Culture promotes entrepreneurship empowers employees to make decisions and motivates them to succeed

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Interview by Pamela Reynolds

When football player Colin Kaepernick took a knee during the American national anthem before a 2016 game to protest racism and police brutality, the National Football League effectively blacklisted him. Yet by taking that one defiant action, Kaepernick also became a leader.

“There's no doubt that Colin Kaepernick has affected the decisions of an enormous number of people in a dramatic way,” says Max Bazerman, professor of business administration at Harvard Business School.

Kaepernick is among the influential leaders who Don Moore, professor and academic dean at the Haas School of Business at the University of California, Berkeley and Bazerman explore in a new book Decision Leadership: Empowering Others to Make Better Choices. The authors contend that a leader’s success depends not just on making good decisions but on helping other people do so as well. By encouraging others to make wiser, more ethical choices, the impact of solid decision-making ripples out in an organization.

Taking a big-picture view

Whether people are in the limelight or not, they nevertheless have an opportunity to bring a big-picture perspective to every choice and consider the consequences not just for themselves but for their colleagues, organizations, and, ultimately, the world.

Once people do that, say the authors, the ethical implications of their actions suddenly crystalize, leading them to make even better decisions that snowball. By creating that context, good leaders can set the stage for others to more easily make better decisions that benefit everyone.

“We often think in terms of the leader as guiding a factory of decisions,” Moore says.

Good leadership in the business world

What does good leadership look like in business?

The authors point to Jessica Wisdom, formerly a people analytics manager at Google and now co-founder and head of People Science at Humu. In her role at Google, Wisdom, a behavioral scientist, implemented several system “nudges” designed to help employees, known as Googlers, make wiser choices.

Since weight gain was a concern among some Googlers who enjoyed the free food on campus, Wisdom moved high-calorie items from the front of the cafeteria to the back. She set up similar decision nudges related to hiring, saving for retirement, choosing work assignments, and organizing teams. Each change gently encouraged Googlers to make a good choice that would lead to increased innovation and happiness.

“What I like about her is, it's kind of unambiguous that she's affecting the decisions of lots of other people, and she's using contemporary tools of modern behavioral science,” says Moore. And yet, he says, she’s not who business leaders typically envision when they think of leadership.

Leaders should put themselves in others’ shoes

How can people become both better decision-makers and leaders? The authors outline specific strategies, many of which call for staying flexible while listening to others:

Consider the perspective of others. If managers want to make better decisions, they must strive to understand their employees’ point of view.

“You have to understand the world that they're in,” says Bazerman. “Most humans don't do a very good job of what your mother may have told you to do, which is to put yourself in the shoes of others.”

Think multiple steps ahead. Leaders need to consider how encouraging certain behaviors will play out over time, even when they cannot predict future events.

“Colin [Kaepernick] didn't know exactly what would happen, but he thought that he was moving us in the right direction,” says Bazerman. “That's also what leaders want to do. They want to move us in the right direction and hope that they've created a world where the people around them will make lots of other decisions that will continue to move the organization in the right direction.”

Resist getting cocky. As leaders ascend in the organizational hierarchy, they often become increasingly confident, believing their ideas are the right ones. But that’s a mistake.

“Anytime a leader misattributes the reasons for why they got where they are, ignoring the luck component and instead believing, ‘I'm in this position of authority because I'm so brilliant and I'm so smart,’ they will be tempted to give too much credence to their intuition and listen too little to the perspectives of others, especially their critics,” Moore says.

Ask what’s missing. Leaders need to seek out the people within the organization who disagree with them and ask what they can learn. “That can help reduce the overconfidence leaders are more prone to as they advance in their careers,” says Moore.

Look at the long game. “Short-term outcomes are bound to destroy long-term value,” warns Moore. “Lots of leaders have the mindset that competition is good, and we certainly agree that competition is good in some contexts. But if there's too much competition within organizations, that destroys the opportunity to create value for the overall organization. Parts of your organization are competing when they should be creative problem-solving.”

Value diversity. Better decisions are made when the decision-makers come from a variety of backgrounds and perspectives, the authors say. “When you average the opinions of a set of people, especially a set of well-informed people, you will get closer to the truth than just trying to pick the person who is most expert or who is the highest paid person in the organization,” says Moore.

It’s important, the authors say, to be deliberative in decision-making by conducting experiments and collecting data. Underneath it all, a leader needs a moral compass rooted in the notion that a good decision works toward the collective good.

“We're interested in leaders having a broader view to maximize not what their bonus is going to be based on the share price, but to think about a broader element of all the employees, all people in the community, all people in the world,” Bazerman says. “The larger you think about the relevant circle, the more ethical you can be in terms of creating overall value.”

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[Unsplash/Shwetha Shankar]

Reward Good Decisions, Not Good Results

From Decision Leadership: Empowering Others to Make Better Choices

By Don A. Moore and Max H. Bazerman

Leaders routinely pay too much attention to outcomes while neglecting information about individuals' decision-making processes and the uncertainty that surrounds their decisions, a phenomenon known as the outcome bias. What happens when an employee makes a good decision that turns out poorly? If she is punished, she's likely to be risk averse in the future. In the days when IBM was the leading computer supplier, known for selling reliable but expensive machines, the phrase "No one was ever fired for buying an IBM” was common in organizations. This simplistic slogan ignores the possibility that paying the extra cost for an IBM computer may not have been the best decision.

