Expert answer:When Leaders Make Bad Decisions

Expert answer:Need 200-250 words per part in APA format with scholarly references (Journals) within the last 4 years to answer the below. No Google Scholar books are accepted! Part 1 Consider Kahneman, Lovallo, and Sibony’s 12-question checklist and Campbell, Whitehead and Finkelstein’s red flags. Which is the more effective for identifying and minimizing bias in decision making? Why? Part 2 Does Porter’s theory of business solving social problems reflect a responsibility of business or an ethical position that extends beyond the responsibilities of business? Support your position. Supplemental Material Kahneman, D., Lovallo, D., & Sibony, O. (2011). Before you make that big decision…. Harvard Business Review, 89(6), 50-60. Phipps, K. (2012). Spirituality and strategic leadership: The influence of spiritual beliefs on strategic decision making. Journal of Business Ethics, 106(2), 177-189. Porter, M. (2013). Why business can be good at solving social problems. Retrieved from https://www.ted.com/talks/michael_porter_why_busin… Campbell, A., Whitehead, J., & Finkelstein, S. (2009). Why good leaders make bad decisions. Harvard Business Review, 87(2), 60-66.
campbell__a.__whitehead__j.____finkelstein__s.__2009_._why_good_leaders_make_bad_decisions..pdf

kahneman__d.__lovallo__d.____sibony__o.__2011_._before_you_make_that_big_decision.pdf

phipps__k.__2012_._spirituality_and_strategic_leadership_the_influence_of_spiritual_beliefs_on_strategic_decision_making..pdf

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WHY
GOOD
LEADERS
MAKE
BAD
Neuroscience reveals
what distorts a leader’s
judgment. Here’s how
you can keep your own
judgment clear.
BY ANDREW
CAMPBELL,
JO WHITEHEAD,
AND SYDNEY
FINKELSTEIN
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DECISION MAKING lies at the heart
of our personal and professional lives.
Every day we make decisions. Some are
small, domestic, and innocuous. Others
are more important, affecting people’s
lives, livelihoods, and well-being. Inevitably, we make mistakes along the way.
The daunting reality is that enormously
important decisions made by intelligent,
responsible people with the best information and intentions are sometimes
hopelessly flawed.
Consider Jürgen Schrempp, CEO of
Daimler-Benz. He led the merger of
Chrysler and Daimler against internal
opposition. Nine years later, Daimler
was forced to virtually give Chrysler
away in a private equity deal. Steve
Russell, chief executive of Boots, the
Shout
DECISIONS
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Why Good Leaders Make Bad Decisions
IDEA
put all this in context, however, we first
UK drugstore chain, launched a health
IN BRIEF
need to understand just how the hucare strategy designed to differentiate
man brain forms its judgments.
the stores from competitors and grow
» Leaders make decisions largely
through new health care services such
through unconscious processes
as dentistry. It turned out, though, that
How the Brain Trips Up
that neuroscientists call pattern
Boots managers did not have the skills
We depend primarily on two hardwired
recognition and emotional tagging.
needed to succeed in health care serprocesses for decision making. Our
These processes usually make for
vices, and many of these markets ofbrains assess what’s going on using patquick, effective decisions, but they
can be distorted by self-interest,
fered little profit potential. The strategy
tern recognition, and we react to that
emotional attachments, or misleadcontributed to Russell’s early departure
information – or ignore it – because of
ing memories.
from the top job. Brigadier General
emotional tags that are stored in our
Matthew Broderick, chief of the Homememories. Both of these processes are
» Managers need to find systemland Security Operations Center, who
normally reliable; they are part of our
atic ways to recognize the sources
of bias – what the authors call “red
was responsible for alerting President
evolutionary advantage. But in certain
flag conditions” – and then design
Bush and other senior government officircumstances, both can let us down.
safeguards that introduce more
cials if Hurricane Katrina breached the
Pattern recognition is a complex proanalysis, greater debate, or stronger
levees in New Orleans, went home on
cess that integrates information from as
governance.
Monday, August 29, 2005, after reportmany as 30 different parts of the brain.
