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Why do good managers make bad decisions?

Jack Smith, Dialogue, Flowers Gallery

On BusinessWeek.com, Matt Boyle talks to management guru Sydney Finkelstein about his latest book Think Again, which examines why ostensibly good managers make poor decisions.

In the book, Finkelstein pinpoints four key internal biases that lead to poor decision making. These are: inappropriate prejudgments, inappropriate experience, self interest and attachments.

The first two biases are the most interesting, according to Boyle. Inappropriate prejudgment occurs when a course of action is chosen, and then advice or information that does not adhere to that path is ignored. Inappropriate experience is an attitude of "what worked before will work again".

Richard Fuld, CEO of Lehman Brothers, is singled out by Finkelstein as a victim of inappropriate experience, featuring on the author's list of 2007's worst CEOs. He says: "[Fuld] was unable to break out of his own experience and history by seeing the risks that Lehman had."

Finkelstein also offers some advice to help managers cope in the current downturn; he believes the present situation represents "an opportunity to make hard changes that [managers] need to make that may have been resisted before."

Bad Management: Why Managers Make Poor Decisions
Matt Boyle