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Why good leaders make bad decisions

Dick Fuld thought he could save Lehman Brothers

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in Leaders & Managers,Management Training

Dick Fuld saved Lehman in the late 1990s, following the collapse of Long-Term Capital Management. Ten years later, he probably thought he’d do it again.

What causes a good leader to make bad decisions?

Relying on experience, even when the current problem is way more complex.

“Experience that seems useful is actually sometimes dangerous,” says Sydney Finkelstein, co-author of Think Again: Why Good Leaders Make Bad Decisions and How to Keep it From Happening to You.

Making prejudgments that turn out to be wrong.

Example: The head of the Department of Homeland Security made early judgments about how bad Hurricane Katrina would be. As data flowed in, he chose to heed reports supporting his early call, rather than noticing the facts.

Attachments to people, places or things. Say you need to downsize or sell off businesses. Whether you make the best possible decision depends in part on how aware you are of any attachments.

Tip: Walk into any decision recognizing that you’re biased, and try to identify what affects your objectivity.

— Adapted from “Why Good Managers Make Bad Decisions,” Erin White, The Wall Street Journal.

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