Flaws in Strategic Decision Making
Published 11/30/2008
Author:
Contributors to the development and analysis of this survey include Renee Dye, a consultant in McKinsey’s Atlanta office; and Olivier Sibony and Vincent Truong, a director and consultant, respectively, in the Paris office.
Summary
Irrational thinking doesn’t just affect individual economic decisions; it affects corporate strategic planning as well. Since its inception nearly three decades ago, behavioral economics has upset the pristine premise of classical economic theory—the view that individuals will always behave rationally to achieve the best possible outcome. Today it’s clear that the vagaries of individual and group psychology can cause irrational decision making by both individuals and organizations, resulting in less than ideal outcomes. Even the best-designed strategic planning processes don’t always lead to optimal decisions. A recent survey by McKinsey attempts to assess the frequency and intensity of the most common managerial biases in companies. Specifically, they asked executives about a single recent strategic decision at their companies that had a clearly satisfactory or unsatisfactory outcome, focusing on the role that various biases may have played.
© 2008 The McKinsey Quarterly
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