Sometimes you have to trust your gut. There are even situations when following your instincts is the best approach. Rarely, however, is strategic decision making by an executive one of those times. In an interview in the current McKinsey Quarterly, two great scholars whose studies usually represent opposing views, agree that leaders' decisions based on intuition are usually not the wisest. Princeton psychologist Daniel Kahneman won the Nobel Prize in economics in 2002 for his work in prospect theory, which deals with the counterintuitive choices make under uncertainty. Gary Klein, a senior scientist at MacroCognition, studies intuition as a powerful factor in good decision making in high-pressure situations. Yet they agree that when in comes to executives in organizational decision making, intuition is overvalued.
It can be difficult to recognize your biases in making business decisions. Most people, I believe, prefer to think that they can evaluate options fairly and form strategy based on independent judgments. But the truth is, many strategic decisions are poor and could stand to be vastly improved. A recent McKinsey Quarterly study of 2,207 executives found that only 28 percent said the quality of strategic decisions in their companies was generally good, 60 percent said that bad decisions were about as frequent as good ones, and 12 percent that good decisions were altogether infrequent. With almost 3 out of 4 decisions just as likely to be bad as good, something is definitely wrong.