IMD International

Almost exactly two years ago the economic tsunami descended on the world. Its causes were manifold and complex. It is widely accepted that many banks took risks that they shouldn’t have. Somehow, the wrong decisions were made, the wrong risks were taken, and they weren’t stopped. The antecedents of this undoubtedly included systemic causes, buried deep and running through the entire financial and political systems. But what is also clear is that specific protective structures and mechanisms that were established to secure these institutions from bad risks and poor decisions – such as the banks’ boards – failed to deliver.

Good guidelines and motivations are rarely enough to ensure sound decisions. Indeed, research has shown that it is entirely natural for decision-making groups, whatever their motivations and guidelines, to tend to suppress information flow, have more extreme attitudes, make more extreme judgements, and are less flexible in adapting their approach to changing circumstances, and – amazingly despite all this – have greater confidence in their decisions. This assessment is not a reflection on individual ability or motivation, but is due to natural group dynamics. Put your best people in a cohesive group and chances are that sooner or later, these group dynamics will emerge and get the better of them. These are not faults that arise when someone does something wrong; but are instead natural occurrences that require extra, unusual steps to avoid.

Traditional learning mechanisms are insufficient in addressing the pervasive and deep-rooted challenges of good team decisions. The reason for this is that many of the causes of the problem are what could be called default human behaviors – what most people are accustomed to do in a given situation.

Consequently, merely establishing processes and providing guidelines and information is unlikely to deliver improvement. To bring about change against the tide – to help people do something other than what comes naturally to them – requires more than just imparting awareness of how they should act and then leaving them to it. It demands hands-on help and repeated practice and feedback: direct and individualized interventions that enable the development and practice of new skills. This often requires the presence of an expert coach.

Groupthink: Why acting effectively in a group isn’t easy
The challenge facing executive groups in ensuring that failure does not reoccur is simple: Groupthink. The term was coined by William H. Whyte in a 1952 Fortune magazine article, but is perhaps most synonymous with the work of Irving Janis, who researched the subject extensively. Janis (1972)[1] defined Groupthink as:

A mode of thinking that people engage in when deeply involved in a cohesive in-group, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action.

Through his research Janis identified three layers of Groupthink: key underlying causes, common symptomatic behaviors and resulting decision-making flaws. The key causes included group cohesion, directive leadership and ideological homogeneity. The common symptomatic behaviors resulting from these causes included overestimation of the capabilities of the group, close-mindedness and pressures for uniformity. And the consequent decision-making flaws included inadequate contingency planning, insufficient information search and biased assessments of risk, cost-benefits and moral implications.

While some details of his model have been much debated, the concept of Groupthink has remained intact and subsequent research has confirmed the existence of many of its aspects[2]. Generally accepted is that groups tend to suppress dissent; focus discussion on things that they already agree about rather than things they disagree about; have more extreme attitudes and judgements on a wide array of issues and decisions than the individuals within the groups; have greater confidence in the correctness of their decisions and attitudes than individuals; lead individuals to publicly endorse decisions and attitudes that they view as normal for the group despite privately holding reservations. It should come as no surprise that group decision-making is difficult.

What’s to be done: Processes, insights and psychological safety
Broadly speaking, two main types of solutions to the problem of Groupthink have been suggested. The first are process solutions – solutions that seek to insert particular processes into decision-making meetings with the aim of ensuring effective debate and discussion. Therefore, organizations should set up several independent groups, working on the same problem; the board should invite outside experts into meetings to discuss key issues; each member should discuss the group's ideas with trusted people outside of the group (i.e. a coach or mentor).

Subsequent research has added to this list. First, and unsurprisingly, simply having a debate helps, as can just extending the time available for discussion. Likewise, assigning at least one group member the role of Devil’s Advocate can have a positive impact on decision-making, an idea that has been developed and extended in Edward de Bono’s[3] popular ‘Six Hats’ process for decision-making discussions.

The second type of solution to the problem of Groupthink is insight solutions. These are solutions that focus more on helping decision-making teams to understand how they make decisions and the politics and biases involved. The ultimate goal is to help teams improve their decision-making process. This is the approach championed by Chris Argyris, who argued that simply creating debate is of uncertain use when the issues involved are potentially threatening or embarrassing to the participants. He thus sought to surface the cognitive biases, personal politics and emotional undercurrents that lurk behind and underpin so much organizational decision-making. He described a method for improving the thinking and decision-making of executive groups that are involved engaging them both collectively and individually as a coach/facilitator, giving them feedback, challenging their thinking, and using focused exercises to help them reflect on how they operate. His purpose here was to help executive groups to understand their patterns of behavior, what they both individually and collectively did to maintain them, and what they could do to change them.

There is of course substantial merit in both types of solutions. However, the best way forward is combining these: using simple processes to encourage certain behaviors and working with teams to help them understand their default behaviors and the social-political context which breeds them. At the same time, any intervention aimed at improving decision-making processes should be utilized.

The ultimate goal is to help organizations create a culture in which ideas, challenges and concerns can be freely voiced: what is called a culture of psychological safety[4] – where individuals believe that it is safe to take interpersonal risks, such as asking for help, admitting errors and challenging. It is pointless sending leaders to a course on ‘articulating challenges’ and pushing them to have the ‘courage to lead’ if they then get shot down for doing so. If organizations really want to ensure good decision-making for tomorrow, they need today to start creating an environment in which speaking up can not just survive, but actually thrive and is encouraged and rewarded. It is just one way to help avoid the next financial crisis.

Shlomo Ben-Hur teaches leadership, organizational behavior and corporate learning at IMD. He is the faculty member responsible for the leadership stream in IMD’s Advanced Strategic Management program.

[1] Janis, I. L. (1972). Victims of groupthink. Boston: Houghton Mifflin. [2] Baron, R. S. (2005). So Right It's Wrong: Groupthink and the Ubiquitous Nature of Polarized Group Decision Making. In Zanna, Mark P (Ed.) Advances in Experimental Social Psychology, Vol. 37. (219-253). San Diego. Elsevier Academic Press. [3] Brodbeck, F.C., Kerschreiter, R., Mojzisch, A., Frey, D., & Schulz-Hardt, S. (2002). The dissemination of critical, unshared information in decision-making groups: the effects of pre-discussion dissent. European Journal of Social Psychology, 32:35–56 [4] Edmondson, A. (1999). Psychological Safety and Learning Behaviour in Work Teams. Administrative Science Quarterly, 44:350-383

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