CEOs are decision-making machines.
The problem is…they have better chances in a casino than in decision making!
In a 2009 McKinsey survey of 2,207 executives, 60% said bad decisions were about "as common as good ones". 12% claimed, "good decisions were rare". (1)
I recounted some of my own decisions as a CEO and realized that for every great product launch, there was a failed one. For every successful market penetration, there was a failed one.
Money managers have learned how to beat the odds in trading stock, currency and commodity markets. They know the only obstacles they have are their own irrational, emotional and cognitive biases. So, they set stop-loss orders to mitigate them.
Every CEO is a “money manager” of the decision portfolio of their corporations. A CEO success is ALL ABOUT maximizing good decisions and minimizing bad ones.
CEO success is the sum of GOOD decisions minus BAD ones!
Money managers and gamblers only have to deal with their own cognitive biases. However, CEOs have to deal with their own biases and those of their executives, board members, trusted advisors and industry experts.
McKinsey consultants’ candid conversations behind closed doors with CEOs confirm that biases affect the most important strategic decisions made by the smartest executives. “Mergers routinely fail to deliver the expected synergies. Strategic plans often ignore competitive responses. And large investment projects are over budget and over time—over and over again.” (1)
To make good decisions, we must see through our own biases we have developed through habits, training, experiences, practices, culture and — human nature. It requires limiting our own biases, limiting others’ biases, and limiting group biases. Right?
Easier said than done.
Biases are hard-wired in our nature and we can’t overcome them by simply trying harder.
Dan Lovallo, professor of business strategy and Olivier Sibony, director at McKinsey suggest leadership activities that impact decisions (such as managing meetings, gathering and analyzing data, and stimulating debate) that will minimize the impact of cognitive biases on critical decisions. (2)
The problem is that these leadership improvements will take a long time to be effective. And CEO effectiveness is all about making the right decisions, right now. Not 3, 5, 10 years from now.
How can you instantly set "loss-stop orders” on your bad decisions?
The fastest way to overcome decision-making biases is by vetting your decisions with a trusted CEO Mastermind Group from different industries, backgrounds, and experiences.
An effective Mastermind Group is not a social or networking group. It is a confidential, private and trusted advisory board. It serves as growth accelerator by challenging your biases and those of your stakeholders.
The group members boldly question challenge and advise each other on high-impact issues so that their decisions lead to better results. You can't get this within your own company. Your employees, advisors and board members have their own agendas. They are not CEOs. They do not really see the views from the top.
In a CEO Mastermind Group, you get the benefit of diverse perspectives and choices that you might not have thought of. It is like having 12 CEOs who care about you at your disposal, without having them on your payroll.
I believe every CEO must try this.