Source: McKinsey Quarterly, by Dan P. Lovallo and Olivier Sibony.
Companies are vulnerable to misconceptions, biases, and plain old lies. But not hopelessly vulnerable. The chief executive of a large multinational was trying to decide whether to undertake an enormous merger—one that would not only change the direction of his company but also transform its whole industry. He had gathered his top team for a final discussion…
Errors in strategic decision making can arise from the cognitive biases we all have as human beings. These biases, which distort the way people collect and process information, can also arise from interactions in organizational settings, where judgment may be colored by self-interest that leads employees to perpetrate more or less conscious deceptions.
PRIMO: this article, published in 2006, gives a good and practical insight in the sources of errors in strategic decisions, whether it is in the public or private sector. Examples of distortions and deceptions are described in relation to the potential results of the decisions: overoptimism, loss aversion, overconfidence, misaligned time horizons, misaligned risk profiles, champion bias and ‘sunflower management’ are well elaborated. >>