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Foreword

At the outset of a book of stories about judgment, perhaps the way to begin is by telling the story behind the book itself. In the spring of 2010, Tom Davenport and I met for lunch, not with any thought of embarking on a new project but only to catch up. But with two disasters much in the news at the time—the continuing fallout from the global economic meltdown and the explosion of BP's Deepwater Horizon oil platform in the Gulf of Mexico—our conversation kept returning to the question of why it is so hard for organizations to do the right thing.

Our prior research together, spanning two decades, was a source of pride for us. We had focused on knowledge in organizations rather than the more prevalent subjects of information technology and data management and felt we had made a serious difference in at least some management thinking, conversation, and actions. Knowledge, we had argued, was the most valuable asset in modern organizations, and their success depended on their attention to cultivating it, sharing it, and using it.

Now, however, we had to admit that the catastrophes being visited on the world weren't owing to failures of knowledge. Not at all. Who knew more about finance than the employees of the firms that precipitated the financial crisis? Their halls were full of Ivy League graduates rubbing shoulders with the world's leading economists and finance professionals. How could anyone say there wasn't sufficient know-how? And who knew more about how to rein in the risks of their operations than the regulators? Often hired directly from the very entities they were to regulate, they had not only the requisite intellectual tools to understand complex financial structures but intimate familiarity with how they were being applied. Yet all this knowledge, the product of the very strong investments in human capital these organizations made, had brought us to our collective economic knees. So what was missing if it wasn't information or even knowledge? Try judgment.

As that conversation led to others, it wasn't long before Tom and I asked Brook Manville to join the discussion. Not surprisingly, given how long we have been friends and colleagues, he had also been thinking along the same lines. All of us knew something of the existing literature on judgment, which is not unsubstantial. We wondered whether its lessons had simply gone unheeded, or whether it fell short in some way of offering the right lessons for today's organizations.

What we discovered, first, was that the wealth of material already published on judgment treated it as only an individual capacity and exercise. Whether the source is an ancient one, like Aristotle's inquiries into “practical wisdom,” or a thoroughly modern one, like Dan Ariely's fascinating behavioral economics studies, the focus is on the sole actor and his or her ability to choose a wise course of action. At the same time, most writing on judgment conflates judgment and decision making, to the former's disadvantage. People chipping away at the subject tend to opt for one of two modes, approaching it either as an application of mathematics (following the hugely influential Howard Raiffa) or as a branch of individual psychology (building on Herbert Simon's cognitive science).

We discovered, in other words, that no one was looking into the workings of what we term organizational judgment—the collective capacity to make good calls and wise moves when the need for them exceeds the scope of any single leader's direct control. We wanted to know why some organizations manage to display good judgment while others seem to lack it. If a group's judgment is something other than the sum total of the practical wisdom of individuals in the group, then we wanted to know what it is, how it is called upon in moments of need, and how to get more of it.

Very briefly, organizational judgment is to group decisions what individual judgment is to individual decisions. It is what guides organizations when information alone cannot. It is the context in which group decisions are made—the atmosphere of collective experience, bias, and belief that sets the boundaries, the limits, the methods of analysis, the very conversations and vocabularies and stories that are the heart and soul of so many decisions.

Think of a recent decision you were party to. Whether it related only to your own life or to the direction of a group, it was not made in a vacuum. I am willing to bet you did not approach it with Cartesian purity, plotting coordinates and noncontextually weighing factors as if you were considering some crystalline structure. No, you made that decision in a social setting. It is that setting which differs from organization to organization, and which is the focus of this book. All the experiences and emotions and histories and individual stories add up to a “climate of opinion” in any organization that is the soil from which decisions emerge.

All this, Brook, Tom, and I agreed, was uncharted territory and important to explore. We agreed that the way to begin was by going out and talking to real people about the judgment calls their organizations had made. And as we began those visits, we realized that the best way in which we could share what we were learning with others would be to tell those organizations' stories in all their richness.

In terms of my personal involvement, this was a point where the story of the book took a turn. Soon after we began this fieldwork, I became ill for a time and decided I could not responsibly commit to a full share of the research and writing. It was a tough admission, but in the end, the right call. I instead offer this Foreword in gratitude—both for Tom and Brook's understanding and support, and for the discoveries that populate the pages that follow.

