Most managers pride themselves on being rational – of making decisions after having carefully analysed data.

However, research has shown that it is not possible to be completely objective and know all there is to know, particularly when strategies are being formulated with the future in mind.  The reason is that we all have a natural tendency to see what we want to see and disregard, or distort, what does not fit our paradigms.

To err is human

Managers, like everybody else, have beliefs and perceptions about the environment in which they operate.  Their knowledge, skills and prior experiences come together to create a lens through which events are interpreted.

If managers are optimistic, they will observe possibilities and feel confident about the future.  If they are pessimistic, the same circumstances may be seen to be negative.  Facts are interpreted in a variety of ways and only with hindsight can we know which perspective was the correct one.

Our predispositions and beliefs not only obstruct us from perceiving objective reality, they also cause what is known as selective perception.

After giving a motivational talk, people often tell me how much they value my presentation.  When I probe deeper and ask what was the most meaningful part of my speech, I am sometimes told things I never said.  Frequently these are things I would very much have liked to have said, but did not.  And I am happy to take the credit.

On the other hand, I have sometimes been criticised for things that I did not say.  When I try to correct these misconceptions, I am told that I definitely did say them and that I am in denial.

To a greater or lesser degree, we all see what we want to see.  We create our realities by gathering data that give support and credence to our beliefs.  Then, when conflicting evidence comes up, we either do not notice it, or we negate it.

Numerous studies of industries and companies in crises have shown that senior managers maintain a great deal of confidence in their own distorted perceptions of what was going on, despite obvious signs that things were amiss.

An example of this occurred in the watch-making industry of Switzerland.  For over a century Swiss time-pieces were the hallmark of quality and accuracy.  With great pride and justification, the Swiss regarded themselves as the best watch makers in the world.  Their watches were mechanical masterpieces, and they were priced accordingly.

Then in the late 1970’s, electronic watches came to the fore.  Pioneered by the Japanese, digital watches were relatively inexpensive and even more accurate than their Swiss counterparts.

In spite of information that was readily available, the Swiss watchmakers chose to disregard the looming threat.  According to them, Japanese watches could never be compared with Swiss chronographs.

It was only after the Swiss had lost about 90% of their market that they acknowledged the world had changed.  People no longer wanted expensive spring loaded, mechanical devises that required winding-up each day.  So the Swiss were forced to change their ideas.

Today Switzerland has regained much ground, but the road back was difficult.  Even then, the Swiss have not recovered anything like the dominant market share they once enjoyed in the watch industry.

It should be borne in mind that very few executives deliberately distort or deny facts.  It’s simply that information outside their selective mindsets are not considered, or taken seriously.

John M Mezias and William H. Starbuck in a Harvard Business Review article said:

“Managers often have badly distorted pictures of their businesses and their environment.  Though they receive endless data about their organisations and the markets they operate in, managers tend to focus on what is happening right now, in their specific jobs, in their specific business units, operating in very specific, competitive situations.  Busy among the trees, they lose sight of the forest.   They base their analysis on formal corporate documents, personal experiences, rumours, conversations during meetings, speeches by their CEOs, and other sources of varied reliability”.

I want to emphasize that no self-respecting manager will intentionally disregard pertinent information that lies outside his or her frame of reference; rather, the information is simply not noticed or believed.  It is human to see what we want to see, and little else.

Since each person is prone to selective perception, and even unconscious distortion, what then is the solution?

Openness and Flexibility are the Fonts of Wisdom

To overcome the obstacles of selective perception and unconscious distortion managers need to be open to conflicting and even disagreeable data.  They also need to keep in touch with, as well as listen, to people at all levels of the organisation.

Many executives, especially highly articulate, strong leaders, have an extra-ordinarily powerful influence on their followers.  Subordinates frequently feel intimidated in their presence.

Consequently, though subordinates may have their own thoughts under normal circumstances, these thoughts are not expressed when the opposing ideas of the leader are known.  The outcome is that the executive never gets to hear what subordinate’s think, and contradictory views or warnings on pertinent information remain unknown.

To be open and receptive to others’ ideas you need to:

1. obtain the thoughts and perspectives of others before you express your own;
2. seek a range of divergent views, opinions and facts?  And give due consideration to all of them, especially unpalatable or opposing data;
3. take action when a clear picture emerges.  Always do so in the best interests of the company.

Sometimes tough decisions and actions must be taken.  Occasionally they may be opposed.  But as long as decisions are based on a thorough investigation of divergent positions, as much information as possible, and as long as the well-being of the organisation is the motivating factor, it is the way to go.

Bear in mind though, that no matter how careful you are with facts, and no matter how many perspectives you take into account, you will never have complete knowledge or understanding of anything.  Effective managers are aware of this phenomenon and so they are prepared to adjust their thinking, and their actions, in response to feedback and new information.  This requires a willingness to admit mistakes.

In 1981 Bill Gates was quoted as saying “640k should be enough memory for anybody”.  With hindsight this statement seems ludicrous.  Surely a person like Bill Gates should have known better?  But he didn’t.

What is important is not that Gates made a mistake.  We all do.  Rather, it is that he quickly admitted his error, altered his thinking, and established his empire by adapting to the changing requirements of his market.

Admitting a mistake posed no threat to Bill Gates.  However, most managers today are wrapped up in their egos.  They fear being wrong and endeavour to protect themselves through defensive and offensive measures aimed at covering up or justifying behaviours.  Consequently, they miss valuable cues and often only wake up when the damage has been done.

Like Gates, managers need to take a pragmatic and flexible approach.  We must acknowledge that being human means being imperfect.  We cannot be right every time, and we will sometimes, make wrong assessments and decisions no matter how objective we may be.  One of the greatest assets we bring to strategic thinking and decision-making is not total objectivity or error-free judgement, for these are illusions.  Rather, it is the ability to make use of feedback and be flexible enough to change our minds whenever this is required.

Flexibility in thinking is indeed more valuable than rational objectivity on it’s own, for the reason that what seems so true and logical is often simply a belief or viewpoint that is sometimes invalidated with hindsight.

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Dr Ray Laferla, CEO of Integrated Human Dynamics, publishes articles as the one you have just read, on a monthly basis, free of charge.

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