Business Decision-Making: Gut Instinct or Hard Data?

Making business decisions based on gut instincts 

As a business owner, you develop your sixth sense or intuition, which can be a valuable tool for helping you make good decisions for your company. Depending on your gut instincts allows you to access your innate knowledge that’s not always consciously available — but is a wealth of information we’ve been gathering for our entire life.

Whether you call it gut feelings or intuition, everyone experiences it. For instance, you may go by your gut feeling regarding business deals, projects or customers. You get a feeling; you have a sense of what is going on without consulting objective data or facts. For experts, it might be wiser to rely on their gut instincts rather than external data to make business decisions because they’ve spent their professional careers harnessing their skills and cultivating a specific knowledge base. So gathering external opinions, facts and big data could muddy the waters and, ultimately, waste time and energy.

Intuition can play an essential role in your business. Trusting your intuition can help in many ways, such as not agreeing to a risky deal because your gut was telling you something wasn’t right. Some of the ways you can rely on your intuition may include the following:

• When you first meet someone, take a minute while talking with them to see how you feel about the person. Remember, if your gut is telling you something isn’t right, it probably isn’t.
• Rather than looking for good or bad signs, take a quiet moment to understand how you feel about a situation.
• Trusting your gut instincts means paying attention to how your body reacts. If you’re ready to trust your intuition to make a decision but need buy-in from others, make a business case for why others should also trust your direction.

Pros of basing decisions on gut instincts 

In the age of information overload, relying on your gut instincts may seem counterintuitive. However, in some cases, listening to your gut can yield more accurate and confident decisions. [Read on to learn how to understand and incorporate customer emotions into your sales strategies.]

• Our minds hold a wealth of aggregated unconscious knowledge. The internet is known as the information highway, but our brains can contain massive amounts of data we accumulate daily. However, our conscious mind can only process a fraction of the information our body sends to our brain, even though our body retains that knowledge. This unconscious knowledge is what we access when we listen to our gut instincts when we otherwise wouldn’t.
• Your gut instincts can push you out of your comfort zone. Relying on your gut instincts rather than logic can help you push your boundaries and explore new ideas, opportunities and experiences.
• You can make decisions faster and with less anxiety. Learning to rely on your gut instincts can help lessen any stress you might feel and help you come to a decision more quickly than you had before. You’ll also be less likely to second-guess yourself since you rely on your instincts rather than logic.

Cons of basing decisions on gut instincts

Although gut instincts may be helpful in certain situations, some business decisions can go awry when based on just feelings.

• Emotions can cloud judgment. Your emotions can significantly impact your decisions. Emotions, especially anger, can interfere with your ability to make rational decisions, which can affect your team, your organization and your business deals. Learning how to control your emotions and knowing the difference between intuition and emotion is essential.
• Human cognition is fallible. As humans, we’re susceptible to unconscious or implicit biases. Once we form those biases and opinions, it can take a lot of self-awareness and effort to alter them. 
• It’s easy to confuse intuition with fear. Our body can react to fear and similarly show our gut reactions to certain situations and people, so it can be easy to confuse the two sensations. It’s worth taking some time to parse your physical responses to understand if what you’re experiencing is fear or your intuition.
• Some decisions are too important to leave to gut instinct alone. Suppose a particular human relations decision requires buy-in from multiple stakeholders. In that case, consider the facts, gather and analyze external data and seek expert opinions rather than following your gut instincts alone.
• It’s possible to make truly horrible decisions based on instinct. While the press typically glorifies successful gut instincts, it’s entirely possible to make a terrible decision by leaving everything to your intuition.

Making business decisions based on hard data

We live in the information age, and everything is accessible instantly at our fingertips. Because we have easy access to so much information, we look to facts, science and data to confirm our ideas and decisions rather than relying on our instincts. Leveraging big data and embracing business intelligence has been the trend for the last couple of years, and it’s easy to see why. [Learn more about incorporating facts and emotions in your sales strategy.]

Making decisions based on sophisticated data can lead to significant leaps in growth, innovation and commercial success. Of course, some decisions are better suited for relying on your gut instincts. Still, most business decisions require gathering and consulting data and insights to ensure your choices align with your overall objectives and strategies. Basing your decisions on hard data can also help you gain the support and traction you need to execute your vision.

Pros of basing decisions on data

Since instincts can’t always be trusted, many professionals turn to hard data like statistics to guide their decision-making because they can see the logic behind their choices.

• Knowledge drives progress and innovation. Data-driven decisions can make or break a company. Those embracing data-driven decisions tend to be more collaborative than companies that don’t. Analyzing data across your business allows you to identify emerging industry trends and patterns. You can then compare your results to those across your industry to make informed decisions and ensure your business remains competitive.
• Leveraging information encourages adaptability and fosters better communication. When you foster a culture of data-driven decisions, everyone has access to the information they need to learn from previous triumphs and identify and strategize how to improve and optimize where necessary. Relying on data to make business decisions also encourages better cross-company communication since everyone in the organization works with the same data. Your workforce can analyze past performances, seek opportunities for improvement and develop strategies to ensure your business is always relevant and successful.
• Data helps you better understand your business. “It’s crucial to consistently monitor and analyze data to gain a comprehensive understanding of your business model,” explained Fredrik Jansson, VP, Strategy at Configura. “By doing so, you can identify how your business operates [and] which actions are driving results and anticipate future trends.”

Cons of basing decisions on data 

Although it’s often more straightforward to rely on data to make the right business decisions, there are a few ways data can lead to poor outcomes.

• You might be working with “bad data.” Every industry has to deal with bad data or information that can be confusing or misleading and is, ultimately, a hindrance more than a help. Your database could be rife with several kinds of bad data, including outdated, inaccurate, duplicate, missing or unformatted data — the most common type of bad data. A study by Great Expectations found that 77 percent of the 500 data practitioners they surveyed had data quality issues, and 91 percent reported that those problems hurt business performance. You must have the proper processes in place to review your data and correct any inaccuracies as soon as possible.
• Your data results could be skewed or biased. Just like our thoughts and opinions can be biased, so can your business data. There are three types of biases to watch for in your data: technical, human and methodological. Implement proper training and processes so that your workforce is aware of these data-based biases and accounts for them to avoid skewed conclusions as a result. 
• Data alone may not paint the full picture. A balanced approach between data and intuition usually results in better business decisions and outcomes. “While data provides a solid foundation for informed choices, relying solely on numbers can sometimes lead to overlooking important qualitative factors,” said Jansson. “Intuition, based on experience and knowledge, can help identify trends and patterns that might not be immediately apparent from the data.”

Informed decision-making: how to blend data and intuition

Making decisions is complex. It involves different processes: reason, data, intuition and emotion. Instead of choosing one over the other, merge using your gut with gathering facts and data to make the most informed and confident business decisions possible.

For business leaders, who tend to focus on the data behind their decisions, pairing those conclusions with intuition may be outside of their comfort zone. But the stretch is worth it, according to Jansson, since qualitative data like customer feedback, industry trends and brainstorming with team members can be just as important as hard data. “By exposing themselves to a wider range of perspectives, [business leaders] can develop a stronger sense of intuition,” Jansson explained.

Conversely, leaders who rely on their gut instinct often can learn a thing or two from data analysis tools and techniques. “By visualizing data and identifying trends, [leaders] can gain a deeper understanding of their business and make more informed decisions,” Jansson said. “It’s also important to recognize that intuition can be biased, so using data can help to counterbalance these biases.”

Kaytlyn Smith contributed to the reporting and writing in this article.