poor decisionsI just recently finished reading a very interesting and well-written book called “Think Again” by Sydney Finkelstein, Jo Whitehead and Andrew Campbell. Their book is a study of bad decisions in organizations – why they occur and what can be done to make better decisions.  Much of the “why they occur” portion is grounded in neuroscience, which is good. However, since the book was published in 2008 it doesn’t discuss some of the neuroscience discoveries during the past eight years. But, it is still a provocative and valuable book to read. The authors discuss four “red flags” that indicate that a decision may be in jeopardy. These red flags include:

  • – misleading experiences
  • – misleading pre-judgements
  • – inappropriate self-interest
  • – inappropriate attachments
  The book also outlines four categories of “safeguards” to reduce the chances that a decision will be incorrect:
  • – experience, data and analysis
  • – group debate and challenge
  • – governance
  • – monitoring
I have certainly seen and personally fallen into many of the traps described in the book so, even though it feels a little academic at times, I mentally connected with it in many ways. However, I believe that it missed some key ideas, or at least expressed them in ways that are not really useful. We have seen many really bad decisions in organizations so I would now add my own perspectives about why they go bad, and what you can do about that problem Reason #1 – Pressures to Grow (and be seen as a leader) While this is probably closest to the authors’ notion of inappropriate self-interest (though they treat examples of this as more about misleading experiences), I think it is different than they characterized. Virtually every example they cite and in our experience has some form of growth or survival pressure as the main catalyst. There are virtually no circumstances in any organization where it is OK for a leader to say that the current state is OK and growth and improvements aren’t needed. In order to be successful, they have to be seen as moving forward or they fail. I once made a bad decision to enter into a new business purely because I knew that my current core business was going to shrink and it was either transition or die. I wasn’t successful in making the transition because I didn’t really understand the new business but the old business did in fact die and I was basically out of a job. One caveat here, there are many bad decisions (or more correctly non-decisions) where people see their markets changing but believe they are not in jeopardy, right up to the time that they are gone – so it isn’t just growth that causes bad decisions. Reason #2The “We Know What We Are Doing” fallacy This is similar to the authors’ description of misleading experiences. In our experience at Cerebyte, leaders of organizations consistently overgeneralize their knowledge and success. They think that because they were successful in one industry or discipline, that they are going to successful in another and they overgeneralize past success.  In simple terms, they don’t know what they don’t know, but are self-satisfied that they are knowledgeable and skilled in the area – but they are so wrong. Most of the time leaders are successful because of wide confluence of many factors, yet people see themselves as the leader that made things happen, which is giving themselves vastly too much credit.  Think of the number of times effective financial managers were made CEOs only to trash the organization.  Similarly, we find constantly that someone who has been very successful as an operations manager focusing on building efficiency is a disaster as a change leader when the market changes (see our blog on the efficiency obsession).  It is remarkable how different businesses can be even when they appear to be similar. Retail is very different from services and the services industry is very different from manufacturing. One may be good working in one industry, but you are very unlikely to be good at any of the others   Reason #3 – The “Trusted Advisor” fallacy Sometimes leaders recognize that they are personally limited in their applicable experience and so turn to others for expertise and support. But who do they turn to? Overwhelming, they turn to people who they know and trust, who mostly don’t know anything more about the requirements of the situation then they do. We experienced this with a client that was doing a major software implementation. The executive team gave responsibility for the work to their operations manager who had done other software programs in support of his organization. But none of those projects were even remotely as complicated and difficult as this one so he turned to trusted consultants who had advised him on other programs. The problem was that they knew nothing about this particular area of software implementation. In this situation there were multi-layers of trusted advisors, all of whom were both arrogant and ignorant – which is a very dangerous combination. Cerebyte was invited in to help as part of a team of new people — mostly unknown – and we knew immediately that they were making every mistake possible yet when we did say something about this, our advice was rejected in favor of the trusted advisors. The problem here is that people again don’t know what they don’t know to the degree that they don’t know that their long-time trusted advisors may be ignorant too.  We’ve seen many times when a true expert comes in and presents an accurate description of the situation that is so outside of people’s knowledge and comfort zone that it is rejected as absurd, counter-intuitive and not worthy of review. We used to see this reaction in our consulting practice in support of SAP implementations. The conventional wisdom for any system design and implementation is you start with business requirements and either develop your own software or modify an existing package to meet those requirements. Sellers and servicers of SAP and the IT departments that buy SAP, love the idea of customizing it to fit a business’ requirements because it produces big sales and budgets. But the reality of SAP implementations is that they are so complex and difficult that the only way to do them successfully is to accept all of the defaults (i.e. do no customization) and change the business processes to fit what SAP can do.  Imagine how you are received when you go to the head of manufacturing and tell them that the only way for them to be successful with SAP is to change their business to fit what SAP can do! It is completely counter-intuitive and gets rejected every time (though companies always come eventually to this realization). There are many other issues that we’ve seen that cause people to make poor decisions, but this blog post is already too long. However, there is one “safeguard” and it is the only one necessary to stop all of this – humility. Leaders who are humble about their abilities and those of their teams and advisors approach decision making very differently than the examples in the book and in our experience. While they don’t make perfect decisions they are better than decisions made due to arrogance and ignorance. So which are you – someone who falls into the lists outlined in the book “Think Again” or someone who is humble about your abilities and therefore likely to be a better decision maker?]]>

Share this...