The Ladder Of Inference

Any prospective management consultant should be interested in understanding how people reason, identify opportunities, draw conclusions, and make decisions. In the medium to long term, having a framework or mental model for thinking about these topics will help you be a more effective consultant, employee, manager, or business owner. In the near term, it might help you perform better in a case or fit interview as you prepare for a career in management consulting. So how do people reason, draw conclusions, and make decisions? The Ladder Of Inference is a framework or mental model for analyzing human reasoning. In this article, we’ll define, explore, and discuss how to leverage this model.

What Is The Ladder Of Inference?

The Ladder Of Inference is a framework for understanding how people make decisions. In a fast-moving corporate environment or consulting project, when you accept or challenge a colleague or client’s conclusions, or when you form your own perspectives, you want to be confident in your reasoning. Of course, the model applies outside of work in all aspects of life. The Ladder Of Inference provides a 7-step process for analyzing a decision-making process.

1. Actual, observable, facts, data, or experiences to consider are made available.
2. A process of “selecting” data from step 1 occurs.
3. One applies meaning to the data from step 2.
4. Assumptions about the data, based on the meaning you’ve applied, are made.
5. Conclusions are drawn based on the data you’ve selected, what you’ve determined that the data means, and the assumptions you’ve made.
6. You adopt beliefs that are associated with your conclusions.
7. You take actions based on the beliefs you’ve adopted.

The Ladder Of Inference, on its surface, simply provides a useful framework for understanding the decision-making process. Yet, the 1992 book that popularized the framework, the Fifth Discipline (co-written by Chris Argyris and Peter Senge) asserts that it goes beyond just understanding the decision making process. They contend that it is a powerful tool for understanding both how an individual and how groups can jump to incorrect conclusions.

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How Does The Ladder Of Inference Create Bad Judgement?

The primary way in which the Ladder Of Inference can create bad judgement is through a “reflexive loop”. This happens between beliefs and data. Human beings can’t possibly analyze all available data before they begin to move up the ladder and initiate the decision-making process. Imagine a video camera capturing everything in front of its lens. It’s only recording what it “sees,” much like an individual. Yet, much more happens in a room or event than what our eyes can see. People can be more or less inclusive in the data they consider, but it’s impossible to be exhaustive and see everything. So what happens?

Once you form strong beliefs, you may find yourself increasingly selecting data that ends up reinforcing those very same beliefs. This is the “reflexive loop”. It leads you to quickly move up the ladder toward decisions and actions that seem very fact-based. But in reality, they are ultimately a function of the beliefs you had before even considering the objective facts of the situation.

The Ladder Of Inference Examples

Let’s consider an example situation to see how different members of a group might jump to different conclusions based on the same data. Imagine a company experiencing a negative sales trend in a region. A meeting is called to investigate the issue and develop a plan of attack for reversing the trend. In the meeting there is a general manager with profit and loss responsibility for the division. A product manager, a sales manager, and an operations manager are also present. Everyone in the meeting does some research in advance to develop a perspective or what’s happening:

• The product manager focuses on how a negative sales trend is likely the result of a bad pricing strategy. He thinks pricing needs to be brought down to stimulate volume growth in the region. He brings data showing that a few key products in the region haven’t been re-priced in well over a year.
• The sales manager states that he’s been frustrated with the salesperson in that territory for some time now. His review last year was below average. It may be time to fire this person and hire someone new who can deliver results.
• The operations manager points to operational statistics that are impacting sales. Late shipments have accelerated above a trend, and utilization in the plant has been down. Improving operational performance, in his view, will no doubt reverse the sales trend.

General Manager Perspective

Now, put yourself in the shoes of the general manager who is ultimately responsible for the performance of the business. Everyone agrees that sales in this region are lackluster. Those facts are clear. But he has been presented with wildly divergent perspectives on what is causing this and what to do about it. In each case, someone has “cherry picked” data that reinforces beliefs they already have or at least relate to their expertise.

Understandably, everyone is focused on potential causes of the decline that are related to what they know about. The product manager focuses on selecting data related to product pricing. The sales manager focuses on the performance of his team. The operations manager looks to operational statistics.

Upon further analysis, it might be clear that most products in the region are priced competitively. The salesperson in question has been improving over time, even though his review in the previous year was poor. And operationally, although some specific data points are out of line, overall a recent customer experience survey suggests our customer service and delivery speeds are not so problematic.

