There is no shortage of high-profile examples of bad business decisions. Less well-known but just as insidious is the large number of good decisions that go bad. Frequently, these decisions are premised on good ideas that garner support but then somehow get lost, sidetracked or even reversed en route from approval to execution. Bad decisions and poor decision-making processes are a big drain on management time, waste precious resources (often not detected on any balance sheet) and put a serious crimp on innovation. Over the years, researchers have attempted to understand the reasons for these failures. Many have focused on problems inherent to small groups: bad chemistry, ineffective leadership, failed group processes, groupthink and more.1 Psychologists, for their part, have highlighted “cognitive biases” — for example, the overconfidence of decision makers and their tendency to discount alternative viewpoints.2 Although such factors are certainly important, researchers have largely overlooked another significant explanation for the problem: the role networks play, both within a team and throughout an organization, in the way decisions are framed and how they are carried out.
The leading question
How do informal networks in organizations affect the ways decisions are framed and executed?
- Leaders often try to rectify inefficient and ineffective decision making by increasing collaboration.
- Leaders are often blind to the way their own informal network bias affects how they frame decisions.
- The technique of network analysis enables leaders to see where they are overloaded and where they are missing contributions from the periphery.
Executives often frame problems based on their own network of influential relationships. Social scientists have shown that “who you know” has much to do with “what you know.”3 One researcher, summarizing a decade’s worth of studies focused on how engineers solved problems, found that engineers and scientists looking for information were roughly five times more likely to turn to friends or colleagues than to electronic and paper-based repositories.4 Even with the explosion of information technology, our own research and that of many others points to the substantive degree to which people continue to rely on other people for the information they need to get their work done.5 But researchers have yet to apply this fundamental awareness to the way networks can systematically bias the information executives rely on in framing decisions.
1.See, for example, W.G. Dyer, “Team Building: Current Issues and New Alternatives”