Reasons Not to Make Decisions Today on Gut Instincts

I still know some entrepreneurs who boast of simply following their gut instincts, rather than listen to anyone or any data, to make strategic decisions. We’ve all worked with autocratic leaders in large companies who seem to thrive in this mode. They all forget or ignore the high-profile failures that have resulted from some single-handed business decisions.

One of the biggest in this decade was the merger of America Online (AOL) with Time Warner, engineered in the early 2000’s by Time Warner CEO Gerald Levin and AOL CEO Steve Case for a whopping $164 billion. Levin famously prevailed on his board and ignored everyone, but later admitted that he had presided over perhaps the worst deal of the century. Time Warner was forced to take a $99 billion loss only two years after the merger, and Levin was forced out. It’s been downhill from there.

A classic book by Thomas H. Davenport and Brook Manville, “Judgment Calls: Twelve Stories of Big Decisions and the Teams That Got Them Right” helped me put some structure around the better alternatives available today. I like the authors’ outline of four major trends which shape the new pattern for making good business decisions:

1. The recognition that “none of us is as smart as all of us.” There is so much positive feedback on the value of involving customers in product development, and the use of social media for crowd feedback, at a very low cost, that’s it hard to argue that one person could have more insight alone, and be right more often.
2. New models for “collaborative leadership” in organizations. The support for “open source” software and Wikipedia have pioneered other business archetypes based on open innovation, collaborative decision making, and flat hierarchies. The art of collaboration is now taught as a key success skill at every level within organizations.
3. The use of data and analytics to support and make decisions. Intuition should never be ignored, but it should be supplemented by the growing wealth of data and analytic power available. The evidence is overwhelming that systematic analysis, not paralysis, leads to better decisions than intuition alone.
4. Technology moves to the realms of knowledge, insight, and judgment. Ever-improving information technology makes possible the timely results and analytical decision support above. It allows for rapid capture and distribution of the many forms of explicit and implicit knowledge, derived directly from the base transactions.

All of these lead to a new paradigm of organizational judgment and decision making, to add some repeatable process and quantification to your intuition:

• Decision making as a participative problem-solving process. Making important decisions is like any other problem to be solved, and must be approached with discipline and fact-based analysis. Smart executives seek collaboration with multiple points of view, including contrarian ones and stakeholders, before jumping off the cliff.
• The opportunities of new technology and analytics. Technology and business intelligence are no longer the rarified provenance of “the geeks downstairs,” but are integral to decision making and the overall judgment exercised by executives at every level, whatever the industry or sector.
• The power of culture. Organizations that practice great judgment have the basics embedded in their culture, including respect for problem-solving and leaders as facilitators of decisions, rather than monarchs. The also reward cultural change as analytical processes and technology evolves.
• Leaders doing the right thing and establishing the right context. The role of the leader in creating organizational judgment is often first about reframing decisions as not their own exclusively. It’s also about building a team with the right mind-set, and giving them the responsibility and accountability to stand up and be counted.

Even the legendary Steve Jobs at Apple admitted to some early gut decisions which came back to haunt him, most notably his hiring of John Sculley to help him, who ultimately “destroyed everything I spent 10 years working for, starting with me.” It is said that at his second stint at Apple, Jobs relied much more on others in key decisions, but never sacrificed his values.

In my view, the days are long gone when a lone wolf at the top can make these key decisions, based primarily on intuition. Yet I still see too many executives in that mode most the time, usually driven by extreme passion and a large ego. Maybe it’s time to take a hard look at your own organization, and a hard look in the mirror, before your golden gut comes back to bite you in the butt.