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Lead Your Team Managing

Study: Bosses Don't Always Make the Best Decisions

It’s probably not a news flash for your employees, but if you own a business, you might be surprised to learn that you may not be the most qualified person to guide your business’ future.

That’s the finding of new research that finds that if senior managers are making decisions without fully understanding customer needs and technology possibilities, the decisions might not always to the benefit of the company.

The researchers determined that the rapidly changing nature of the global marketplace, as well as technology require that companies have two simultaneous strategies. The first is to execute existing business plans. The second is to have a set of projects in the development pipeline that remain on strategy, but can be adapted as the market changes.

“The hardest thing to do is to strike a balance between maintaining a short-term focus on what really needs to be done now and modifying the strategic trajectory to remain successful in the future by deciding which new projects should be brought into the pipeline, given certain environmental changes,” said University of Utah marketing professor Abbie Griffin, who conducted the research.

 “Most firms tend to go to one end or the other of a spectrum: either they go forward rigidly in strategy despite environmental changes and are too focused on completing projects already in the pipeline; or they go to the other end of the spectrum and shift from project priority to project priority, hopping on what looks best at any given point in time, losing focus and confusing employees,” Griffin said.

In-depth case studies of four companies found some decisions were based on careful fact-finding and cross-departmental collaboration, while others had often negative internal political elements or suffered from corporate executives’ power struggles. Other decisions ultimately were made based on opinions tied to past experiences at the expense of new factual revelations.

“Most frequently, top-down decisions for which products to pursue are more the cause of a firm's portfolio problems – unless the senior managers dictating those decisions are immersed in the market and technology capabilities,” Griffin said. “If senior managers are making these decisions without having deep connections to understanding customer needs and technology possibilities in detail, then portfolio decisions become much more political in nature – not always to the benefit of the firm.”

The research, which was co-authored by Linda Kester, will appear in the 2011 edition of the Journal of Production Innovation Management.