How This Knowledge Lead To Better Decisions?

Let’s assume that, in fact, the real reason sales have been declining is that a competitor recently entered the market in this region. We’re losing share. How can the general manager find his or her way to this more accurate realization? The danger might be that, because of his own background in product management, or sales, or operations, he quickly accepts one perspective over the others from the meeting mentioned above.

Keys To Leveraging The Ladder Of Inference For Better Decision Making

These apply whether you are in a corporate boardroom, team meeting at school, or management consulting interview.

1. Expand Your View Of The Relevant Facts.

Of course, one can’t be exhaustive and attempt to turn over every theoretical stone before determining what facts to “select” and focus on. However, you can at least challenge your initial intuition with more questions to, at the margin, test your early hypotheses. So, for example, the operations manager in the scenario above can move beyond the sample statistics in his mind, and research overall customer satisfaction scores in the region. The product manager can, instead of following his intuition around price as the issue, look at prices across all products in the region and find that, with a broader perspective, evidence for a pricing issue just really isn’t there.

2. Always Consider Alternatives

This is where the general manager can identify alternative explanations for the sales declines. He or she can, once it’s clear that the product manager, sales manager, and operations manager theories don’t hold water, ask for alternative explanations. Those three explanations were all internally focused. Perhaps he can look externally. Maybe the overall market is shrinking in this region? If that’s not true, perhaps something in the competitor landscape has changed. Bingo. Considering alternatives, by the way, is one of the most basic yet most powerful consulting best practices to get to better decisions.

How Does The Ladder Of Inference Relate To Emotional Intelligence?

This workbook on emotional intelligence in the workplace by Neerja Bhatia and Steve Davis begins with the following quote, attributed to Albert Einstein, “We should take care not to make the intellect our god. It has, of course. powerful muscles, but not personality. It cannot lead, it can only serve.”

You may have heard of emotional intelligence and think of it as a form of “IQ” for understanding and managing emotions. Emotional intelligence can be thought of as the ability to be aware, open, and flexible to manage the actions and behaviors of yourself and others. Emotional intelligence, then, is about being aware of your own and others’ emotions and being courageous enough to ask questions to challenge underlying assumptions and beliefs that may be driving you or a group toward a suboptimal decision.

How Does Emotional Intelligence Relate To The Ladder Of Inference?

Emotional intelligence helps us become more aware of what we are both thinking and feeling as we gather and analyze information. Thus far, you may have gotten the impression that the ladder of inference reveals flaws in logic or reasoning. That may be true. But often, it’s not as if there is truly flawed logic. Instead, emotions or biases cause us to focus too much on some facts over others.

Team Meeting Trigger

For example, imagine you’re in one of your first team meetings as a new consultant. A question is raised which requires some mental math to be performed. You’ve always been nervous about mental math, and it causes you to freeze up a bit inside. But the question really wasn’t addressed to you. Someone else answers the question, and the meeting moves on. But you then notice that your manager noticed that you didn’t volunteer an answer and gives you a funny look. Later in the day, you feel she challenges you on an analytical point about the analysis you’re working on. You begin to form a belief that your manager doesn’t think you are all that good at analysis and dealing with data.

Now, what has happened here? You selected some data from a few meetings, assigned meaning, made some assumptions, and started to form a belief. It may be right, but it may be wrong. Without a healthy dose of emotional intelligence, you might let this belief set in, and it would lead to stress that causes you to make analytical mistakes in front of this manager.  By applying some emotional intelligence, you can acknowledge that yes, mental math is an Achilles heel of yours, but simply not volunteering an answer in a meeting related to a question that was asked of a group is unlikely to have caused your manager to take notice. No reason to feel stress. Instead, focus on building your skills and increasing in your analytical capabilities.

Summary

The ladder of inference is a mental model for understanding how you reach conclusions and take actions. It highlights that we often select data, make assumptions, and draw conclusions that reinforce existing beliefs in an unhelpful cycle. Considering a broader set of facts, evaluating alternatives, and recognizing the importance of emotional intelligence in the reasoning process are important ways to navigate through the ladder of inference towards more effective decisions.

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• The Pyramid Principle
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