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Decision-making is one of the few variables that crosses all business functions, affects all companies, and leads to success or failure wherever it is used. However, decision-making is not a science: it’s highly subjective and susceptible to cognitive biases. In an organization, cognitive bias works on individual and group levels, influencing decision-making and outcomes. The results are often errors or bad choices, such as Lehman Brothers’s excessive risk-taking, Toyota’s inadequate response to quality problems, and BP’s decisions to skimp on safety practices. Some errors are unavoidable, but systemic errors can be prevented, largely by addressing the propensity for bias. Types of bias can include overconfidence, confirmation bias, analogy bias, availability bias, and herd mentality (groupthink). While completely removing bias is probably impossible, avoiding systemic errors is possible by taking the following steps: 1) force awareness of the potential for bias; 2) conduct a frank self-examination; 3) critically evaluate the knowledge the organization uses to make decisions; 4) diagnose the cultural codes of groups; 5) reframe problems; and 6) actively seek out contrary viewpoints. However you deal with cognitive bias, begin with acknowledgement that it exists in all organizations and teams. To prevent bias from leading to poor organizational decision-making, inputs for decisions should be tested for quality just like inputs in manufacturing are tested for quality.

There is a growing cottage industry of superficial thought about corporate governance, and bad science has overwhelmed the process of clarifying the role and processes of a successful board. As this article states, there are features of governance and functions of governance. Regulators have forced boards into a compliance mode that places high value on features of governance as opposed to functions of governance, with grave penalties for non-compliance. The focus on features has led to a faulty evaluation metric for corporate governance. Indeed, counting features — such as separation of the chairperson and CEO, majority voting, and elimination of staggered boards — is the most common scale used when comparing boards. However, the verification of a board’s features does little for understanding and evaluating actual board behaviour. Understanding a board’s success or failure should be based on organizational theory, such as organizational design, culture, the personality and leadership of the CEO, and the quality of the board. How the functional relationships between the board and management work is likely far more important than board features to the growth, and sometimes survival, of an organization.