» By using the approach described
ing that they seemed to be holding, deFaced with a new situation, we make
in this article, companies will
spite multiple reports of breaches.
assumptions based on prior experiences
avoid many flawed decisions that
All these executives were highly
and judgments. Thus a chess master can
are caused by the way our brains
qualified for their jobs, and yet they
assess a chess game and choose a highoperate.
made decisions that soon seemed
quality move in as little as six seconds
clearly wrong. Why? And more imporby drawing on patterns he or she has
tant, how can we avoid making similar
seen before. But pattern recognition
mistakes? This is the topic we’ve been
can also mislead us. When we’re dealexploring for the past four years, and
ing with seemingly familiar situations,
the journey has taken us deep into a field called decision
our brains can cause us to think we understand them when
neuroscience. We began by assembling a database of 83 deciwe don’t.
sions that we felt were flawed at the time they were made.
What happened to Matthew Broderick during Hurricane
From our analysis of these cases, we concluded that flawed
Katrina is instructive. Broderick had been involved in operadecisions start with errors of judgment made by influential
tions centers in Vietnam and in other military engagements,
individuals. Hence we needed to understand how these errors
and he had led the Homeland Security Operations Center
of judgment occur.
during previous hurricanes. These experiences had taught him
In the following pages, we will describe the conditions that
that early reports surrounding a major event are often false:
promote errors of judgment and explore ways organizations
It’s better to wait for the “ground truth” from a reliable source
can build protections into the decision-making process to
before acting. Unfortunately, he had no experience with a hurreduce the risk of mistakes. We’ll conclude by showing how
ricane hitting a city built below sea level.
two leading companies applied the approach we describe. To
By late on August 29, some 12 hours after Katrina hit New
Orleans, Broderick had received 17 reports of major
flooding and levee breaches.
But he also had gotten conflicting information. The
Army Corps of Engineers
had reported that it had no
evidence of levee breaches,
and a late afternoon CNN
report from Bourbon Street
in the French Quarter had
shown city dwellers partying and claiming they had
dodged the bullet. Broder-
THE REALITY IS that important
decisions made by intelligent, responsible
people with the best information and
intentions are sometimes hopelessly flawed.
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IDEA IN
PRACTICE
ick’s pattern-recognition process told
him that these contrary reports were
LEADERS MAKE QUICK DECISIONS
ing whether to appoint her number
the ground truth he was looking for. So
by recognizing patterns in the situtwo as her successor. She recogbefore going home for the night, he isations they encounter, bolstered by
nized that her judgment might be
sued a situation report stating that the
emotional associations attached to
distorted by her attachment to her
levees had not been breached, although
those patterns. Most of the time,
colleague and by her vested interhe did add that further assessment
the process works well, but it can
est in keeping her workload down
result in serious mistakes when
would be needed the next day.
during her transition. The executive
judgments are biased.
asked a headhunter to evaluate her
Emotional tagging is the process by
colleague and to determine whether
which emotional information attaches
EXAMPLE When Wang Laborabetter candidates could be found
itself to the thoughts and experiences
tories launched its own personal
externally.
stored in our memories. This emotional
computer, founder An Wang chose
information tells us whether to pay
to create a proprietary operating
If the risk of distorted decision
attention to something or not, and it
system even though the IBM PC
making is high, companies need to
was clearly becoming the standard.
tells us what sort of action we should
build safeguards into the decision
This blunder was influenced by his
be contemplating (immediate or postprocess: Expose decision makers to
belief that IBM had cheated him
poned, fight or flight). When the parts
additional experience and analysis,
early in his career, which made him
of our brains controlling emotions are
design in more debate and opportureluctant to consider using a system
damaged, we can see how important
nities for challenge, and add more
linked to an IBM product.
emotional tagging is: Neurological reoversight.
search shows that we become slow and
To guard against distorted decision
EXAMPLE In helping the CEO
incompetent decision makers even
making and strengthen the decision
make an important strategic decithough we can retain the capacity for
process, get the help of an indepension, the chairman of one global
objective analysis.
dent person to identify which decichemical company encouraged the
Like pattern recognition, emotional
sion makers are likely to be affected
chief executive to seek advice from
tagging helps us reach sensible deciby self-interest, emotional attachinvestment bankers, set up a project
sions most of the time. But it, too, can
ments, or misleading memories.
team to analyze options, and create
mislead us. Take the case of Wang
a steering committee that included
EXAMPLE The about-to-be-promoted
Laboratories, the top company in the
the chairman and the CFO to generhead of the cosmetics business at
word-processing industry in the early
ate the decision.
