The Takeaway: Eventually even good managers will make bad decisions, but there are ways to minimize the frequency and severity of mistakes, say Tuck School of Business professors Sydney Finkelstein and Jo Whitehead and Andrew Campbell from Ashridge Business School in their latest book Think Again. The business profs outline four underlying faults in thinking that decision makers should watch out for and avoid, as well as examples of disastrous past decisions that have resulted from corporate leaders falling prey to these four logical missteps:
- Misleading experiences, or memories that seem similar to the current situation, but in reality are not. This fault contributes to more than half of all flawed decisions.
- Misleading prejudgments, or situations where previous decisions or judgments influence current decision making.
- Inappropriate self-interests, or personal interests that conflict with the responsibilities leaders have for other stakeholders. Crystal clear case in point: former Merrill Lynch chief executive John Thain proposing a $10 million bonus for himself while the financial sector was in dire straights.
- Inappropriate attachments, or the strong feelings people tend to have towards a particular group, tribe, place or possession, and which are inappropriate given the decision. For an example, look at President Obama's appointment of Tom Daschle, with which he had a close relationship, despite early warning signs that the nomination would run into trouble.
Keeping a keen eye out for these faults, examining past decisions for errors and encouraging others to voice alternate viewpoints, the authors suggest, could go a long way towards improving the likelihood of good decisions. For those looking for more on these ideas, check out this interview with Finkelstein on ReportonBusiness.com, or, for the really deep dive, pick up a copy of the book.
(Image of red flag by DRB62, CC 2.0)
The Find: Minimize the frequency with which you make bad decisions by keeping a look out for four red flags that indicate your underlying thinking about the problem may be faulty.