1. Evaluate the often tried approach of adopting past solutions to similar problems encountered today? Is this a form of linear thinking or not?

2. Why is linear thinking dangerous?

3. Whether the application of the tools of rational economics lead to "better decisions", across all contextual frameworks?

4. What about human behavioral responses and organizational discipline in each of these frameworks?

Read the 2 articles below to help answer the questions.

Article 1:

In January 1993, a gunman murdered seven in others. Why do these approaches fail even people in a fast-food restaurant in Palatine, a when logic indicates they should prevail? suburb of Chicago. In his dual roles as an ad- The answer lies in a fundamental assumption ministrative executive and spokesperson for of organizational theory and practice: that a the police department, Deputy Chief Walter certain level of predictability and order ex- Gasior suddenly had to cope with several ists in the world. This assumption, grounded different situations at once. He had to deal in the Newtonian science that underlies scien- with the grieving families and a frightened tific management, encourages simplifications community, help direct the operations of an that are useful in ordered circumstances. extremely busy police department, and take Circumstances change, however, and as they questions from the media, which inundated become more complex, the simplifications the town with reporters and film crews. can fail. Good leadership is not a one-size- "There would literally be four people coming fits-all proposition. at me with logistics and media issues all at We believe the time has come to broaden once, he recalls. "And in the midst of all this, the traditional approach to leadership and we still had a department that had to keep decision making and form a new perspective running on a routine basis." based on complexity science. (For more on Though Gasior was ultimately successful in this, see the sidebar "Understanding Complex- juggling multiple demands, not all leaders ity.") Over the past ten years, we have applied achieve the desired results when they face the principles of that science to governments situations that require a variety of decisions and a broad range of industries. Working with and responses. All too often, managers rely other contributors, we developed the Cynefin on common leadership approaches that work framework, which allows executives to see well in one set of circumstances but fall short things from new viewpoints, assimilate complexconcepts, and address real-world problems are easily discernible by everyone. Often, the and opportunities. (Cynefin, pronounced right answer is self-evident and undisputed. In ku-nev-in, is a Welsh word that signifies the this realm of "known knowns," decisions are multiple factors in our environment and our unquestioned because all parties share an un- experience that influence us in ways we can derstanding. Areas that are little subject to never understand.) Using this approach, change, such as problems with order process- leaders learn to define the framework with ing and fulfillment, usually belong here. examples from their own organization's his- Simple contexts, properly assessed, require tory and scenarios of its possible future. This straightforward management and monitoring. enhances communication and helps execu- Here, leaders sense, categorize, and respond. tives rapidly understand the context in which That is, they assess the facts of the situation, they are operating. categorize them, and then base their response The U.S. Defense Advanced Research on established practice. Heavily process- Projects Agency has applied the framework oriented situations, such as loan payment to counterterrorism, and it is currently a key processing, are often simple contexts. If some- component of Singapore's Risk Assessment thing goes awry, an employee can usually and Horizon Scanning program. Over time, identify the problem (when, say, a borrower the framework has evolved through hun- pays less than is required), categorize it dreds of applications, from helping a pharma- (review the loan documents to see how partial ceuticalscompany develop a new product payments must be processed), and respond strategy to assisting a Canadian provincial appropriately (either not accept the payment government in its efforts to engage employees or apply the funds according to the terms in policy making. of the note). Since both managers and employ- The framework sorts the issues facing ees have access to the information necessary leaders into five contexts defined by the nature for dealing with the situation in this domain, of the relationship between cause and effect. a command-and-control style for setting Four of these-simple, complicated, com- parameters works best. Directives are straight- plex, and chaotic-require leaders to diagnose forward, decisions can be easily delegated, situations and to act in contextually appropri- and functions are automated. Adhering to ate ways. The fifth-disorder-applies when best practices or process reengineering makes it is unclear which of the other four contexts sense. Exhaustive communication among is predominant managers and employees is not usually re- Using the Cynefin framework can help ex- quired because disagreement about what ecutives sense which context they are in so needs to be done is rare. that they can not only make better decisions Nevertheless, problems can arise in simple but also avoid the problems that arise when contexts. First, issues may be incorrectly clas- their preferred management style causes sified within this domain because they have them to make mistakes. In this article, we been oversimplified. Leaders who constantly focus on the first four contexts, offering exam- ask for condensed information, regardless of ples and suggestions about how to lead and the complexity of the situation, particularly make appropriate decisions in each of them. run this risk. Since the complex domain is much more Second, leaders are susceptible to entrained prevalent in the business world than most thinking, a conditioned response that occurs David J. Snowden (snowded@mac leaders realize-and requires different, often when people are blinded to new ways of think- .com) is the founder and chief scientific counterintuitive, responses-we concentrate ing by the perspectives they acquired through officer of Cognitive Edge, an interna- particularly on that context. Leaders who past experience, training, and success. tional research network. He is based understand that the world is often irrational Third, when things appear to be going primarily in Lockeridge, England. and unpredictable will find the Cynefin smoothly, leaders often become complacent. Mary E. Boone (mary@maryboone framework particularly useful. if the context changes at that point, a leader com) is the president of Boone Associ- is likely to miss what is happening and react ates, a consulting firm in Essex, "Con- Simple Contexts: The Domain of too late. In the exhibit "The Cynefin Frame- necticut and the author of numerous Best Practice work," the simple domain lies adjacent to books and articles, including Managing Simple contexts are characterized by stability the chaotic-and for good reason. The most Interactively (McGraw-Hill, 2001). and clear cause-and-effect relationships that frequent collapses into chaos occur becausesuccess has bred complacency. This shift can longer leads to foresight after a shift in con- bring about catastrophic failure-think of text, a corresponding change in management the many previously dominant technolo style may be called for. gies that were suddenly