How can leaders promote risk-neutral decisions that maximize expected value? First, they can train key employees in basic decision analysis, including a lesson in how deviation from risk neutrality makes the firm less effective. Second, they need to accept that some good decisions will inevitably lead to bad outcomes. Leaders ought to reward wise decisions with positive expected values, even when they get unlucky results. This will be easier if the company documents expected values ahead of important decisions rather than relying on outcomes perturbed by chance.

When the only available data are outcomes, it is important to look at a large portfolio of outcomes. That's why Samuelson's friend wanted one hundred bets rather than one. Third, leaders should make risk neutrality part of the organization's culture. They need to view deviations from risk neutrality as likely mistakes rather than as personal choices. Everyone should make decisions that maximize long-term expected value. Fourth, leaders can encourage wise risk taking by rewarding well-intentioned failure. In other words, you should not punish people for unlucky outcomes on smart bets with positive expected value.

Promote joint, rather than separate, evaluation. Steps 1 and 4 of our rational decision outline require that decision makers compare the many alternatives before them. Nevertheless, companies regularly make high-stakes “whether” decisions. Companies decide whether to go public, whether to pursue an acquisition, whether to declare bankruptcy. Too many of these "whether" decisions fail. Instead, you should make your "whether” decisions into "which" decisions between alternatives. Expand your thinking from evaluating a single option to considering all of the possible alternatives open to you. This is basically encouragement to think big about Step 4 in the logical decision-making process by generating alternatives that offer differing possible courses of action.

As a leader, you might be looking for ways to hire better people and discriminate less in the process. In a study with the economists Iris Bohnet and Alexandra van Geen, Max identified a tool that can help you meet those goals: joint decision making. We found that when people are evaluating employees one at a time their System 1 thought processes tend to dominate. As a result, they tend to rely on nonpredictive gender stereotypes and to hire men for mathematical tasks and women for verbal tasks. They rely on fit similarity and neglect diversity. In contrast, when people compare two or more applicants at a time they focus more on job-relevant criteria and treat employees equally, regardless of gender. This more deliberative hiring improves organizational performance.

Why does joint, or comparative, decision making lead to more deliberation and better results? When we evaluate one option (one product, one potential employee, one job offer, one possible vacation) at a time, System 1 has a powerful influence on our decisions. But when we compare multiple options simultaneously, the comparison process activates deliberation about how the options differ. That is, comparison is more likely to trigger System 2 processing. As a result, we are less biased, more rational, and more ethical when we operate in joint decision-making mode. As a leader, you can not only engage in joint decision making yourself but also encourage others in your organization to adopt this more effective mode.

In one experiment, Max and his colleagues asked graduating MBA students whether they would accept a particular job offer from a consulting firm. Condition A participants were told they would receive the same moderate salary offered to all rookie MBA hires (Job A). Condition B participants were offered a job (Job B) with a slightly higher salary than was offered to participants in condition A, but they learned that some other new hires were being offered even more. MBA students who evaluated Job A or Job B rated Job A as more attractive, even though Job A offered less money. Feeling it was unfair for similar candidates to be paid more for the same job, participants in Condition B had a strong negative emotional reaction to Job B.

Now let's look at what happened when we presented MBA students with both offers, Job A and Job B, and asked them to choose between the two. The comparative process prompted the students to override their negative emotional reaction and focus on the fact that Job B would pay them more than Job A. We give the emotions triggered by social comparisons more weight when evaluating a single option than when comparing two or more options at the same time. The emotional reactions prompt more intuitive thinking.

The psychologists Ilana Ritov and Daniel Kahneman found similar inconsistencies in people's evaluation of the importance of addressing various environmental and social issues." People read about environmental crises, such as birds being threatened by toxic pollution, and indicated their support for remediation. Those who read about just one remediation plan and indicated how much they would be willing to support it gave similar answers regardless of whether the plan would save 20, 200, or 2,000 birds. However, those who considered all three plans at once were, unsurprisingly, more enthusiastic about the plan that would save more birds. Basically, intuitive emotional reactions drove their decisions of whether to support a particular remediation plan. However, when they chose which of several different plans to support, it was obvious which plans were more effective, and participants' level of support better reflected plans' actual effectiveness.

Turning to a different context, Edward Chang and colleagues examined hiring decisions. In one study they examined how people selected guest speakers for a conference. The conference needed speakers for each of five different topics. When the job was to select a single speaker, women constituted 32 percent of those chosen, even though the pool of potential speakers was evenly split by gender. By contrast, when participants selected speakers across all five topics collectively, on average, 46 percent were women. Although cognitively the participants generally endorsed the value of gender diversity, joint selection decision enabled decision makers to better consider diversity as a decision criterion.

Leaders can facilitate better decisions in their organizations by encouraging others to make comparisons when facing important decisions. Comparisons can be particularly relevant in the realms of hiring, choosing an acquisition target, and deciding which project to fund or which supplier to use. Comparison steers us toward System 2 thinking, greater deliberation, and better decisions.

Excerpted from Decision Leadership: Empowering Others to Make Better Choices by Don A. Moore and Max H. Bazerman © 2022. Excerpted with permission from Yale University Press.

Which of the following cultures develops an emphasis on entrepreneurship and respect?

Is the degree to which a job gives an employee the freedom and discretion needed to schedule different tasks and decide how do you carry them out?

Which of the following is a characteristic of the organizational culture in a tall organization?

Is increasing the degree of responsibility a worker has over his or her job?