9 Habits That Lead to Bad Decisions

New products and services are in most cases developed with the best intentions. But often companies find out – after investing a lot of time and money – that the users hate the product. Why do well-meaning people make bad decisions? 

As an advisory financial expert, you should be familiar with these 9 pitfalls.To provide an objective answer to the question of why people make wrong decisions in organizations, two analysts at Harvard Business Review compared 360-degree feedback data from 50,000 leaders and compared the behavior of those perceived as good decision-makers with that of bad decision makers. 

This statistical analysis of differences revealed 9 factors that most often form the basis of poor decisions. 

1. LazinessBy laziness, the authors mean a failure to check facts, critically test assumptions, take initiative and collect additional input. The bottom line is that these decision makers are negligent in their jobs and unwilling to give themselves a little trouble. They rely on past experiences and the results achieved then. 

2. Not anticipating unexpected eventsIt’s disheartening to think a lot about everything that can go wrong in life, so most people assume the worst won’t happen. Unfortunately, bad things happen regularly: people die, get divorced, have accidents, markets collapse, house prices fall and business partners turn out to be unreliable. Research shows that people who take the time to consider what could go wrong are very effective in anticipating problems that arise. But most people are so excited about making the decision themselves that they forgo this exercise. 

3. IndecisionOf course you need good information to make a decision, but a danger is that the data keeps changing and paralysis occurs. When analytics and reports are delayed, bad decision makers postpone a decision and miss out on opportunities. Often making no decision is worse than making the wrong decision. The most paralyzed leaders are those who believe that a mistake will cost them their careers. As a result, they avoid risks and that can end badly.  

4. Dwelling in the PastMany decision makers make wrong decisions because they use old data or the processes they have always used. As a result, they become accustomed to methodologies that worked in the past, and therefore do not look for new ways to get things done. This often results in bad decisions because the old processes turn out to be based on assumptions that are no longer correct. 

5. Lack of strategic alignmentBad decisions also regularly arise because the leaders don’t connect a problem to the overall strategy. In the absence of a clear strategy that provides context, many decisions seem logical. But when a clear link is made with the strategy, the best solutions often surface. 

6. Too dependent on othersSome decisions are never made because one person waits for another, who in turn waits too long for another. Effective decision makers find ways to make independent decisions when necessary. 

7. Working too isolatedSome leaders wait for input because they haven’t taken enough steps to have the right information in a timely manner or haven’t developed strong relationships that allow them to draw on the expertise of others when they need to make a complex decision. Research shows that it is important for effective decision-making to be able to draw on the knowledge, experience and expertise of others. Leaders sometimes lack the right network capabilities to access the right information. What also happens is that leaders do not sufficiently involve others because they want the credit for making a decision. 

8. Having too little technical depthOrganizations today are highly complex, and even the best leaders lack the technical depth necessary to fully understand complex issues. When they rely too much on the expertise of others, they have trouble integrating the information to make a good decision. Therefore, the best decision makers often possess in-depth substantive expertise, and when pieces of their knowledge are lacking to grasp the full implications of a decision, they involve others to help them. 

9. Failure to communicate the what, when, where and how related to their decisionSome good decisions become bad decisions because those involved don’t understand them well. Communicating the reasons and implications of a decision is essential to properly implement the decision. 

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