disrupted by more dynamic alternatives. Complicated Contexts: The Domain Leaders need to avoid micromanaging and of Experts stay connected to what is happening in order Complicated contexts, unlike simple ones, to spot a change in context. By and large, may contain multiple right answers, and line workers in a simple situation are more though there is a clear relationship between than capable of independently handling cause and effect, not everyone can see it. This any issues that may arise. Indeed, those is the realm of "known unknowns." While with years of experience also have deep insight leaders in a simple context must sense, catego- into how the work should be done. Leaders rize, and respond to a situation, those in a should create a communication channel-an complicated context must sense, analyze, and anonymous one, if necessary-that allows respond. This approach is not easy and often dissenters to provide early warnings about requires expertise: A motorist may know that complacency. something is wrong with his car because the Finally, it's important to remember that engine is knocking, but he has to take it to a best practice is, by definition, past practice. mechanic to diagnose the problem. Using best practices is common, and often Because the complicated context calls for appropriate, in simple contexts. Difficulties investigating several options-many of which arise, however, if staff members are discour- may be excellent-good practice, as opposed to aged from bucking the process even when best practice, is more appropriate. For exam- it's not working anymore. Since hindsight no ple, the customary approach to engineering a Understanding Complexity Complexity is more a way of thinking about frequently referred to as emergence. isolation. More recently, some thinkers and the world than a new way of working with The system has a history, and the past practitioners have started to argue that mathematical models. Over a century ago, is integrated with the present; the ele- human complex systems are very different Frederick Winslow Taylor, the father of scien- ments evolve with one another and from those in nature and cannot be modeled tific management, revolutionized leadership. with the environment; and evolution in the same ways because of human unpre- Today, advances in complexity science, com- is irreversible dictability and intellect. Consider the follow- bined with knowledge from the cognitive . Though a complex system may, in retro- ing ways in which humans are distinct from sciences, are transforming the field once spect, appear to be ordered and predict- other animals: again. Complexity is poised to help current able, hindsight does not lead to foresight They have multiple identities and can and future leaders make sense of advanced because the external conditions and fluidly switch between them without technology, globalization, intricate markets, systems constantly change. conscious thought. (For example, a per- cultural change, and much more. In short, Unlike in ordered systems (where the son can be a respected member of the the science of complexity can help all of us system constrains the agents), or chaotic community as well as a terrorist.) address the challenges and opportunities we systems (where there are no constraints), They make decisions based on past face in a new epoch of human history. in a complex system the agents and the patterns of success and failure, rather A complex system has the following char- system constrain one another, especially than on logical, definable rules. acteristics: over time. This means that we cannot They can, in certain circumstances, pur- . It involves large numbers of interacting forecast or predict what will happen. posefully change the systems in which elements. One of the early theories of complexity is they operate to equilibrium states (think The interactions are nonlinear, and that complex phenomena arise from simple of a Six Sigma project) in order to create minor changes can produce dispropor rules. Consider the rules for the flocking predictable outcomes. tionately major consequences, behavior of birds: Fly to the center of the Leaders who want to apply the principles . The system is dynamic, the whole is flock, match speed, and avoid collision. This of complexity science to their organizations greater than the sum of its parts, and simple-rule theory was applied to industrial will need to think and act differently than solutions can't be imposed; rather, they modeling and production early on, and it they have in the past. This may not be easy, arise from the circumstances. This is promised much; but it did not deliver in but it is essential in complex contexts.new cell phone might emphasize feature A over their knowledge, and they are unlikely to feature B, but an alternative plan-emphasizing tolerate controversial ideas. If the context feature C-might be equally valuable. has shifted, however, the leader may need Another example is the search for oil or access to those maverick concepts. To get mineral deposits. The effort usually requires a around this issue, a leader must listen to the team of experts, more than one place will po- experts while simultaneously welcoming tentially produce results, and the location of novel thoughts and solutions from others. the right spots for drilling or mining involves Executives at one shoe manufacturer did complicated analysis and understanding of this by opening up the brainstorming pro- consequences at multiple levels. cess for new shoe styles to the entire com- Entrained thinking is a danger in compli- pany. As a result, a security guard submitted cated contexts, too, but it is the experts a design for a shoe that became one of their (rather than the leaders) who are prone to best sellers. it, and they tend to dominate the domain. Another potential obstacle is "analysis When this problem occurs, innovative sugges paralysis," where a group of experts hits a tions by nonexperts may be overlooked or stalemate, unable to agree on any answers dismissed, resulting in lost opportunities. The because of each individual's entrained experts have, after all, invested in building thinking-or ego. Working in unfamiliar environments can help leaders and experts approach decision The Cynefin Framework making more creatively. For instance, we put retail marketing professionals in several mili- The Cynefin framework helps leaders world of fact-based management; the tary research environments for two weeks. determine the prevailing operative context unordered world represents pattern- The settings were unfamiliar and challenging, so that they can make appropriate based management. but they shared a primary similarity with the choices. Each domain requires different The very nature of the fifth context- retail environment: In both cases, the market- actions. Simple and complicated contexts disorder-makes it particularly difficult to ers had to work with large volumes of data assume an ordered universe, where recognize when one is in it. Here, multi- from which it was critical to identify small cause-and-effect relationships are per- ple perspectives jostle for prominence, trends or weak signals. They discovered that ceptible, and right answers can be deter- factional leaders argue with one another, there was little difference between, say, mined based on the facts. Complex and and cacophony rules. The way out of this handling outgoing disaffected customers and chaotic contexts are unordered-there is realm is to break down the situation into anticipating incoming ballistic missiles. The no immediately apparent relationship constituent parts and assign each to one exercise helped the marketing