Look out for amplifiers

By Jo Whitehead *

(exechange) — September 1, 2020 — Current events remind us that various factors can amplify the chance of CEOs making bad decisions.

Our research suggests that “amplifiers” include weaknesses in the decision process, such as missing information, weak boards or pressures on senior teams that distort their decision-making.

Some are external to the decision, such as industry cyclicality or a high debt level.

Take the example of Boeing, where CEO Dennis Muilenburg left after two of its 737 Max planes crashed.

Management was under pressure to come up with a competing product to the Airbus 320 Neo. This pressure contributed to the decision to revamp an existing product, the 737, requiring a change to the balance of the plane, rather than performing a more fundamental and expensive full redesign.

The board clearly did not have sufficient expertise in safety and so was not able to probe the risks involved.

Concerns were raised lower down in the organization, but it appears that these did not flow up to the top.

The moral for managers — spot potential amplifiers and recognize how they may impact your ability to manage major challenges.

* The writer is a director of the Ashridge Strategic Management Centre at Hult International Business School and is currently researching why companies and CEOs stumble. Jo.whitehead@ashridge.hult.edu.

Editor’s note: This is a guest post.