Why Good Leaders Make Bad Decisions

We have probably all learned a lesson the hard way a time or two. Many good leaders learn how to do it the right way by either observing others’ mistakes or making their own. If we adapt, it was a “learning moment” (and not a mistake). But, that is not what we are talking about here.

There are two kinds of “bad” decisions that leaders make which are not only harmful to themselves, but others. They are avoidable, and while the first time it happens they are not necessarily selfish acts, as they are repeated, they certainly play to a personal agenda.

You are all aware of the corporate helmsman who makes ethical mistakes, usually driven by an unhealthy company (and the desire to keep it afloat) and mixed in with a little personal greed. I had occasion to meet the “whistleblower”, Cynthia Cooper, Vice President of Internal Audit at WorldCom. The story she told was one of a small step; a one-time issue to cover for poor financial performance just until it righted itself. The people asked to make the accounting entry pushed back. But, they were told any responsibility for it would be absorbed by the CFO and the CEO. These leaders are people the employees respected and who held their careers in their hands. They made the one-time change, and then made it again, and again and again, until finally someone inside the company noticed and called them on it. Unfortunately for the employees, they went to prison too.

Rick Frost, CEO of LP Construction shared how he holds himself accountable. He writes up a list of his values, hands them out to his staff and asks them to bring in the paper he gave them if he violates any of the items on the list. It keeps them all safe from giving into the pressures every executive faces.

Now, the second category of bad decisions may surprise you. It involves something that happens frequently–making bad decisions because you “guess”. Some people call it “using experience” or “going with their gut”. Admittedly, this can work in some situations. But, would you put your company at risk for the farm? Too many leaders don’t know the facts about their industry, their competitors and even their own operations. They make decisions based on how they perceive themselves. I wish I had a nickel for every executive I run into whose company provides the best quality or customer service in their industry. Few have any empirical information to support it.

As humans, we are guilty of seeing ourselves in a better light than we really are. Studies bear this out time and again. We are A or B players and everyone else are the C’s. When asked, if rated on a bell curve, what grade would employees give themselves, 70% were a B or above. Executives need to know the truth and act on it; not on what they hope is right or the way they see the world through tinted glasses. Every company needs to do the work to examine the market, have a plan to guide them based on those insights and finally, know the values they stand for and live them every day. Easier said than done (which is why many companies don‘t do it).

So, how to prevent bad decisions? Accountability.

  • Prepare a written statement of your values and hold yourself accountable.
  • Give your list to at least one other person and make sure they hold you accountable
  • Have an accountability partner outside the company who knows you well and makes you better–a mentor.
  • Be sure you know your market and your competitors; make decisions on market truths, not your historical experience.

Most people don’t mean to do harm; they just revert to self preservation if they are not reminding themselves daily of their values. Be accountable to yourself, your employees, your board and your soul.

(Originally publish August 17, 2010)

Start Scaling Your Business Now

Contact Breakthrough Masters For a Consultation