Eliminating Mistakes in Business Decision-Making

Eliminating Mistakes in Business Decision-Making

In both Industrialised Countries and in Developing Countries, business plans fail at an extraordinary rate. For

example, companies spend more than $3 trillion on acquisitions every year, yet the M&A failure rate is between 70% and 90%.

The fundamental point behind this course is that, neuroscientists say, 95% of our thinking is actually unconscious – that is, we’re not even consciously aware that we’re processing thoughts. Further, neuroscientists argue that we also take thinking “shortcuts” – heuristics, more of less “rules of thumb” – to save us the tiring labour of thinking through lots of matters thoroughly and carefully. The problem, from the point of view of corporate decision making, is that these unconscious rules of thumb often mislead us. Board members and Executive Management regularly commit cognitive mistakes, often with disastrous consequences.

Cognitive scientists now believe that there are, extraordinarily, almost 200 unconscious cognitive biases. A prominent example, for instance, is groupthink, when the desire for harmony or for comformity in a group results in an irrational or dysfunctional decision making outcome. After the 2008 Financial Crisis, for instance, government reports in four different countries – the United Kingdom, the United States, Ireland, and Iceland – traced an important element in the banking crisis to be groupthink on the Boards of Directors of even prominent, well-established banks.