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oGOOD LEADERS

WHY

BAD
DECISIONS
Neuroscience reveals what distorts a leader’s judgment. Here’s how you can keep your own judgment clear.

MAKE

BY ANDREW CAMPBELL, JO WHITEHEAD, AND SYDNEY FINKELSTEIN

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, affectingpeople’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

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Why Good Leaders Make Bad Decisions

put all this in context, however, we first UK drugstore chain, launched a health IN BRIEF needto 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 ontwo 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 emotionalattachments, 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 ofbias – 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 homeon 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 executiveswere 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...