When Leaders “Waffle,” Confidence Plummets

By Bruce L. Katcher, Ph.D.

The Backstory
When Congress approved the $700 billion bailout package, U.S. Treasury Secretary Henry Paulson roiled the U.S. financial markets by continually flip-flopping on how the money would be used. First, he said that the bailout would be used to buy troubled assets that had been clogging the balance sheets of banks. Then he said he would use the money to ease access to home, school, and auto loans. Then he said he would not even ask Congress for the second half of the $700 billion. Who knows how it will all end up?

Paulson tried to defend his actions by saying that flexibility is needed when dealing with changing conditions.

But the damage had been done. It is common knowledge that psychological forces dictate the stock market. Paulson's waffling contributed to a continued erosion of consumer confidence and the stock market continued its volatility. This was a good example of how poor decision making made a bad situation worse by bringing about a loss of confidence that then dramatically impacted the market.

The Problem
Leaders of organizations, as well as government leaders, need to be mindful of the importance of making clear-cut, well thought-out decisions. Unfortunately, many organizational leaders do not do a particularly good job of this. Our research shows that only one out of two employees believes the leader of his organization makes sound decisions.

Good decision making is especially important during these challenging economic times, as leaders are being called upon to make big decisions about reducing costs, identifying new strategic directions, and whether to implement previously planned investments in the future.

If employees trust their leaders and believe they make sound decisions, they will follow them even when they don't agree with their decisions. The key is that they believe their leaders can provide them with a clear, consistent direction.

What to Do
1. Think before you act. In his defense, we know that Secretary Paulson was under pressure to act quickly. The problem was that in his haste, his decisions were not well thought-out. He appeared to make a new, contradictory decision on a daily basis. The markets would have responded better to more consistent, albeit delayed, decisions.

2. Check decisions with others before going public. Many senior decision-making groups suffer from what Irving Janis calls “groupthink.” This is when the group, in the pursuit of cohesiveness, is quick to acquiesce to the leader to minimize conflict without first critically testing, analyzing, and evaluating ideas.

Here is an approach I have used in my consulting work to help groups view major decisions from multiple perspectives before making a final decision. It involves a devil’s advocate approach to make certain that the decision has been thoroughly reviewed, critiqued, evaluated, and reevaluated.

Break up the decision-making group into the following four subgroups and have them answer some basic questions:

* THE OPTIMISTIC GROUP: “The glass is half full.”
–How will this decision help the organization?
–I am confident that this decision will work as intended because . . .

* THE PESSIMISTIC GROUP: “The glass is half empty.”
–Why is this a bad decision and how might it hurt the organization?
–I doubt that this plan will work as intended because . . .

*THE CAUTIOUS GROUP: “Let’s reconsider whether we should be drinking at all.”
–Have we identified the correct approach?
–I am cautiously optimistic, but not without reservations, because . . .
–What are some alternatives decisions that have not been considered?

* THE PRAGMATIC GROUP: “Let’s drink, but very carefully.”
–What are the major challenges we will face to make this decision work?
-–In order to make the decision successful, it will be important to . . .
–How will we know if the decision is succeeding and whether midcourse corrections are needed?

3. Fully communicate decisions. Our research also shows that only 38% of employees believe management does a good job explaining the reasons behind its decisions. Employees want to be treated like adults. They want to know why a decision was made, what the risks are, and what potential rewards they can expect. Most importantly, they want honesty from their leaders.

When you are faced with an important decision, don’t waffle. Enlist others to help you view the problem from multiple perspectives so that you can make a thoughtful, informed decision. Once you’ve decided, fully communicate the plan to employees and others.

Author Bio:
Dr. Bruce L. Katcher is an industrial/organizational psychologist and is president of The Discovery Group.  He is the author of 30 Reasons Employees Hate Their Managers (AMACOM, 2007).  Contact him at bruce@discoverysurveys.com or on the Web at www.discoverysurveys.com

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