

 

Citations

[i] https://www.pwc.com/us/en/services/consulting/cloud-digital/data-analytics.html

[ii] https://hbr.org/2019/10/when-its-ok-to-trust-your-gut-on-a-big-decision

[iii] https://www.domo.com/learn/infographic/data-never-sleeps-5

[iv] https://hbr.org/2022/11/bad-data-is-sapping-your-teams-productivity

[v] https://www.psychologytoday.com/us/articles/201912/8-truths-about-intuition

[vi] https://hbr.org/2013/12/how-google-sold-its-engineers-on-management

[vii] https://hbr.org/2022/09/emotions-arent-the-enemy-of-good-decision-making

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Rizwan Ahmed
Rizwan Ahmed
AuditStudent.com, founded by Rizwan Ahmed, is an educational platform dedicated to empowering students and professionals in the all fields of life. Discover comprehensive resources and expert guidance to excel in the dynamic education industry.
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