Half of strategic decision making in organisations fails

Why are strategic decisions mostly mistakes?

Thrive invites voices from many spheres to share their perspectives on our Community platform. Community stories are not commissioned by our editorial team, and opinions expressed by Community contributors do not reflect the opinions of Thrive or its employees. More information on our Community guidelines is available here.

More than half of all strategic decisions made by directors turn out to be wrong according to new research, conducted by PHD student Joep Steffes at Nyenrode Business University.

This is due to time constraints, not having all of the information, and bias which often causes directors to make important decisions that are not based on reason but ‘gut’.

These decisions, which could be deciding not to enter a new market or to pursue a merger, require more thought than your average decision – a director can’t simply rely on automatic actions, speed, and intuition.
Each year over 30,000 new products are launched but 80% of these fail as a result of poor decision making, according to research from former professor Clayton Christensen at Harvard Business School.

“Businesses need to ensure that their directors are making fully-informed decisions by selecting directors based on cognitive capabilities and critical thinking skills. They have to put more cognitive effort in the decision-making process. They need to have decision governance structures and responsibilities in place which effects how decisions are made and that monitor the decision-making process.” says Steffes.

Poor decision making among directors could be as a result of the ‘old boys’ network’ where these jobs were given rather than earned. This is often due to non-diverse thinking as a result of homogeneous boards.

“The position of director would often be passed on to those in the ‘old boys’ network’ rather than a candidate who is more qualified. However, this doesn’t work anymore. Directors need to have real knowledge and expertise to be able to do this role, they need to fully understand how the behavioural process works.” says Steffes.

If a company is more responsive to the behaviour of directors in this capacity, it leads to better decisions which can not only be of value to shareholders and the organisation but can bring social benefits too.

    You might also like...

    Opportunity knocks is written on a cellphone someone is holding

    Should I Take That Informal Leadership Role?

    by Mira Brancu, PhD

    How To Make Real And Lasting Improvements In Your Eating And Exercise

    by Kathy Caprino

    7 Science-Backed Strategies Leaders Can Use To Optimize Employee Brain Capital

    by Bryan Robinson, Ph.D.
    We use cookies on our site to give you the best experience possible. By continuing to browse the site, you agree to this use. For more information on how we use cookies, see our Privacy Policy.