Almost exactly two years ago the economic tsunami descended on the world. Its causes were manifold and complex, but we know that somehow the wrong decisions were made, and the wrong risks were taken, and they weren’t stopped. It is clear that specific protective structures and mechanisms established to secure institutions from bad risks and poor decisions–such as banks’ boards–failed to deliver.
Good guidelines and motivations are rarely enough to ensure sound decisions. Indeed, research has shown that it is entirely natural for decision-making groups, whatever their motivations and guidelines, to tend to suppress information flow, have extreme attitudes, make extreme judgments, be inflexible in adapting their approach to changing circumstances, and–despite all that–have great confidence in their decisions.
This is not because of individual ability or motivation; it arises from natural group dynamics. Put your best people in a cohesive group, and chances are that sooner or later these group dynamics will emerge and get the better of them. These are not faults that arise when something goes wrong. They are natural occurrences that require extra, unusual steps to avoid.
Traditional learning mechanisms are insufficient for addressing the pervasive and deep-rooted challenges of good team decisions. The reason for this is that many of the causes of the problem are what could be called default human behaviors–what most people are accustomed to doing in a given situation.
Consequently, merely establishing processes and providing guidelines and information is unlikely to deliver improvement. To bring about change against the tide, to help people do something other than what comes naturally to them, requires more than just imparting awareness of how they should act and then leaving them to it. It demands hands-on help and repeated practice and feedback, direct and individualized interventions to make possible the development and practice of new skills. This often requires the presence of an expert coach.
The cause of decision-making failure by executive teams is simple: groupthink. That term was coined by William H. Whyte in a 1952 Fortune magazine article but is perhaps most strongly associated with the work of the research psychologist Irving Janis, who in 1972 defined groupthink as “a mode of thinking that people engage in when deeply involved in a cohesive in-group, when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action.”
After much research, Janis identified three layers of groupthink: key underlying causes, common symptomatic behaviors and resulting decision-making flaws. The key causes included group cohesion, directive leadership and ideological homogeneity. The common symptomatic behaviors resulting from those causes included overestimation of the capabilities of the group, close-mindedness and pressure for uniformity. And the consequent decision-making flaws included inadequate contingency planning, insufficient information search and biased assessments of risk, cost-benefits and moral implications.
Some details of his model have been much debated, but the concept of groupthink has remained strong, and further research has confirmed many of its aspects. It is now generally accepted that groups tend to suppress dissent, focus discussion on things that they already agree about rather than what they disagree about, have more extreme attitudes and judgments on a wide array of issues and decisions than the individuals they comprise, have greater confidence in the correctness of their decisions and attitudes than individuals, and lead individuals to publicly endorse decisions and attitudes that they view as normal for the group, even when they privately hold reservations. So it’s no surprise that group decision-making is difficult.
What is to be done? Broadly speaking, two main kinds of solution to the problem of groupthink have been suggested. The first kind is process solutions–solutions that seek to implement particular processes as part of decision-making meetings to ensure effective debate and discussion. For instance, organizations should set up several independent groups to work on any one problem; a board should invite outside experts into meetings to discuss key issues; each member should discuss the group’s ideas with trusted people outside of the group, perhaps a coach or a mentor.
Subsequent research has added to this list. First, and unsurprisingly, simply having a debate helps, as can just extending the time available for discussion. Likewise, assigning at least one group member to be a devil’s advocate can have a positive effect. That idea has been developed and extended in Edward de Bono’s popular “Six Hats” system for decision-making discussions.
The second kind of solution to the problem of groupthink is insight solutions. That means focusing on helping decision-making teams understand how they make decisions and the politics and biases involved. This approach was championed by the business theorist Chris Argyris, who argued that simply creating debate is of uncertain use when the issues involved are potentially threatening or embarrassing to the participants. He sought to uncover the cognitive biases, personal politics and emotional undercurrents that lurk behind and underpin organizational decision-making.
Argyris described a method for improving the thinking and decision-making of executive groups that involved engaging them both collectively and individually as a coach-facilitator, giving them feedback, challenging their thinking and using focused exercises to help them reflect on how they operate. The goal was to help them understand their patterns of behavior, both individual and collective, and then change them.
There is of course substantial merit in both kinds of solution. However, the best way forward is to combine them. Use simple processes to encourage certain behaviors and work with teams to help them understand their default behaviors and the social-political context that breeds them. At the same time, any other intervention that can improve decision-making should be used too.
The ultimate goal is to help organizations create a culture in which ideas, challenges and concerns can be freely voiced, what is called a culture of “psychological safety,” where individuals believe they can safely take interpersonal risks, such as asking for help, admitting errors and challenging authority. There is no point in giving leaders training in “articulating challenges” and pushing them to have the “courage to lead” if they’ll get shot down for doing so.
If organizations really want to ensure good decision-making for tomorrow, they need to start today to create an environment in which speaking up will not just survive but actually thrive, and will be encouraged and rewarded. That is just one way to help avoid the next financial crisis.
Shlomo Ben-Hur teaches leadership, organizational behavior and corporate learning at the business school IMD. He is the faculty member responsible for the leadership stream in IMD’s Advanced Strategic Management program. Karsten Jonsen is a research fellows at IMD, and Nikolas Kinley is head of leadership, GRB Functions at Barclays Bank.