The important news that they bring back from their investigations is that the background and context we call organizational judgment can not only be discerned, it can be managed. Maybe not as much as some might like, but in meaningful ways. Things can be done to ensure that the courses of action taken by organizations are more grounded in reality and a shared sense of what is right. In particular, Tom and Brook found the evidence of what we had suspected: that honing organizational judgment means creating processes and mechanisms that allow discussion and debate and conversation to work its own collective chemistry.

I'm proud to say, then, that I was present at the beginning of something big. Across the history of theorizing about how decisions are best made, we have already seen three eras. First, there was the “great man” school of thought (a folly that Tom nicely summarizes in chapter 1.) According to its teachings, judgment was surely accorded central importance, but the judgment was assumed to be an individual characteristic—indeed, one of the distinguishing characteristics that separated truly great men (yes, alas, always thought to be men) from the rest of mankind.

The corrective to that way of thinking came later, marking a second era. The key to good decision making was understood to be more abundant information relevant to the decision, and much later, to be the ever-snazzier technology that could make it possible to process immense amounts of potentially relevant data. Even as investments in analytics yielded many triumphs, however, they also revealed that not every nuance of a decision could be nailed by numbers.

It's a lesson we were reminded of anew when the 2009 death of Robert McNamara, architect of the Vietnam War, spurred so many reflections on his singular career. In many ways he was emblematic of a type of executive all too common in the post–World War II world: very smart and achievement-driven, but overly convinced that problems of any kind would yield to rational analysis. The group of men that formed around him were labeled the “whiz kids” for their acumen in using operational analysis to solve logistical problems during the Vietnam War. On top of McNamara's predisposition to disregard the role of judgment, he worked in environments—first Ford Motor Company, then the U.S. Department of Defense, then the World Bank—where there was no real sense that judgment was a capacity worthy of development and conscious exercise. Thus, sadly, there were virtually no mechanisms or processes in these environments that could systematically challenge decisions that were, in fact, judgment calls—and bad ones. Famously, McNamara came to understand this late in his life, as he struggled to comprehend how moves he supported intellectually had produced so much damage and tragedy.

McNamara's high-profile mistakes were hardly the death knell of a data- and IT-smitten era. And indeed the advances in these fields should continue, because decision making always benefits from better information. At the same time, the awareness grew that not every important input to human decision making and action had been or could be practically expressed as data. Knowledge, largely tacit, always dynamic, went beyond the concrete capture of databases. The realization that this did not mean it was unmanageable ushered in a third era.

And now, we see the dawn of a fourth era of thinking about organizational decision making, in which the importance of judgment is acknowledged. As with knowledge, and before it, information, the new thought is not that judgment matters. It always did. The breakthrough is that judgment has become tractable enough to analysis, even at the organizational level, to be worth discussing.

It's easy to see why, historically, judgment hasn't been talked about much in the academy or in firms. For one thing, it's hard to settle on the right “unit of analysis” as a basis for work on the subject. The question of where judgment resides is elusive and resistant to the type of analysis academics need to produce for their professional advancement. And so there has been much more focus on individual decision making: it is just easier to deal with.

Another hurdle in studying organizational judgment is that it's hard to find the evidence to distinguish good practice from bad. Failure is an orphan, says the proverb, while success has many parents. When one wants to investigate bad judgment, in a systematic rather than individualistic way, one has to search pretty hard to find a live example. It is much easier to say, “Well, the former CEO was a fool” than “We really need to look at how our own judgment capabilities failed us.”

And certainly, given the lack of widespread vocabulary and frameworks about the subject, it is hard to find organizations who can talk about their judgment capabilities and how they are developed. Enterprises and teams that exercise good judgment usually “just do it”—either by unconsciously following a tradition, or by taking conscious actions but not using the language of judgment in their deliberations.

Our hope is that this book will begin to lower these hurdles. It will not be the last word on organizational judgment, we hope. (In fact, it cannot even claim to be the first. For those who know James March's work, it is not surprising that he has already ventured into this territory. The models of organizational decision making he has developed are true syntheses of decision modeling and humanistic common sense.) Rather, in telling the stories of judgment calls that worked out, and the capabilities that made them routine rather than extraordinary events, we hope to introduce many others to a new field for study, full of concepts and practices that are not taught today, but are powerfully needed.