Today’s digital age gives us instant access to information and virtually unlimited choices at our fingertips.
Having all this information at our disposal is empowering when you feel like you’ve covered all the bases and made the best decision possible. But sometimes having too many choices works against you when it prevents you from making decisions—or second-guessing the ones you’ve just made.
Remember the famous “jam” study done at a busy upscale grocery in New York? One busy Saturday, researchers from Columbia University set up sampling tables with 24 different types of jam for shoppers to try. Sure enough, lots of shoppers stopped by because who can resist a free sample? The next weekend, researchers repeated the experiment. But, this time, they only offered six types of jam instead of 24. Lots of shoppers stopped by again, but only half as many as the first time. But, here’s the thing. On the second weekend, when there were only one-fourth as many jams to choose from, 10 times as many shoppers actually made a purchase!
As with so many things in life, the more options you are faced with, the more trouble your brain has making a decision. When people get overwhelmed with too many choices, they usually take the safe way out and decide not to do anything.
What does jam have to do with accounting?
Decision fatigue impacts everyone, whether you are shopping for jam, deciding what to have for dinner or selecting a new technology partner. If you’re a cautious, highly analytical person, you can be particularly vulnerable to decision fatigue. That’s the price you pay for being a perfectionist.
Suppose you’re looking for new billing software, time-tracking software or a customer relationship management system. If there are only two vendors to choose from, the decision is easy. But, when there are hundreds of options to choose from, how does your brain make a distinction? Are you really going to compare a dozen CRM options side by side? Are you really going to demo them all? Even if you did, would you be able to remember the first demo when you got to the end of the list? No, you get overwhelmed and just tell yourself, “I’m just going to use what I’ve always used because there are too many options to consider.” Options should be a good thing, but only if they’re processed the right way.
Let’s take client onboarding, another area in which many CPAs face challenges. It’s a straightforward process that’s essentially the same each time you bring new clients into the firm. But, many CPAs tell me they can’t standardize the new client onboarding process because every client is unique and because the process needs to be tailored to a client’s specific needs. Really?
Suppose you told a new client: “This is how we operate. This is why we operate this way. This is how you’ll benefit by following our specific onboarding process.” Ninety-nine percent of the time clients will agree to follow your process without much pushback. But, as soon as you start asking clients, “How would you like this to be delivered?” you’re introducing new variables into the equation and slowing down the decision-making process. That’s not a good use of your time, your staff’s time or your client’s time.
“Satisficing” vs. “Maximizing”
In his book “Paradox of Choice” Barry Schwartz argues that the freedom of choice doesn’t make us happier—instead it paralyzes us and makes us less satisfied. Ever wonder why Steve Jobs wore the same black turtleneck and jeans to work every day? It was a good look for him and it was one less decision he had to make every day—i.e. “what should I wear to work today?”
It’s important to understand the difference between what Schwartz calls “Satisficing” and “Maximizing.” Satisficing refers to the day-to-day decisions that don’t have to be perfect and that don’t carry long-term consequences if made incorrectly. “Which shirt should I wear?” or “Should I have eggs or oatmeal for breakfast?” or “Where should we go for lunch?” These are decisions that simply have to be satisfactory. Don’t spend lots of time or mental energy on satisficing.
You only have so much processing power you can tap in a given day. If you use it all up on satisficing, you won’t have enough bandwidth left for the really important decisions that need to be Maximized.
Making a key hire or committing to a new business plan are decisions that need to be Maximized. Just like choosing a spouse or deciding where to live, these decisions shouldn’t be satisficed because they’re going to have a big impact on your future and your happiness. But, you can’t do this for every single decision you make in a day.
Many CPAs spend their day in endless pursuit of perfection. Rows and columns must always balance. Debits must equal credits. Assets must equal Liabilities + Owner’s Equity. The problem with this mindset is that most things in life aren’t as tidy and absolute as math and accounting. For most other decisions you’re going to make in your personal and professional life, there is no balanced ledger. For instance, if you’re evaluating two accounting software packages, you have to look at more than just the cost difference. You have to weigh customer support, ease of use, features and benefits, and the financial stability of the vendor, to name just a few. There are lots of intangibles.
When we were setting up Atlas Tax Advisors, the precursor to our current firm L&H CPAs and Advisors, we were trying to figure out the right tax software to use at our growing firm. We came to the conclusion that if we were going to keep growing, we would need a very robust package, and it certainly wouldn’t be cheap. We felt it would be better to start with more horsepower than we needed at first so we didn’t outgrow it in a few years and have to start the process when the stakes were higher. We also knew we needed the software to be (a) online, (b) able to scale and (c) widely used by other CPAs.
It didn’t take long to narrow the choices down to two global brand names. Neither solution was cheap, but both met all the criteria we were looking for. Then we said, “Let’s just do two demos and see which one our team thinks is more intuitive — and that’s the one we’ll go with.” From there, it simply came down to which solutions had more current users at our firm and more users at the firms we were thinking of acquiring. The final decision was based not on which of the two final choices was better; it was based on which one would streamline our learning curve and ramp up time.
Judging a book by its cover
As an author, one of the most things you have to do is select a cover for your book. That certainly qualifies as a Maximizer decision. For my new book, The Personal CFO, we put out a bid for cover designs and received a host of promising designs. It wasn’t easy, but we narrowed it down to two choices: (a) an image of a keyhole, implying there were valuable secrets inside the book, and (b) an image of a tray being held aloft by a white-gloved concierge. This cover implied that the Personal CFO delivered a very high level of service.
We put the two cover designs out on social media and asked people to vote. It ended up close to a 50/50 tie. But, when we asked our very best clients which design they preferred, they overwhelmingly voted for the concierge. Why? Because they told us our firm was like a financial concierge service for them. Sounds like a good tie breaker.
If you’re interested in learning more about how your brain makes decisions, I urge you to read anything by Malcom Gladwell, and Daniel Kahneman's Thinking, Fast and Slow, and when running meetings, follow the “two pizza rule” advocated by Amazon founder Jeff Bezos: Every internal team in your organization should be small enough that it can be fed with two (regular) pizzas. That keeps the “what ifs” and second-guessing to a minimum and prevents you from getting caught up in a decision-making jam.