group learn between cause and effect, and the way of the other four realms, Leaders can how to detect a potential loss of loyalty forward is determined based on emerg- then make decisions and intervene in and take action before a valued customer ing patterns. The ordered world is the contextually appropriate ways. switched to a competitor. By improving their strategy, the marketers were able to retain far more high-volume business. Games, too, can encourage novel thinking. UNORDERED COMPLEX We created a game played on a fictional planet that was based on the culture of a real probe sense client organization. When the executives respond "landed" on the alien planet, they were asked to address problems and opportunities facing COMPLICATED the inhabitants. The issues they encountered CHAOTIC DISORDER sense were disguised but designed to mirror real act analyze situations, many of which were controversial sorise respond respond sense or sensitive. Because the environment seemed categorize Based on a graphic by Debera Johnson so foreign and remote, however, the players respond found it much easier to come up with fresh SIMPLE ideas than they otherwise might have done. ORDERED Playing a metaphorical game increases man- agers' willingness to experiment, allows them to resolve issues or problems more easilyand creatively, and broadens the range of will die. None of those experts knew a priori options in their decision-making processes. what would work. Instead, they had to let a The goal of such games is to get as many solution emerge from the materials at hand. perspectives as possible to promote unfet- And they succeeded. (Conditions of scarcity tered analysis. often produce more creative results than Reaching decisions in the complicated do- conditions of abundance.) main can often take a lot of time, and there is Another example comes from YouTube. always a trade-off between finding the right The founders could not possibly have pre- answer and simply making a decision. When dicted all the applications for streaming the right answer is elusive, however, and you video technology that now exist. Once people must base your decision on incomplete data, started using YouTube creatively, however, your situation is probably complex rather the company could support and augment the than complicated. emerging patterns of use. YouTube has become a popular platform for expressing political Complex Contexts: The Domain of views, for example. The company built on this Emergence pattern by sponsoring a debate for presiden- In a complicated context, at least one right tial hopefuls with video feeds from the site. answer exists. In a complex context, however, As in the other contexts, leaders face sev- right answers can't be ferreted out. It's like the eral challenges in the complex domain. Of difference between, say, a Ferrari and the primary concern is the temptation to fall Brazilian rainforest. Ferraris are complicated back into traditional command-and-control machines, but an expert mechanic can take management styles-to demand fail-safe one apart and reassemble it without changing business plans with defined outcomes. Leaders a thing. The car is static, and the whole is the who don't recognize that a complex domain sum of its parts. The rainforest, on the other requires a more experimental mode of man- hand, is in constant flux-a species becomes agement may become impatient when they extinct, weather patterns change, an agricul- don't seem to be achieving the results they tural project reroutes a water source-and the were aiming for. They may also find it difficult whole is far more than the sum of its parts. to tolerate failure, which is an essential aspect This is the realm of "unknown unknowns," and of experimental understanding. If they try it is the domain to which much of contempo- to overcontrol the organization, they will rary business has shifted. preempt the opportunity for informative Most situations and decisions in organiza- patterns to emerge. Leaders who try to impose tions are complex because some major order in a complex context will fail, but those change-a bad quarter, a shift in management, who set the stage, step back a bit, allow a merger or acquisition-introduces unpre- patterns to emerge, and determine which dictability and flux. In this domain, we can un- ones are desirable will succeed. (See the derstand why things happen only in retrospect. sidebar "Tools for Managing in a Complex Instructive patterns, however, can emerge if Context.") They will discern many opportu the leader conducts experiments that are safe nities for innovation, creativity, and new to fail. That is why, instead of attempting business models. to impose a course of action, leaders must patiently allow the path forward to reveal Chaotic Contexts: The Domain of itself. They need to probe first, then sense, Rapid Response and then respond. In a chaotic context, searching for right an- There is a scene in the film Apollo 13 when swers would be pointless: The relationships the astronauts encounter a crisis ("Houston, between cause and effect are impossible to de- we have a problem") that moves the situation termine because they shift constantly and no into a complex domain. A group of experts is manageable patterns exist-only turbulence. put in a room with a mishmash of materials- This is the realm of unknowables. The events bits of plastic and odds and ends that mirror of September 11, 2001, fall into this category. the resources available to the astronauts in In the chaotic domain, a leader's immediate flight. Leaders tell the team: This is what job is not to discover patterns but to stanch the you have; find a solution or the astronauts bleeding. A leader must first act to establishorder, then sense where stability is present establish order. However, in his role as and from where it is absent, and then respond mayor-certainly one of the most complex by working to transform the situation from jobs in the world-he was widely criticized chaos to complexity, where the identification for the same top-down leadership style that of emerging patterns can both help prevent proved so enormously effective during the future crises and discern new opportunities. catastrophe. He was also criticized afterward Communication of the most direct top-down for suggesting that elections be postponed so or broadcast kind is imperative; there's simply he could maintain order and stability. Indeed, no time to ask for input. a specific danger for leaders following a crisis Unfortunately, most leadership "recipes" is that some of them become less successful arise from examples of good crisis manage- when the context shifts because they are not ment. This is a mistake, and not only because able to switch styles to match it. chaotic situations are mercifully rare. Though Moreover, leaders who are highly successful the events of September 11 were not immedia in chaotic contexts can develop an overin- ately comprehensible, the crisis demanded flated self-image, becoming legends in their decisive action. New York's mayor at the time, own minds. When they generate cultlike adora- Rudy Giuliani, demonstrated exceptional tion, leading actually becomes harder for effectiveness under chaotic conditions by them because a circle of admiring supporters issuing directives and taking action to re- cuts them off from accurate information. Tools for Managing in a Complex Context Given the ambiguities of the complex do- the condition of the merchandise. meeting environment. Each team ap- main, how can leaders lead effectively? Participants police themselves by points a spokesperson who moves . Open up the discussion. Complex rating one another on the