Distortions and Deceptions in Strategic Decisions
Companies are vulnerable to misconceptions, biases, and plain old lies. But not hopelessly vulnerable.
Jan 9, 2006
Strategic decisions are never simple to make. They sometimes go wrong because of human shortcomings.
Behavioral economics shows that any decision with an element of risk is subject to universal human biases such as overoptimism and loss aversion.
Strategic decisions are also susceptible to the "principal-agent problem": when the incentives of certain employees are not aligned with the interests of the company, those employees look after their own interests in deceptive ways.
Companies can reduce their exposure to these intertwined and harmful patterns of distortion and deception by adjusting their decision-making processes and strengthening the culture of debate.
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