A recent Strategy+Business article on divestiture strategy identified five biases that can result in executives not making timely decisions to divest assets or sell business units that aren’t a fit, in spite of “a strong correlation between long-term value, as gauged by total shareholder return, and a proactive divestiture strategy.”
As I read through explanations for why leaders have trouble ‘letting go’ of capital assets, I couldn’t help but think of variations on similar themes that also get in the way of effective leadership. Sometimes, as leaders, we struggle to ‘let go’ of behaviors that have made us successful up to a point but are now getting in the way. In other situations, we hesitate to act for fear of outcomes beyond our control. Here is a brief riff on the five biases:
Overconfidence
Just as “excess confidence can lead managers to overestimate their ability to fix a business unit … [that] should be sold,” overconfidence can also cause you to monopolize conversations, add too much ‘value,’ and otherwise reduce commitment from team members. The best leaders don’t need to prove that they are the smartest person in the room. When you have enough ego strength to purposefully pause and be more intentional in listening to others, you are not only likely to learn something new, you will also tend to have a more committed and productive team.
Status quo bias
Strategic change can be thwarted because of “a preference for keeping things the way they are.” Such resistance gets in the way of growth for you and your team as well. Trying new directions can pose some risk and require bravery. Curiosity, balanced with ambition, will help you let go of old habits and rethink the actions that will make you more successful.
Confirmation bias
Even the most self-aware leaders have biases. As the Strategy+Business article says, “New information can be inconvenient, but management’s failure to seek it out can impact the trajectory and speed of decision-making.” Often what we ‘know’ prevents us from accessing information that can make us more successful. Openness to new information and a willingness to be ‘wrong’ in the spirit of learning and reaching better decisions benefits you, your team, and your organizations.
Anticipated regret
It’s wonderful when leaders bring their humanity to work. There is merit to your concerns about how employees may reaction to decisions. When you take these things into account, you are to be applauded. Sometimes the best decision for an organization impacts an individual in negative ways or upsets team members. Yet failing to act can have detrimental consequences too. None of us can control what others think, how they feel, or what they do. We can only control how we show up, alignment of words and actions, and the respect and care we demonstrate through our interactions with others. Focus on what you can control.
Loss of prestige
Is a divestiture an admission that a previous strategy has failed? Maybe. In a similar manner, FOPO (fear of other people’s opinions) may cause leaders to hesitate rather than taking action. While Machiavelli suggested it was better to be feared than loved, this is not about either of those outcomes. Taking other perspectives into account is important. So is having a clear understanding of the top priorities for you and your team. These will guide you through the inevitable changes and obstacles that every leader faces from time to time. Once you have gathered the best information available, take action. That is your responsibility as a leader.
In each instance, courage, humility, and the discipline to stay on the path will serve you well.
Good luck on your leadership journey!
Source:
PwC. (2023). C-Suite Insights: Five reasons executives have trouble ‘letting go.’ Strategy+Business. https://www.pwc.com/gx/en/issues/c-suite-insights/the-leadership-agenda/five-reasons-executives-have-trouble-letting-go.html
This post originally appeared on LinkedIn: https://www.linkedin.com/pulse/five-biases-limit-leadership-effectiveness-phyllis-sarkaria-mcec
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