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Why Good Leaders Make Bad Decisions

Bad business decisions rarely attract the attention they are getting this week, as

four UK bank bosses face the House of Commons Treasury Select Committee to explain how they arrived at decisions that nearly ruined the banks they were heading upAmong those present will be former Royal Bank of Scotland boss Sir Fred ("the Shred") Goodwin, who made the fateful decision to acquire ABN Amro for cash just as classic short sparkles ugg boots clearance the credit markets are imploding. In the US, President Obama recently had to admit "I screwed up" when it was revealed that his nominees for a couple of important posts had not paid their taxes. But bad decisions are UGG Boots Clearance Sale Women nothing new nor do they happen only to other people. Bad decisions are something we all need to guard againstWhen bad decisions hit the press, the first reponse is to call for more regulation, more oversight and more bureaucracy. But that kills innovation and motivation and is often ineffective. Is there anything that you can do to reduce the risk of a bad decision, without adding layers of heavy handed process?

We think so. Our recent study of flawed decisions suggests that they are much more likely to occur under what we call "red flag conditions". Forewarned is forearmed. If UGGS Clearance Sale UGGS Clearance Outlet you can spot one of the four red flags, you can take steps to reduce the risk of screwing upBy identifying the decision maker's potential red flags it is possible to identify their potential bias. Under these conditions we may think we recognize something when we do not. William D Smithburg became CEO of Quaker Oats, the global food and drinks business, in 1981 UGG Boots Clearance Sale Women and executed the successful acquisition of Gatorade, the sports drink company in 1983. In 1994, the expanding company sought to repeat the success by acquiring another successful but underexploited drinks company SnappleWhat Smithburg failed to recognize was that, whereas Gatorade was promoted and distributed in a traditional fashion and was a rising star in its market, Snapple was a quirky, entrepreneurial organisation producing an image drink that was already losing market share. Steve Russell, when CEO of Boots between 2000 and 2004, had a potentially misleading and strong prejudgement that Boots's growth potential lay in health care services. In his own words, "I had been formulating this ambition for Boots since I was merchandising director of Boots the Chemist in the late 1980s. So, when I became CEO, I was determined to make it happen."

With hindsight, he commented: "We did not have the know how to make these services work. We should not have tried to do so much of it ourselves." Other managers suggested that many of the services Boots tried to enter were inherently low margin businesses. A turbulent trading period ensued and Russell resigned in 2004The lesson: Consider whether the decision maker is prejudicing a decision could it distort their thinking and cause them to behave in a blinkered manner?This can be a powerful and often unconscious influence, even among professionals who are highly ethical. There are suspicions that doctors allow their prescription choices to be influenced by drug company favours and freebies. Yet, he shelled out $750m for US clothing brand Brooks Brothers even though his team felt it was worth considerably less. M share price fell sharply.