Why Do People Make Bad Decisions?

by Greenwood, Ramon Monday, April 06, 2009
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It is wise to spend some time examining the question as to why people make bad decisions because there's an inescapable correlation between the quality of one's decisions at work and the total of one's career success.

"Think Again: Why Good Leaders Make Bad Decisions and How To Keep It From Happening To You", a new book co-authored by Sydney Finkelstein, a professor at Dartmouth's Tuck School of Business, provides some keen insight on the issue.

Mr. Finkelstein and his co-authors studied research in neuroscience and psychology and concluded there are four reasons good managers make bad decisions.

1. They tend to rely on past experiences. Situations seldom are exactly like what's happened in the past.

2. Decisions are driven by self-interest. That force is always at work even when it is not recognized.

3. Decisions are based on judgment made before all the facts are available and sticking with them even when later findings indicate a chance of course.

4. Decisions are strongly influenced by attachments to people, places or things that managers are reluctant to change or give up.

The reader of this book will be made aware of steps managers can take to avoid making bad decisions along their career path.

One is to be aware that there is no such thing as complete objectivity.
Managers can shift in favor of making good decisions by recognizing biases and guarding against them.

Another step that will help assure good decisions is to avoid the trap of the yes man syndrome by encouraging open debate by people who have differences of opinion.

Other career coaches teach that bad decisions are made because the right questions are not asked in the process. Another obstacle is that more information is assembled than is needed. Fact gathering is confused with decision-making. This often occurs because no one wants to step up and make a decision.

A contributing factor to bad decisions is that the wrong mode has been employed in the process.

Decisions are usually made in one of three ways, each of which can lead to a sound conclusion if used in the proper context.

1. An immediate decision is required so the person in charge "commands".

2. Time permits assimilating opinions and reaching a decision.

3. Arriving at a consensus so as to help assure support by those who participated in the decision.

The key is to make sure the correct mode is put to work.

Each decision carries with it some degree of risk as well as reward.
Traveling a career path to success requires the courage and ability to make good decisions. To be a good manager one doesn't have to be right all of the time, just most of the time to reach his career goals.