Tim Koller, Dan Lovallo
[A premortem is where] at the start of a project, you imagine that the project went wrong and think about what could have caused that result. You put yourself into the future and, in a non-judgmental way, think of all the things that could derail the project. It creates a safe way for people to discuss their concerns without being perceived as criticizing the project. … [ Read more ]
Content: Quotation | Authors: Dan P. Lovallo, Tim Koller | Source: “McKinsey Quarterly” | Subjects: Management, Project Management
J. André de Barros Teixeira, Tim Koller, and Dan Lovallo
Multiple studies have indicated the degree to which business leaders are loath to kill projects. One such study developed by IESE Business School Professor Luis Huete found that companies and individuals that have had a track record of success have a harder time killing projects, because they carry with them an ingrained belief that they can turn everything into gold, so long as everyone works … [ Read more ]
Content: Quotation | Authors: Dan P. Lovallo, J. André de Barros Teixeira, Tim Koller | Source: “McKinsey Quarterly” | Subjects: Management, Organizational Behavior
How To Be Objective About Budgets
Addressing anchoring bias can lead to more accurate budget forecasts, better budget conversations, and more dynamic resource reallocation.
Content: Multimedia Content | Authors: Dan P. Lovallo, Sean Brown, Tim Koller | Source: “McKinsey Quarterly” | Subjects: Finance, Management, Organizational Behavior
How To Take the ‘Outside View’
It may be easier than you think to debias your decisions and make better forecasts by building the “outside view.”
Content: Multimedia Content | Authors: Dan P. Lovallo, Tim Koller | Source: “McKinsey Quarterly” | Subjects: Decision Making, Management, Organizational Behavior
Should Assessing Financial Similarity Be Part of Your Corporate Portfolio Strategy?
Businesses with different financial profiles can tax managers and put performance at risk. When divesting isn’t an option, here’s how to manage the conflicts.
Content: Article | Authors: Dan P. Lovallo, Tim Koller, Zane Williams | Source: “McKinsey Quarterly” | Subjects: Finance, Management, Strategy
Early-Stage Research on Decision-Making Styles
People make decisions—often in very different ways. Learn more about five distinct styles and the preferences that shape them.
Content: Article | Authors: Dan P. Lovallo, Olivier Sibony | Source: “McKinsey Quarterly” | Subjects: Management, Organizational Behavior, Personal Development, Productivity / Work Tips
Taking the Bias Out of Meetings
Managing bias effectively can help lessen the impact it has on your company’s strategy.
Content: Article | Authors: Dan P. Lovallo, Olivier Sibony | Source: “McKinsey Quarterly” | Subjects: Management, Organizational Behavior
Beating the Odds in Market Entry
How to avoid the cognitive biases that undermine market entry decisions.
Content: Article | Authors: Dan P. Lovallo, John T. Horn, S. Patrick Viguerie | Source: “McKinsey Quarterly” | Subjects: Management, Strategy
Re-Anchor Your Next Budget Meeting
Anchoring is the psychological phenomenon that makes a number stick in your mind and influence you — even though you think you’re disregarding it. An anchor is such a powerful influence that only another anchor can overcome it. Re-anchoring combats the anchor of history and convention with another anchor, grounded in a different set of facts.
Content: Article | Authors: Dan P. Lovallo, Olivier Sibony | Source: “Harvard Business Review” | Subject: Management
Overcoming a Bias Against Risk
Risk-averse midlevel managers making routine investment decisions can shift an entire company’s risk profile. An organization-wide stance toward risk can help.
Content: Article | Authors: Dan P. Lovallo, Tim Koller, Zane D. Williams | Source: “McKinsey Quarterly” | Subjects: Finance, Management, Organizational Behavior, Risk Management
Tim Koller, Dan Lovallo, and Zane Williams
Many of the managerial tactics used by companies in their capital-allocation and evaluation processes fail to take note of basic [behavioral biases]. By considering the success or failure of projects in isolation, for example, they fail to understand how each will add risk to the company’s overall portfolio and institutionalize a tendency toward risk aversion, essentially recreating the narrow framing that occurs at the individual … [ Read more ]
Content: Quotation | Authors: Dan P. Lovallo, Tim Koller, Zane D. Williams | Source: “McKinsey Quarterly” | Subject: Risk Management
How to Put Your Money Where Your Strategy Is
Most companies allocate the same resources to the same business units year after year. That makes it difficult to realize strategic goals and undermines performance. Here’s how to overcome inertia.
Content: Article | Authors: Dan P. Lovallo, Reinier Musters, Stephen Hall | Source: “McKinsey Quarterly” | Subjects: Finance, Management, Strategy
The Case for Behavioral Strategy
Left unchecked, subconscious biases will undermine strategic decision making. Here’s how to counter them and improve corporate performance.
Content: Article | Authors: Dan P. Lovallo, Olivier Sibony | Source: “McKinsey Quarterly” | Subjects: Organizational Behavior, Strategy
Distortions and Deceptions in Strategic Decisions
Companies are vulnerable to misconceptions, biases, and plain old lies. But not hopelessly vulnerable.
Content: Article | Authors: Dan P. Lovallo, Olivier Sibony | Source: “McKinsey Quarterly” | Subjects: Organizational Behavior, Strategy
Dan P. Lovallo and Olivier Sibony
Loss aversion wouldn’t have such a large effect on decisions made in times of uncertainty if people viewed each gamble not in isolation but as one of many taken during their own lives or the life of an organization. But executives, like all of us, tend to evaluate every option as a change from a reference point – usually the status quo – not as … [ Read more ]
Content: Quotation | Authors: Dan P. Lovallo, Olivier Sibony | Source: “McKinsey Quarterly” | Subject: Risk Management
Dan P. Lovallo and Olivier Sibony
When companies evaluate strategic decisions, three conditions frequently create agency problems. One is the misalignment of time horizons between individuals and corporations. …Another problem that can generate harmful deceptions is the differing risk profiles of individuals and organizations. …The final agency issue arises from the likelihood that a subordinate knows much more than a superior does about a given issue. Higher-ranking executives must therefore make … [ Read more ]
Content: Quotation | Authors: Dan P. Lovallo, Olivier Sibony | Source: “McKinsey Quarterly” | Subject: Organizational Behavior
Learning to Let Go: Making Better Exit Decisions
Although canceling a project or exiting a business may often be regarded as a sign of failure, such moves are really a perfectly normal part of the creative-destruction process. Companies need to realize that in this way they can free up their resources and improve their ability to embrace new market opportunities.
By neutralizing the psychological biases that make it harder for executives to evaluate struggling … [ Read more ]
Content: Article | Authors: Dan P. Lovallo, John T. Horn, S. Patrick Viguerie | Source: “McKinsey Quarterly” | Subjects: Management, Strategy
Optimism: Don’t Let it Run Away with You
Many M&A decisions may be the result of hubris, say Dan Lovallo and Daniel Kahneman. Heres a technique to help executives avoid the bad kind of optimism.
Content: Article | Authors: Dan P. Lovallo, Daniel Kahneman | Source: “Harvard Business School (HBS) Working Knowledge” | Subjects: Leadership, Management