Why are bosses so bad at making good decisions?
Admit it. How often have you questioned – whether in private or out loud – the big decisions made by bosses? Examples abound, of course. Why did we acquire that site? Granted, parking is not bad. But where can I get a decent lunch outside? Why did we hire that manager? (Yes, that buffoon.) And remind me again why we didn’t bother with cybersecurity?
One would have thought that, given their years of relevant experience and commensurate salaries, leaders would make consistently good decisions. Alas, not so! But let’s be fair to our senior colleagues here. Perhaps we should not be overly critical about genetically predisposed, hapless Mr. Beans and ill-fated snake oil salesmen – check out Tomas Chamorro-Premuzic’s (2019) Why Do So Many Incompetent Men Become Leaders? Perhaps it’s not their fault entirely.
Moreover, it is also true and fair to say that decision-making at the top can be hard irrespective of natural, managerial ability. There are many reasons why this is so – here are six big ones:
1. Complexity & Scope
Broad Focus: Strategic management encompasses a wide range of issues, including long-term planning, resource allocation, competitive analysis, and organisational alignment. Leaders must consider not just the internal workings of the organisation but also external factors like market trends, economic conditions, and technological changes. This broad scope can make it difficult to see how all the pieces fit together.
Interconnectedness: Strategies involve interconnected decisions that must be aligned across various departments and levels of the organisation. Leaders often struggle with understanding how decisions in one area affect other parts of the business.
2. Uncertainty & Risk
Unpredictability: Strategic decisions are often made with incomplete information and in environments characterised by uncertainty. The future is inherently unpredictable, making it difficult to anticipate the outcomes of strategic choices.
Risk Management: Leaders must balance potential risks with opportunities, a task that requires a deep understanding of both the business and its environment. The fear of making the wrong decision can lead to analysis paralysis.
3. Dynamic & Changing Environments
Constant Change: Markets, technologies, and consumer preferences are constantly evolving. Keeping up with these changes and adjusting strategies accordingly is a significant challenge. Leaders may struggle to shift from reactive to proactive strategies.
Disruptive Forces: Leaders must also deal with disruptive innovations or competitors that can rapidly change the landscape. Adapting to these disruptions requires agility and foresight, which are difficult to maintain consistently.
4. Balancing Short-Term & Long-Term Goals
Immediate Pressures: Leaders often face pressure to deliver short-term results, such as quarterly earnings, which can conflict with the need for long-term strategic planning. Balancing these competing priorities requires a disciplined approach.
Vision vs. Execution: Leaders may have a clear vision but struggle with translating that vision into actionable steps that deliver long-term success. Strategic management requires both a big-picture perspective and attention to detail, which can be difficult to maintain simultaneously.
5. Organisational Culture & Resistance to Change
Cultural Barriers: Organisational culture can either support or hinder strategic initiatives. Leaders may encounter resistance from employees or other stakeholders who are reluctant to change. Managing this resistance while maintaining morale is a delicate balance.
Alignment & Communication: Ensuring that everyone in the organisation understands and buys into the strategy is a significant challenge. Misalignment can lead to ineffective execution and failed initiatives.
6. Cognitive & Emotional Challenges
Cognitive Overload: The sheer volume of information that leaders must process to make informed strategic decisions can be overwhelming. This can lead to cognitive overload, where critical information is missed or misinterpreted.
Emotional Biases: Leaders, like all humans, are subject to cognitive and emotional biases that can cloud their judgment. For example, overconfidence, fear of failure, or attachment to the status quo can all impair strategic decision-making.
Conclusion
In conclusion, while it's easy to critique the decisions made by those at the top, it’s important to recognise the complex nature of strategic management. Leaders are tasked with navigating a landscape fraught with uncertainty, balancing short-term demands with long-term goals, and making decisions that must align with both internal dynamics and external pressures. Add to this the cognitive and emotional challenges they face, and it becomes clear that making consistently sound decisions is far from simple. So, the next time you find yourself questioning a decision from above, remember that the path to good leadership is paved with difficult choices and an array of unseen challenges. Understanding these factors can foster a more empathetic view of the decision-making process and perhaps even inspire better decision-making at all levels of the organisation.
My next blog will offer some solutions to the above challenge.