Avoid Making Bad Decisions During Change: Leader’s Guide

Avoid Making Bad Decisions
Decision-making can make or break a company, a project, and a career. While few bad decisions lead to dramatic, headline-worthy disasters, many create a cascade of costly and avoidable problems.

Poor decisions are especially damaging when they involve organizational change. Change initiatives are inherently complex, and flawed judgment can:

• Send the organization in the wrong direction.
• Erode trust.
• Stall change momentum.
• Decrease performance.

Managing change is difficult enough — don’t make it harder by compounding uncertainty with poor decision-making.

Emotional Bias, Decisions, and Risk
Despite our preference to believe otherwise, we know from postmortem analysis and strategic decision making simulation data that decisions are rarely made with pure rationality. Decision-makers are human, and research in decision making training consistently shows that emotional biases influence judgment. Decision-making is inherently messy — yet it remains one of the most critical skills for business leaders.

The larger the decision, particularly those tied to major change, the greater the risk when judgment is flawed.

The opportunity for leaders lies in awareness. By recognizing the emotions and biases that interfere with sound judgment and well-managed change, leaders can anticipate their influence, account for them more effectively, and reduce the likelihood of costly mistakes.

Three Feelings to Pay Attention to Avoid Making Bad Decisions

Drawing on more than three decades of change management consulting, we’ve identified three emotions that commonly shape how leaders make decisions during change — and the unintended consequences that often follow.

1. Beware of the Bias of Overconfidence
   Leadership simulation assessment data reveals that most of us like to believe we are more capable, informed, and accurate than we actually are. In business, that tendency often shows up as unrealistic — and sometimes reckless — optimism.

   A classic example is the Time Warner–AOL merger. Confident in the deal’s structure, Time Warner’s leadership chose not to include protections that would have allowed them to revisit the terms if AOL’s stock price fell below a certain threshold. Shortly after the merger, AOL shares dropped by 50 percent. Time Warner had no meaningful recourse.

   Overconfidence bias reflects the gap between what people truly know and what they believe they know. Research shows that experts are often more vulnerable than novices — not because they predict outcomes more accurately, but because they express their predictions with greater certainty. In high-stakes decisions, that misplaced confidence can dramatically increase risk.

2. Avoid the Bias of Motivated Reasoning
   Motivated reasoning, also known as confirmation bias, is the tendency to interpret or seek out information in ways that reinforce preexisting beliefs. It causes decision-makers to overvalue evidence that supports their hypotheses while dismissing or downplaying evidence that challenges them.

   A striking example is General Motors’ failure to recognize the growing market for smaller cars. Confident in the success of their large models, leadership clung to the belief that past performance would continue, despite clear signals to the contrary. This flawed decision-making culture contributed to GM’s bankruptcy in 2009.

   Could this outcome have been avoided if GM had confronted — rather than ignored — evidence that challenged its assumptions? The lesson is clear: objective, open-minded evaluation of information and constructive debate are critical to avoiding costly decision missteps.

3. Be Aware of Faulty Framing and Anchoring Biases
   Framing bias occurs when people respond differently to the same choice depending on how it is presented. Typically, individuals avoid risk when options are framed positively but pursue risk when framed negatively.

   Anchoring bias arises when decision-makers rely too heavily on the first piece of information offered, allowing it to unduly influence subsequent judgments.  Good decisions require good information — but even accurate information can mislead if it is poorly framed or anchored to the wrong reference point.

   Consider sales negotiations: the initial price often sets the anchor, making subsequent offers seem reasonable even if they exceed the actual value of the product or service.

   Classic business examples include the London executive at Decca Records who rejected the Beatles, framing his decision on the belief that “groups were out,” and Coca-Cola’s launch of New Coke, where taste tests failed to account for whether consumers actually wanted to replace the original. In both cases, the wrong reference points led to flawed decisions.

   Awareness of framing and anchoring biases helps leaders evaluate information more objectively and avoid decisions based on misleading perspectives.

Three Steps to Improve Your Decision-Making

1. Follow a Proven Process
   Leverage strategic decision-making training and a structured process to avoid jumping to conclusions without careful evaluation.
2. Seek Diverse Perspectives
   Invite colleagues to challenge your assumptions, highlight cognitive biases, and offer alternative viewpoints.
3. Mitigate Common Biases
   Minimize overconfidence, motivated reasoning, and faulty framing so that your decisions and proposed changes consistently advance the organization toward a healthy, sustainable future.

The Bottom Line
To avoid making bad decisions during change, be deliberate in how you structure communications and initiatives — people naturally anchor to the information you present, whether intended or not. At the same time, remain vigilant of emotional biases and account for them as you make decisions and plan for organizational change.

To learn more about managing organizational change, please download Top 5 Science-Backed Perspectives of Change Leadership Not to be Ignored

by Tristam Brown: CEO

Tristam Brown is an executive business consultant and organizational development expert with more than three decades of experience helping organizations accelerate performance, build high-impact teams, and turn strategy into execution. As CEO of LSA Global, he works with leaders to get and stay aligned™ through research-backed strategy, culture, and talent solutions that produce measurable, business-critical results. See full bio.