quality of from that team's table to another contexts require more interactive their behavior. team's table. The spokesperson pre- communication than any of the other . Stimulate attractors. Attractors are sents the first group's conclusions while domains. Large group methods (LGMs), phenomena that arise when small stim- the second group listens in silence. The for instance, are efficient approaches uli and probes (whether from leaders or spokesperson then turns around to face to initiating democratic, interactive, others) resonate with people. As attrac- away from the second team, which rips multidirectional discussion sessions. tors gain momentum, they provide into the presentation, no holds barred, Here, people generate innovative ideas structure and coherence. EBay again while the spokesperson listens quietly. that help leaders with development and provides an illustrative example. In Each team's spokesperson visits other execution of complex decisions and strat- 1995, founder Pierre Omidyar launched tables in turn; by the end of the session, egies. For example, "positive deviance" is an offering called Auction Web on his all the ideas have been well dissected a type of LCM that allows people to personal website. His probe, the first and honed. Taking turns listening in si- discuss solutions that are already work- item for sale, quickly morphed into lence helps everyone understand the ing within the organization itself, rather eBay, a remarkable attractor for people value of listening carefully, speaking than looking to outside best practices who want to buy and sell things. Today, openly, and not taking criticism personally. for clues about how to proceed. The sellers on ebay continue to provide ex- Manage starting conditions and Plexus Institute used this approach to perimental probes that create attractors monitor for emergence. Because out- address the complex problem of hospital- of various types. One such probe, selling comes are unpredictable in a complex acquired infections, resulting in behavior car on the site, resonated with buyers, context, leaders need to focus on creat- change that lowered the incidence by and soon automobile sales became a ing an environment from which good as much as 50%. popular attractor. things can emerge, rather than trying Set barriers. Barriers limit or delineate Encourage dissent and diversity. to bring about predetermined results behavior. Once the barriers are set, the Dissent and formal debate are valuable and possibly missing opportunities system can self-regulate within those communication assets in complex that arise unexpectedly. Many years boundaries. The founders of eBay, for contexts because they encourage the ago, for instance, 3M instituted a rule al- example, created barriers by establishing emergence of well-forged patterns and lowing its researchers to spend 15% of a simple set of rules. Among them are ideas. A "ritual dissent" approach, for their time on any project that interested pay on time, deliver merchandise instance, puts parallel teams to work on them. One result was a runaway success: quickly, and provide full disclosure on the same problem in a large group the Post-it Note.Decisions in Multiple Contexts: A Leader's Guide Effective leaders learn to shift their decision-making styles to match changing business environments. Simple, complicated, complex, and chaotic contexts each call for different managerial responses. By correctly identifying the governing context, staying aware of danger signals, and avoiding inappropriate reactions, managers can lead effectively in a variety of situations RESPONSE TO THE CONTEXT'S DANGER SIGNALS CHARACTERISTICS THE LEADER'S JOB DANGER SIGNALS Create communication Repeating patterns and Sense, categorize, respond Complacency and comfort channels to challenge orthodoxy consistent events Ensure that proper processes are Desire to make complex Clear cause-and-effect in place problems simple Stay connected without relationships evident to every- micromanaging Delegate Entrained thinking one; right answer exists No challenge of received wisdom Don't assume things Use best practices SIMPLE Known knowns are simple Communicate in clear, direct ways Overreliance on best practice if Fact-based management Recognize both the value and Understand that extensive context shifts the limitations of best practice interactive communication may not be necessary Expert diagnosis required Sense, analyze, respond Experts overconfident in their Encourage external and internal Create panels of experts own solutions or in the efficacy of stakeholders to challenge expert Cause-and-effect relationships past solutions opinions to combat entrained discoverable but not immediately Listen to conflicting advice thinking apparent to everyone; more than Analysis paralysis COMPLICATED one right answer possible Expert panels Use experiments and games to force people to think outside the Known unknowns Viewpoints of nonexperts familiar Fact-based management excluded Flux and unpredictability Probe, sense, respond Temptation to fall back into Be patient and allow time for No right answers; emergent Create environments and habitual, command-and-control reflection instructive patterns experiments that allow patterns mode Use approaches that Unknown unknowns to emerge Temptation to look for facts encourage interaction so Increase levels of interaction and rather than allowing patterns to patterns can emerge Many competing ideas communication emerge COMPLEX A need for creative and innova- Use methods that can help gener- Desire for accelerated r tive approaches ate ideas: Open up discussion (as of problems or exploitation of Pattern-based leadership through large group methods); opportunities set barriers; stimulate attractors; encourage dissent and diversity; and manage starting conditions and monitor for emergence High turbulence Act, sense, respond Applying a command-and-control Set up mechanisms (such as No clear cause-and-effect rela- Look for what works instead of approach longer than needed parallel teams) to take advantage tionships, so no point in looking seeking right answers .Cult of the leader of opportunities afforded by a for right answers chaotic environment Take immediate action to Missed opportunity for innovation CHAOTIC Unknowables reestablish order (command and Encourage advisers to challenge Chaos unabated Many decisions to make and no controll your point of view once the crisis time to think has abated Provide clear, direct High tension communication Work to shift the context from chaotic to complex Pattern-based leadershipYet the chaotic domain is nearly always their workplaces. Had Gasior misread the the best place for leaders to impel innova- context as simple, he might just have said, tion. People are more open to novelty and "Carry on," which would have done nothing directive leadership in these situations than to reassure the community. Had he misread it they would be in other contexts. One excellent as complicated, he might have called in experts technique is to manage chaos and innovation to say it was safe- risking a loss of credibility in parallel: The minute you encounter a crisis, and trust. Instead, Gasior set up a forum appoint a reliable manager or crisis manage for business owners, high school students, ment team to resolve the issue. At the same teachers, and parents to share concerns and time, pick out a separate team and focus its hear the facts. It was the right approach for a members on the opportunities for doing things complex context: He allowed solutions to differently. If you wait until the crisis is over, emerge from the community itself rather the chance will be gone. than