one Indian company was consider1980s. Recognizing that his company’s
future was threatened by the rise of the
personal computer, founder An Wang
built a machine to compete in this sector. Unfortunately, he chose to create a
Compounding the problem of high levels of unconscious
proprietary operating system despite the fact that the IBM PC
thinking is the lack of checks and balances in our decision
was clearly becoming the dominant standard in the industry.
making. Our brains do not naturally follow the classical textThis blunder, which contributed to Wang’s demise a few years
book model: Lay out the options, define the objectives, and
later, was heavily influenced by An Wang’s dislike of IBM. He
assess each option against each objective. Instead, we analyze
believed he had been cheated by IBM over a new technology
the situation using pattern recognition and arrive at a decihe had invented early in his career. These feelings made him
sion to act or not by using emotional tags. The two processes
reject a software platform linked to an IBM product even
happen almost instantaneously. Indeed, as the research of
though the platform was provided by a third party, Microsoft.
psychologist Gary Klein shows, our brains leap to conclusions
Why doesn’t the brain pick up on such errors and correct
and are reluctant to consider alternatives. Moreover, we are
them? The most obvious reason is that much of the mental
particularly bad at revisiting our initial assessment of a situawork we do is unconscious. This makes it hard to check the
tion – our initial frame.
data and logic we use when we make a decision. Typically, we
An exercise we frequently run at Ashridge Business School
spot bugs in our personal software only when we see the results
shows how hard it is to challenge the initial frame. We give
of our errors in judgment. Matthew Broderick found out that
students a case that presents a new technology as a good busihis ground-truth rule of thumb was an inappropriate response
ness opportunity. Often, a team works many hours before it
to Hurricane Katrina only after it was too late. An Wang found
challenges this frame and starts, correctly, to see the new techout that his preference for proprietary software was flawed
nology as a major threat to the company’s dominant market
only after Wang’s personal computer failed in the market.
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Why Good Leaders Make Bad Decisions
position. Even though the financial model consistently calculates negative returns from launching the new technology,
some teams never challenge their original frame and end up
proposing aggressive investments.
Raising the Red Flag
In analyzing how it is that good leaders made bad judgments,
we found they were affected in all cases by three factors that
either distorted their emotional tags or encouraged them to
see a false pattern. We call these factors “red flag conditions.”
The first and most familiar red flag condition, the presence
of inappropriate self-interest, typically biases the emotional importance we place on information, which in turn makes us
readier to perceive the patterns we want to see. Research has
shown that even well-intentioned professionals, such as doctors and auditors, are unable to prevent self-interest from biasing their judgments of which medicine to prescribe or opinion
to give during an audit.
The second, somewhat less familiar condition is the presence
of distorting attachments. We can become attached to people,
places, and things, and these bonds can affect the judgments
we form about both the situation we face and the appropriate
could be improved with Quaker’s marketing and management
skills. Unfortunately, the similarities between Snapple and
Gatorade proved to be superficial, which meant that Quaker
ended up destroying rather than creating value. In fact, Snapple was Smithburg’s worst deal.
Of course, part of what we are saying is common knowledge:
People have biases, and it’s important to manage decisions so
that these biases balance out. Many experienced leaders do
this already. But we’re arguing here that, given the way the
brain works, we cannot rely on leaders to spot and safeguard
against their own errors in judgment. For important decisions,
we need a deliberate, structured way to identify likely sources
of bias – those red flag conditions – and we need to strengthen
the group decision-making process.
Consider the situation faced by Rita Chakra, head of the cosmetics business of Choudry Holdings (the names of the companies and people cited in this and the following examples
have been disguised). She was promoted head of the consumer
products division and needed to decide whether to promote
her number two into her cosmetics job or recruit someone
from outside. Can we anticipate any potential red flags in this
decision? Yes, her emotional tags could be unreliable because
of a distorting attachment she may have
to her colleague or
an inappropriate selfinterest she could
have in keeping her
workload down while
changing jobs. Of
course we don’t know
for certain whether
Rita feels this attachment or holds that
vested interest. And
since the greater part of decision making is unconscious, Rita
would not know either. What we do know is that there is a risk.
So how should Rita protect herself, or how should her boss
help her protect herself?
