Persuasion and dealing with different decision-makers - The Miller-Williams decision-making style matrix

 

Investment decision processes come in many forms. There is the lone wolf portfolio manager that has the ability to make decisions without input or approval from others. There will be constraints on his behavior but not explicit collaboration. The team or committee approach is often employed by larger money management firms that have longer investment horizons. This is more likely to occur with asset allocation decisions. Finally, there is the quantitative approach where a systematic model will generate the investment decisions. Of course, a committee or PM will likely oversee the decisions from the model. what is not often discussed with group decisions is the process of persuasion to achieve consensus. 

Any group decision requires persuasion. Unfortunately, building consensus requires understanding the minds of the other decision-makers in the room. This is a skill or a consideration not generally discussed.  Nevertheless, there has been interesting research on describing or classifying the decision-makers that will have to be sold to reach a conclusion. This classification scheme can be condensed in the Miller-Williams decision-making style matrix. 

Any good presenter should be aware of the different types of decision-makers in his audience; however, this means investment decisions will be driven by a narrative and not just the output from a model. 

The most common decision-maker is the follower at 36% of the Miller-Williams survey group total. Followers are looking for others to make a decision or focused on proven methods. They will not generally think outside the box. Controllers at 9% need to be just given the details in a very logical way. Thinkers at 11% need to be given lots of facts and theory to work through many alternative scenarios. They along with controllers are going to be more risk averse but will likely improve the depth of decision-making. Skeptics at 19% are not going to be open to new ideas and will be looking for creditability and endorsement from others. Charismatics represent 25% of most key decision-makers and will need simple visuals with a focus on results although they will show strong enthusiasm. They will ask whether this idea will make money, and can you provide an easy explanation? 

My guess is that many hedge funds will be dominated by one or two types of decision-makers but not likely followers or skeptics. Pension fund boards will likely be dominated by followers and skeptics, like the majority of decision-makers in the survey sample.

Anticipating the thinking of the audience for any decision approval is a critical skill in gaining support for ideas within a firm and for selling a strategy to clients. These are considerations that are not normally considered when just developing model results.