trying to impose them. Leadership Across Contexts Business schools and organizations equip Good leadership requires openness to change leaders to operate in ordered domains (simple on an individual level. Truly adept leaders will and complicated), but most leaders usually know not only how to identify the context must rely on their natural capabilities when they're working in at any given time but also operating in unordered contexts (complex and how to change their behavior and their deci- chaotic). In the face of greater complexity sions to match that context. They also prepare today, however, intuition, intellect, and cha- their organization to understand the different risma are no longer enough. Leaders need contexts and the conditions for transition be- tools and approaches to guide their firms tween them. Many leaders lead effectively- through less familiar waters. though usually in only one or two domains In the complex environment of the current (not in all of them) and few, if any, prepare business world, leaders often will be called their organizations for diverse contexts. upon to act against their instincts. They will During the Palatine murders of 1993, Deputy need to know when to share power and when Chief Gasior faced four contexts at once. He to wield it alone, when to look to the wisdom had to take immediate action via the media of the group and when to take their own to stem the tide of initial panic by keeping counsel. A deep understanding of context, the the community informed (chaotic); he had to ability to embrace complexity and paradox, help keep the department running routinely and a willingness to flexibly change leader- and according to established procedure ship style will be required for leaders who (simple); he had to call in experts (compli- want to make things happen in a time of cated); and he had to continue to calm the increasing uncertainty. community in the days and weeks following the crime (complex). That last situation Reprint R0711C proved the most challenging. Parents were To order, see the next page afraid to let their children go to school, and or call 800-988-0886 or 617-783-7500 employees were concerned about safety in or go to www.horreprints.orgThe facts have been assembled, and the arguments for and against the options spelled out, but no clear evidence sup- ports any particular one. Now people around the table turn o the CEO. What they're looking for is good judgmentan interpretation of the evidence that points to the right choice. Judgmentthe ability to combine personal qualities with relevant knowledge and experience to form opinions and make decisionsis \"the core of exemplary leadership\" according to Noel Tichy and Warren Bennis (the authors of Judgment: How Winning Leaders Make Great Calls). It is what enables a sound choice in the absence of clear-cut, relevant data or an obvious path. To some degree we are all capable of forming views and interpreting evidence. What we need, of course, is good judgment. A lot of ink has been spilled in the effort to understand what good judgment consists of, Some experts define it as an acquired instinct or \"gut feeling\" that somehow com- bines deep experience with analytic skills at an unconscious level to produce an insight or recognize a pattern that others overlook. At a high level this definition makes intuitive sense; but it is hard to move from understanding what judg- ment is to knowing how to acquire or even to recognize it. In an effort to meet that challenge, I've talked to CEOs in arange of companies, from some of the world's largest right down to start-ups. 've approached leaders in the profes- sions as well: senior partners at law and accountancy firms, generals, doctors, scientists, priests, and diplomats. I asked them to share their observations of their own and other people's exercise of judgment so that I could identify the skills and behaviors that collectively create the conditions for fresh insights and enable decision makers to discern patterns that others miss. I have also looked at the relevant literatures, including leadership and psychology. P've found that leaders with good judgment tend to be gbod listeners and readersable to hear what other people actually mean, and thus able to see patterns that others do not. They have a breadth of experiences and relationships that enable them to recognize parallels or analogies that others missand if they don't know something, they'll know someone who does and lean on that person's judgment. They can recognize their own emotions and biases and take them out of the equa- tion. They're adept at expanding the array of choices under SO0 Qo oey f | | P Leaders with good judgment tend to be good listeners and readers-able to hear what other people actually mean, and thus able to see patterns that others do not. consideration. Finally, they remain grounded in the real world: Alliance Boots, and BHP Billiton. What struck me immedia In making a choice they also consider its implementation. ately and throughout our acquaintance was that he gave me Practices that leaders can adopt, skills they can cultivate, and everyone else his undivided attention. Many people with and relationships they can build will inform the judgments his record of accomplishment would long ago have stopped they make. In this article I'll walk through the six basic listening in favor of pontificating. components of good judgment-I call them learning, trust, Buchanan was more than a good listener-he was adept experience, detachment, options, and delivery-and offer at eliciting information that people might not otherwise suggestions for how to improve them. volunteer. His questions were designed to draw out inter- esting responses. He told me that when deciding whether to accept a directorship, for example, he would ask questions LEARNING such as "Where would you place this company on a spectrum of white to gray?" "At first this sounds like a classic piece of Listen Attentively, Read Critically managementese that is clever but meaningless," he said. Good judgment requires that you turn knowledge into under- "Yet it is sufficiently open-ended to draw out replies on a standing. This sounds obvious, but as ever, the devil is in the wide range of subjects and sufficiently pointed to produce a detail-in this case your approach to learning. Many leaders meaningful response." rush to bad judgments because they unconsciously filter Information overload, particularly with written material, the information they receive or are not sufficiently critical of is another problem. It's not surprising that CEOs with huge what they hear or read. demands on their time and attention struggle to get through The truth, unfortunately, is that few of us really absorb the the volume of emails and briefing papers they receive. As a information we receive. We filter out what we don't expect or director of a large listed company, I would get up to a million want to hear, and this tendency doesn't necessarily improve words to read ahead of a big meeting. Confronted with such a with age. (Research shows, for example, that children notice deluge, it's tempting to skim and to remember only the mate- things that adults don't.) As a result, leaders simply miss a rial that confirms our beliefs. That's why smart leaders demand great deal of the information that's available-a weakness quality rather than quantity in what gets to them. Three hun- to which top performers are especially vulnerable because dred pages for the next big meeting? It's six pages maximum overconfidence so often comes with success. for agenda items at Amazon and the Bank of England. Exceptions exist, of course. I first met John Buchanan