When Consensus Hurts the Company

Abstract

Management is fundamentally about making decisions. In organizations, key decisions are often made by groups -- boards, senior management teams, finance committees and so on -- rather than by single individuals. Thus, an important role of the person leading a decision-making team is to know how to combine multiple opinions -- in effect, to become a decision manager. We have found that how a decision is made can significantly affect the outcome of that decision. We illustrate these ideas in the context of boards of directors.

Keywords: decision making, omission and commission errors, innovation, reliability

JEL Classification: M10