The simple answer is to involve someone else – someone
who has no inappropriate attachments or self-interest. This
could be Rita’s boss, the head of human resources, a headhunter, or a trusted colleague. That person could challenge
her thinking, force her to review her logic, encourage her to
consider options, and possibly even champion a solution she
would find uncomfortable. Fortunately, in this situation, Rita
was already aware of some red flag conditions, and so she
involved a headhunter to help her evaluate her colleague and
external candidates. In the end, Rita did appoint her colleague
but only after checking to see if her judgment was biased.
We’ve found many leaders who intuitively understand that
their thinking or their colleagues’ thinking can be distorted.
But few leaders do so in a structured way, and as a result many
GIVEN THE WAY THE BRAIN
WORKS, we can’t rely on leaders to spot and
safeguard against their own errors in judgment.
actions to take. The reluctance executives often feel to sell a
unit they’ve worked in nicely captures the power of inappropriate attachments.
The final red flag condition is the presence of misleading
memories. These are memories that seem relevant and comparable to the current situation but lead our thinking down
the wrong path. They can cause us to overlook or undervalue
some important differentiating factors, as Matthew Broderick
did when he gave too little thought to the implications of a
hurricane hitting a city below sea level. The chance of being
misled by memories is intensified by any emotional tags we
have attached to the past experience. If our decisions in the
previous similar experience worked well, we’ll be all the more
likely to overlook key differences.
That’s what happened to William Smithburg, former chairman of Quaker Oats. He acquired Snapple because of his vivid
memories of Gatorade, Quaker’s most successful deal. Snapple,
like Gatorade, appeared to be a new drinks company that
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fail to provide sufficient safeguards against bad decisions. Let’s
look now at a couple of companies that approached the problem of decision bias systematically by recognizing and reducing the risk posed by red flag conditions.
Safeguarding Against Your Biases
A European multinational we’ll call Global Chemicals had an
underperforming division. The management team in charge
of the division had twice promised a turnaround and twice
failed to deliver. The CEO, Mark Thaysen, was weighing his
options.
This division was part of Thaysen’s growth strategy. It had
been assembled over the previous five years through two large
and four smaller acquisitions. Thaysen had led the two larger
acquisitions and appointed the managers who were struggling to perform. The chairman of the supervisory board, Olaf
Grunweld, decided to consider whether Thaysen’s judgment
about the underperforming division might be biased and, if
so, how he might help. Grunweld was not second-guessing
Thaysen’s thinking. He was merely alert to the possibility that
the CEO’s views might be distorted.
Grunweld started by looking for red flag conditions. (For
a description of a process for identifying red flags, see the
sidebar, “Identifying Red Flags.”) Thaysen built the underperforming division, and his attachment to it might have made
him reluctant to abandon the strategy or the team he had put
in place. What’s more, because in the past he had successfully
supported the local managers during a tough turnaround in
another division, Thaysen ran the risk of seeing the wrong pattern and unconsciously favoring the view that continued support was needed in this situation, too. Thus alerted to Thaysen’s possible distorting attachments and potential misleading
memories, Grunweld considered three types of safeguards to
strengthen the decision process:
■ Injecting fresh experience or analysis. You can often
counteract biases by exposing the decision maker to new information and a different take on the problem. In this instance,
Grunweld asked an investment bank to tell Thaysen what
value the company might get from selling the underperforming division. Grunweld felt this would encourage Thaysen to
at least consider that radical option – a step Thaysen might too
quickly dismiss if he had become overly attached to the unit
or its management team.
■ Introducing further debate and challenge. This safeguard can ensure that biases are confronted explicitly. It works
best when the power structure of the group debating the
issue is balanced. While Thaysen’s chief financial officer was
a strong individual, Grunweld felt that the other members of
the executive group would be likely to follow Thaysen’s lead
without challenging him. Moreover, the head of the underperforming division was a member of the executive group, making it hard for open debate to occur. So Grunweld proposed
a steering committee consisting of himself, Thaysen, and the
IDENTIFYING
RED FLAGS
Red flags are useful only if they can be spotted before a
decision is made. How can you recognize them in complex
situations? We have developed the following seven-step
process:
1
Check for
misleading
memories. What are the
It’s never possible to list
them all. But it’s normally helpful to note the
extremes. These provide
boundaries for the decision.
uncertainties in this decision? For each area of uncertainty, consider whether
the decision maker might
draw on potentially misleading memories. Think
about past experiences that
could mislead, especially
ones with strong emotional
associations. Think …
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