Overload is not the only challenge when it comes to early in a distinguished four-decade career during which he reading. A more subtle risk is taking the written word at face became the CFO at BP, the chairman of Smith & Nephew, the value. When we listen to people speak, we look (consciously deputy chairman of Vodafone, and a director at AstraZeneca, or unconsciously) for nonverbal clues about the quality of IDEA IN BRIEF THE OBJECTIVE THE CHALLENGE THE SOLUTION A manager's core function is We have no clear framework for to exercise judgment-to form This article identifies six components that learning good judgment or recognizing views and Interpret ambiguous contribute to good judgment: learning, trust, it in others. To evaluate a leader's evidence in a way that will lead experience, detachment, options, and delivery. judgment, we often rely on his or her to a good decision. By working on each, leaders can improve their track record, which can be misleading. ability to make sense of an ambiguous situation.TRUST Seek Diversity, Not Validation Leadership shouldn't be a solitary endeavor. Leaders can draw on the skills and experiences of others as well as their LEADERSHIP own when they approach a decision. Who these advisers are and how much trust the leader places in them are critical to the quality of that leader's judgment. what we're hearing. While reading, we lack that context; and Unfortunately, many CEOs and entrepreneurs bring in an era when the term "fake news" is common, decision people on board who simply echo and validate them. The makers need to pay extra attention to the quality of the disgraced executives Elizabeth Holmes and Sunny Balwani information they see and hear, especially material filtered of the start-up Theranos regarded anyone who raised a by colleagues or obtained through search engines and social concern or an objection as a cynic and a naysayer. "Employ- media exchanges. Are you really as careful in assessing and ees who persisted in doing so were usually marginalized or filtering as you should be, knowing how variable the quality fired, while sycophants were promoted," according to the is? If you believe that you never unconsciously screen out Financial Times. Recently jailed for 18 years, Wu Xiaohui, information, consider whether you choose a newspaper that the founder and leading light of China's Anbang Insurance agrees with what you already think. Group, had built up a diverse international empire, buying People with good judgment are skeptical of information major assets that included New York's Waldorf Astoria hotel. that doesn't make sense. We might none of us be alive today He also surrounded himself with "unimpressive people who if it weren't for a Soviet lieutenant colonel by the name of would just follow his orders and not question them," one Stanislav Petrov. It came to light only after the fall of commu- employee told FT. nism that one day in 1983, as the duty officer at the USSR's The historian Doris Kearns Goodwin, in her book Team of missile tracking center, Petrov was advised that Soviet satel- Rivals, noted that Abraham Lincoln assembled a cabinet of lites had detected a U.S. missile attack on the Soviet Union. experts he respected but who didn't always agree with one He decided that the 100% probability reading was implausi- another. Mckinsey has long included the obligation (not a bly high and did not report the information upward, as were suggestion) to dissent as a central part of the way it does busi- his instructions. Instead he reported a system malfunction. ness. Amazon's Leadership Principles specify that leaders "I had all the data [to suggest a missile attack was ongoing]," should "seek diverse perspectives and work to disconfirm he told the BBC's Russian service in 2013. "If I had sent my their beliefs." report up the chain of command, nobody would have said a Alibaba's Jack Ma thinks along the same lines. Recogniz word against it." It turned out that the satellites had mistaken ing his own ignorance of technology (he was 33 when he got sunlight reflected from clouds for missile engines. his first computer), Ma hired John Wu of Yahoo as his chief To improve: Active listening, including picking up on technology officer, commenting, "For a first-class company what's not said and interpreting body language, is a valuable we need first-class technology. When John comes, I can skill to be honed, and plenty of advice exists. Beware of your sleep soundly." Ma isn't the only mega-entrepreneur who own filters and of defensiveness or aggression that may has looked for advisers with organizational and personal discourage alternative arguments. If you get bored and impa- qualities and experience to fill a void in himself. Facebook's tient when listening, ask questions and check conclusions. Mark Zuckerberg hired Sheryl Sandberg for a similar reason. If you're overwhelmed by written briefing material, focus on And Natalie Massenet, founder of the online fashion the parts that discuss questions and issues rather than those retailer Net-a-Porter, hired the much older Mark Sebba, the that summarize the presentations you'll hear at the meeting. "understated chief executive of Net-a-Porter who brought (Far too many board packs are stuffed with advance copies of order to the ecommerce start-up in the manner of Robert presentations.) Look for gaps or discrepancies in what's being De Niro in The Intern," according to the Times of London. said or written. Think carefully about where the underlying My brother Michael told me that one reason his company's data is coming from and the likely interests of the people sup- chain of opticians, under the brand GrandOptical, became plying it. If you can, get input and data from people on more the largest in France is that he partnered with Daniel Abit- than one side of an argument-especially people you don't tan, whose operational excellence complemented Michael's usually agree with. Finally, make sure the yardsticks and entrepreneurial vision and strategic skills. proxies for data you rely on are sound; look for discrepancies To improve: Cultivate sources of trusted advice: people in the metrics and try to understand them. who will tell you what you need to know rather than whatA Success Is Not a Reliable LEADERSHIP Proxy for Judgment It's tempting to assume that past successes are a sign of good judgment, and in some cases they may be. The you want to hear. When you are recruiting people on whose multigenerational success of some German midsize advice you will rely, don't take outcomes as a proxy for companies and the sheer longevity of Warren Buffett's their good judgment. Make judgment an explicit factor in investment performance are frequently cited examples. appraisals and promotion decisions. Usha Prashar, who But success can have other parents. Luck, the chaired the body that makes the UK's most-senior judicial characteristic that Napoleon famously required of his generals, is often the unacknowledged architect of appointments, pointed to the need to probe how a candi- success. Those in sports can vouch for the importance date did things, not just what he or she had done. Dominic of luck as well as skill. Grant Simmer, successively Barton of Mckinsey told me that he looked for what was not navigator and designer in four America's Cup yachting being said: Did people fail to mention any "real" difficulties victories, has acknowledged the help of luck in the form or setbacks or failures in their careers to date? One CEO said of mistakes made by his competitors. Sometimes, what looks like sustained success may he asked people about situations in which they'd had insuf- conceal trickery. Before the Enron