Decision Making as Leadership Foundation

By: Michael Useem

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Synopsis: All organizations have an interest in ensuring that their leaders make good and timely decisions, but good decision making-so vital to effective leadership-is not a skill that comes naturally to every leader. Studies of what Nobel laureate and noted expert on decision making Daniel Kahneman terms "systemic biases"-the mental flaws that separate the choices leaders actually make from what rational agent models expect-reveal that these biases can be reduced when leaders are trained in decision making and have learned from experience. Both universities and companies bear the responsibility of preparing current and future leaders to make sound decisions in work environments that are often demanding and frequently changing. And given the impact of increasingly global product and equity markets on company operations, the pressures for quality decision making are sure to intensify. The chapter concludes with an examination of how boards of directors make decisions, with rich examples from Boeing (its decision to build the 787 aircraft) and computer technology giant Lenovo (its decision to build a global company). This chapter was originally published as Chapter 18 of "Handbook of Leadership Theory and Practice: A Harvard Business School Centennial Colloquium."