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Smart Companies, Dumb Decisions

Even at successful comapanies, decision-makers sometimes make foolish choices.

Why do smart companies do such dumb things? Paul C. Nutt , a professor of management at Ohio State University's Fisher College of Business, has been studying that question for 19 years. Nutt's research focuses on how executives make decisions and whether those decisions succeed or fail.

Mistakes, Nutt argues, can be errors of omission as well as commission. His latest research examines strategic decisions at 356 companies. More than half the time, he found, such decisions were quickly abandoned, just partially implemented, or never adopted at all.

In an interview with Fast Company, Nutt offered three techniques for increasing the odds that your decisions will translate into action. After all, if you're going to make mistakes, shouldn't they at least reflect what you've decided to do?

1. Check your ego at the door.

The worst way to reach a decision, says Nutt, is to impose your ideas on the organization. Obvious, right? So how come so many executives behave otherwise? Because they think they're acting like "take-charge" leaders. More than 130 of the decisions studied by Nutt reflected this approach, and only 42% of those actually got adopted. Compare that with a 96% success rate for decisions (only 26 out of the 356) where executives conferred with their colleagues and rethought long-term priorities.

"People like to impose their ideas on others or look for a scapegoat because these techniques eliminate ambiguity," says Nutt. "Real visionaries see that they need to reconsider the norms." Translation: the easiest way to avoid mistakes is to manage your ego.

2. Keep asking, "But what about ... ?"

Everyone likes a decisive leader. But as the business world gets more complex, there's a not-so-fine line between being decisive and being blind. Nearly two-thirds of the executives that Nutt studied never investigated alternatives once they'd reached a decision. Nearly 60% of these decisions were dropped, used only in part, or never adopted at all.

"Most people stand by the window, look out, and say, 'Okay, we'll do that,'" he says. "But the more you change your position at the window — the more you broaden your scope — the more you'll see."

3. Nobody is as smart as everybody.

Barely one in five of the executives interviewed by Nutt involved staffers in the decision-making process. Most pushed their decisions through, either by persuasion (41%) or by edict (40%). Each approach is a formula for failure. Persuasion failed in 53% of the cases; edict in 65%. The typical problem, Nutt says, isn't just that decisions lack merit. It's that staffers resent these heavy-handed tactics and thus resist or undermine bosses who resort to them.

"The idea of a charismatic leader, someone who gets his one idea realized by sheer force of personality, is a myth," says Nutt. "If you involve people in at least some of the steps of the process, they will become missionaries for you."

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