scandal broke, in ficient information or conflicting advice. Don't be put off by 2001, CEO Jeff Skilling was hailed as a highly successful assessments that a candidate is "different." Someone who leader. Toshiba's well-regarded boss, Hisao Tanaka, disagrees with you could provide the challenge you need. resigned in disgrace in 2015 after a $1.2 billion profit overstatement covering seven years was unearthed. Bernie Madoff founded his investment firm in 1960 and for 48 years was seen as both successful and a man of EXPERIENCE the highest integrity. When you are trying to assess whether a CEO-or a new Make It Relevant but Not Narrow hire-has good judgment, don't just look at that person's Beyond the data and evidence pertinent to a decision, achievements. Instead try to assess the person according to the six elements described in this article. Does she ask leaders bring their experience to bear when making judg you questions or is she just making a pitch? How did he ment calls. Experience gives context and helps us identify get where he is and whom does he listen to? What kind of potential solutions and anticipate challenges. If they have training has she done? Does he like to challenge his own previously encountered something like a current challenge, assumptions? leaders can scope out areas in which to focus their energy and resources. Mohamed Alabbar, the chairman of Dubai's Emaar Prop- erties and one of the Middle East's most successful entrepre- say, China and South Africa, because such a person would neurs, gave me an example. His first major property crisis, be less likely to ignore important signals. in Singapore in 1991, had taught him about the vulnerability In addition, leaders with deep experience in a partic- that comes with being highly geared in a downturn- and in ular domain may fall into a rut, making judgments out of real estate, only those who learn the lessons of overgearing habit, complacency, or overconfidence. It usually takes in their first crash survive in the long term. Alabbar has since an external crisis to expose this failure, for which the lack navigated Dubai's often dramatic economic cycles and today of lifeboats for the Titanic is the enduring symbol and the owns a portfolio that includes the Burj Khalifa, the world's 2008 financial crisis the moment of truth for many appar- tallest building, and the Dubai Mall, one of the world's ently unassailable titans. The equivalent today are those largest shopping malls. leaders who have underestimated the speed with which But-and it's a big but-if the experience is narrowly environmental issues would move center stage and require based, familiarity can be dangerous. If my company is a tangible response. planning to enter the Indian market, I might not trust the To improve: First, assess how well you draw on your judgment of a person whose only product launches have own experience to make decisions. Start by going through been in the United States. I would probably be less worried your important judgment calls to identify what went well about someone who had also launched new products in, and what went badly, including whether you drew on theLeaders with deep experience in a particular domain may fall into a rut, making judgments out of habit, complacency, or overconfidence. right experience and whether the analogies you made were the energy industry was switching to renewables. It deter appropriate. Record both the wrong and the right. This is mined that decision makers had displayed status quo and tough, and it's tempting to rewrite history, which is why confirmation biases in evaluating the investment context. it can be helpful to share your conclusions with a coach or It also found a number of cases in which hierarchical biases colleagues, who might take a different view of the same had been in play: Subordinates who doubted the judgment experience. Try also to recruit a smart friend who can be of their bosses had kept quiet rather than disagree with a neutral critic. them. Finally, the CFO said, RWE had suffered from Second, especially if you're a young leader, work to "a good dose of action-oriented biases like overconfidence expand your experience. Try to get postings abroad or and excessive optimism." in key corporate functions such as finance, sales, and It is precisely for their ability to resist cognitive biases manufacturing. Get yourself on an acquisition team for a and preserve detachment in decision-making that we often major deal. And as a CEO, a crucial support you can give see CFOs and lawyers rise to the CEO position, especially high-potential managers is more-varied exposure, so get when an organization is in a period of crisis and people's involved in career planning. That will not just do the young jobs are under threat. This quality was widely praised after managers a favor; it will help the company and very possi- the International Monetary Fund chose Christine Lagarde bly you, because it will broaden the experience into which as its director following the dramatic exit in 2011 of her you can tap. predecessor, Dominique Strauss-Kahn, in the wake of a lurid scandal. Although Lagarde was not an economist-unusual for an IMF chief-she had demonstrated her abilities as DETACHMENT France's finance minister despite little political experience. Identify, and Then Challenge, Biases And, undoubtedly, having been a partner in a major interna- tional law firm equipped her to approach negotiation with As you process information and draw on the diversity of detachment-a critical capability at a time when the global your own and other people's knowledge, it's critical that financial system was under severe stress. you understand and address your own biases. Although To improve: Understand, clarify, and accept different passion about objectives and values is a wonderful lead- viewpoints. Encourage people to engage in role-playing and ership quality that can inspire followers to greater efforts, simulations, which forces them to consider agendas other it can also affect how you process information, learn from than their own and can provide a safe space for dissent. If experience, and select advisers. employees are encouraged to play the role of a competitor, The ability to detach, both intellectually and emotion- for example, they can experiment with an idea that they ally, is therefore a vital component of good judgment. But might be reluctant to suggest to the boss. it's a difficult skill to master. As research in behavioral Leadership development programs are a great forum in economics, psychology, and decision sciences has shown which to challenge assumptions by exposing people to col- in recent years, cognitive biases such as anchoring, con- leagues from different cultures and geographies, who come firmation, and risk aversion or excessive risk appetite are to the discussion with different views. pervasive influences in the choices people make. Finally, people with good judgment make sure they have The German utility RWE provides a cautionary example. processes in place that keep them aware of biases. After In a 2017 interview its chief financial officer revealed that discovering how much value had been destroyed, RWE the company had invested $10 billion in constructing established new practices: Major decisions now require conventional power-generation facilities over a five-year that biases be on the table before a discussion and, when period, most of which had to be written off. RWE conducted necessary, that a devil's advocate participate. Acknowledge a postmortem to understand why an investment in conven- that mistakes will occur-and doubt the judgment of anyone tional power technology had been