In recent years we have seen many financial crises, leadership failures so often in major corporates, with some really controversial decisions as in ICICI Bank, or maybe cases like Lehman Brothers and Merrill Lynch etc. Below par behavior of managers are not rare exceptions but not as prominent as the above cases. Now there come the questions that why even such experienced managers behave way below their expectations? What could lead seemingly brilliant executives to make such poor decisions?

A recent study found that 40 to 65 percent of the leaders failed in pursuit of taking their organizations to greater heights. We know that companies spend a lot of time and effort to screen and identify the potential talents, but still, many tend to fail. The answer may lie in the famous quote of philosopher Bertrand Russell who once said, “The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt.”

Can we say that even smart people who are likely to make fewer mistakes prove otherwise? If we make such an assumption, what could drive such reasoning? In fact, what could be the blind spots in their logical reasoning?

Blind Spot through IN GROUP People

When a person is entrusted with leadership roles, of course, s/he is confident or overconfident that their thought process and decisions were superior to many and that is why s/he has been entrusted with the leadership positions… These expectations or this responsibility may create a miscalibration of subjective probabilities.

There are a lot many reasons why such people are prone to mistakes. The leader is very often praised by the people around and it leads to confirmation bias. A comment such as “Wow such a great idea boss… sure you are going to pull it around this time too…”. Comments such as these are reaffirming the infallibility. Many fail to understand that it is equally difficult for people around us to come out with constructive criticism.. but instead, very often they may come up with the psychological support which may encourage a manager but do not insulate our decisions from failures. 

Alphonsa Mathai, from IBM, in one of the leadership programs, shared her experience on how she overcame this difficulty. Often the conversation would end up in exploring ideas for improvisation … like “all right guys… but.. can you spot anything that I am not seeing?". Or in a lighter way asking your team, "how would you look at it differently if you are asked to role-play my position". So it is important to create a set of devils advocates within and beyond the team. Rather than direct feedback, it is more important to know how to cox your people around to give more constructive criticism….and it is the key to overcome the blind spots in managerial decisions.  

Blind Spot through Heuristics

Imagine a situation where we have taken up a new position and we are going to make a major decision based on past success. Let’s say we are going to launch a new product backed by a major marketing campaign… However the product fails… market has not expanded.. so there are fewer customers than we expected. In this situation, our decisions might have been affected by confirmation bias because we interpret market information the way that confirms our preconceptions.

“What worked before will work again,” unknowingly this simple thought process is far too common among many managers. That explains why few leaders continue with the same modus operandi in the face of ever-changing consumer needs in a global economy. “If that worked well for me in the past... it should work well for me in the future" is the typical thought process or a heuristics in decision making.  

Let us call them mental shortcuts (known as heuristics) and they are in reality, very powerful tools. We often find people take fractions of seconds to make many decisions. How many of us actually reflect and answer if somebody asks "how are you". I'm sure that in most cases we do not spend a bit of time thinking at that point in time on how are we feeling… because, if you start really thinking too much about the same… most of our life-time would be lost in this thinking process. People develop heuristics based on past experiences to deal with situations. We have ready-made responses to a situation based on our past successes or failures and many of our managerial decisions are based on these shortcuts. 

In spite of enormously different and fast-changing environments, human brains, though evolved over two hundred thousand years, operate more or less the same way today. When human brains are bombarded with so much information, on a day-to-day basis, the decision process becomes more complex. Therefore, human brains tend to develop short-cuts to make decisions effectively.

But there lies the real problem. Unfortunately, a manager’s prior experiences and expertise cause 'errors' that limit our ability to think divergently and generate new ideas from a subconscious level. So human brains reduce uncertainty, wherever possible with decision-making patterns closer to past experiences, even though the context and the dynamics may be entirely different in the new circumstances. Due to this, managers usually choose a course of action so familiar to him/her and ignore any advice or information that does not support that decision. This is great for survival but not so great for innovation.

Way Forward

As the attention span of consumers is limited at a time, the managers also have limitations in their attention span and focus. But unfortunately, even though managers are cautious and acknowledge the limitations in their memory and attention span but not many people acknowledge their limitations in judgment and decision making. 

We can take the example of driving an automobile, probably involving the ability to discriminate a similar number of almost typical situations. It seems that a good driver makes inferences, rules, and facts just like a heuristically programmed computer. Same as an expert driver who can take appropriate actions instinctively by foot without the driver having to calculate and compare alternatives, a manager may also develop heuristics in decision making. There lies the danger. What we call intuitiveness in decision-making is when human brains recalibrate the heuristics every time in the context of a new environment and timeframe. A good leader must look forward to embedding heuristics with contextual and situational scanning, to develop the intuitiveness in decision making which could be better than mere heuristics. 

Further, our managerial decisions are often driven by internal biases we hold on many specific actionable points. Most of the time these are developed through our prior experiences. First, make a point to reflect and challenge biases identified by openly discussing impacts on current decision making at key decision-making points. Secondly, think (i) how could your decision be different if your assumptions on decision criteria are wrong (ii) what could be your decision if your assumptions were just the opposite? (iii) will you or your group make the same decision with the new awareness?. Finally, create a mentor who can be a devil's advocate.  We rarely see leaders talking about their failures or setbacks (that didn't include a heroic turnaround)? Even when we encounter failure, we are quick to turn it into some sort of a triumph. That justification can be more dangerous.