chosen at a time when who assumes they won't.OPTIONS unintended consequences-were never even considered. This happens for a variety of reasons, including risk aversion on Question the Solution Set Offered the part of people supplying potential answers. That's why In making a decision, a leader is often expected to choose thoroughly exploring the solution set is key to a leader's exer- between at least two options, formulated and presented by cise of judgment. It's not the CEO's job to come up with all the their advocates. But smart leaders don't accept that those options. But he or she can ensure that the management team choices are all there is. During the 2008-2009 financial delivers the full range of possibilities, counteracting fears and crisis, President Obama pressed Treasury Secretary Timothy biases that cause the team to self-edit. When all the options Geithner to explain why he wasn't considering nationalizing can be debated, the judgment is more likely to be right. the banks. Geithner recalls, "We had one of those really To improve: Press for clarification on poorly presented tough conversations. Are you confident this is going to work? information, and challenge your people if you think impor- Can you reassure me? Why are you confident? What are our tant facts are missing. Question their weighting of the vari- choices? I told him that my judgment at the time was that we ables on which their arguments depend. If timing appears had no option but to play out the thing we'd set in motion." to be a key consideration, determine that it's legitimate. Obama was doing what all good leaders should do when Factor in the risks associated with novel solutions-stress told "We have no other option" or "We have two options and and overconfidence-and look for opportunities to mitigate one is really bad" or "We have three options but only one is them through piloting. Use modeling, triangulation, and the acceptable." Other options almost always exist, such as doing opportunities afforded by artificial intelligence. Follow King nothing, delaying a decision until more information is avail- Solomon (a popular nominee in answer to my question "Who able, or conducting a time-limited trial or a pilot implement do you think has/had good judgment?") and dig out people's tation. Tim Breedon, formerly the CEO of the UK financial stakes in the final decision. A telltale sign is being oversold on services company Legal & General, described it to me as "not a particular outcome. What are the personal consequences being boxed in by the way things are presented." to them (and to you) if their solution works or fails? Consult In hindsight, many bad judgment calls were inevita- those you trust. If there isn't anyone, or enough time, try to ble simply because important options-and the risk of imagine what someone you trust would do. Get clear aboutWhen You Have to Move Fast A In most cases, good judgment requires reflection before LEADERSHIP action. A pause for reflection may well make you less likely to be swept along by anger or fear and more likely to ask for additional evidence, consider reframing the question, formulate new options, or reevaluate whether a project is Atlantic and Pacific Oceans. Because de Lesseps had just feasible. When you receive a provocative or hostile email, for instance, counting to 10 (or even 1,000) will help you completed the Suez Canal, investors and politicians-failing build emotional detachment and save you from writing to understand that building a canal through sand does not something you might later regret. qualify you to build one through jungle-did not give his Of course, sometimes you need to act fast. Starbucks plans the scrutiny they deserved. His approach proved disas- CEO Kevin Johnson provides a case in point. One day trously unsuitable, and it was left to the U.S. government to in 2018 an employee in Philadelphia called the police, asking for the arrest of two black men who were sitting at complete the canal by taking a very different approach. a table but hadn't ordered. As social media users started When reviewing projects, smart leaders think carefully to call for a boycott, "his response was personal, swift and about the risks of implementation and press for clarification concrete: he fired the employee who had called the police, from a project's advocates. This is as important for small agreed a settlement with the two men and closed all 8,000 US stores for an afternoon of anti-bias training," according decisions as it is for big ones. to the Financial Times. The speed of Johnson's response A leader with good judgment anticipates risks after a almost certainly prevented a disaster from turning into a course has been determined and knows by whom those risks catastrophe for Starbucks. are best managed. That may not be the person who came Compare that response to United's after a passenger, up with the idea-particularly if the proposer is wedded to David Dao, was dragged off a Chicago-to-Louisville flight in 2017. Instead of addressing the widespread outrage in a particular vision, as was the case with de Lesseps. More reaction to the video of Dao's ordeal, which had gone viral, generally, flair, creativity, and imagination aren't always Oscar Munoz, the CEO of United, sent a supportive letter accompanied by a capability to deliver-which is why small to staff members. Good for morale, perhaps, but not as a tech firms often struggle to capitalize on their inspiration and first response, and Munoz was criticized in the press as are bought out by less-inventive but better-organized giants. klutzy and heartless. If you're in a situation like these, ask yourself three quick To improve: In assessing a proposal, make sure that the questions before responding: Do I tend to act impulsively experience of the people recommending the investment and then regret it? Do I have insufficient relevant exper- closely matches its context. If they point to their prior work, ience? Are the stakes high? If your answer to any of these ask them to explain why that work is relevant to the current is yes, think hard rather than react with your gut. situation. Get the advocates to question their assumptions by engaging in "premortem" discussions, in which participants try to surface what might cause a proposal to fail. RWE now does this as part of its project-evaluation process. rules and ethical issues, because they will help you filter your choices. Finally, don't be afraid to consider radical LEADERS NEED MANY qualities, but underlying them all is options. Discussing them could make you and others aware good judgment. Those with ambition but no judgment run of some that are less radical but well worth considering and out of money. Those with charisma but no judgment lead may encourage other people to speak up. their followers in the wrong direction. Those with passion but no judgment hurl themselves down the wrong paths. Those with drive but no judgment get up very early to do the DELIVERY wrong things. Sheer luck and factors beyond your control Factor in the Feasibility of Execution may determine your eventual success, but good judgment will stack the cards in your favor. HBR Reprint R2001H You can make all the right strategic choices but still end up losing out if you don't exercise judgment in how and by whom those choices will be executed. In 1880 the French SIR ANDREW LIKIERMAN is a professor at London Business diplomat and entrepreneur Ferdinand de Lesseps persuaded School and a director of Times Newspapers and the Beazley Group, both also in London. He has served as dean at LBS and is investors to support digging a canal in Panama to link the a former director of the Bank of England