Sydney Finkelstein couldn’t agree more with Helfat’s opinion on the importance of managerial thinking. For one reason or another, he’s always been interested in why people do what they do—the psychology of decision-making. He’s also always been drawn to the world-changers, the heads of corporations and governments, whose decisions, good or bad, have significant consequences. When you combine these interests you get a people-centric view of an environment where organizations tend to cloud agency. “Companies don’t decide anything,” he said. “People decide to do or not to do.” All of his teaching, all of his research, is based on that insight: the critical role of people in leading organizations.
Finkelstein, the Steven Roth Professor of Management and associate dean for Tuck Executive Education, started his academic career with traditional research for peer-reviewed journals on topics such as executive compensation, top management team tenure, corporate governance, and the role of the CEO in a firm’s success. About 15 years ago, he felt the desire to speak to a much bigger audience and to take on messier questions, such as why people do stupid things and why organizations fail. For these questions Finkelstein had no hypothesis. It was inductive research, which involved interviewing many people, collecting loads of data, then trying to find the patterns and tell the story. “It’s hard to do, but it’s the most fun,” he said.
The first product of that new method was the 2003 best-selling book “Why Smart Executives Fail,” the most in-depth investigation to-date on the phenomenon of corporate failure and managerial mistakes. Through 51 corporate case studies, Finkelstein found that all corporate failures fit into four categories: new business breakdowns, choosing not to cope with change, misguided mergers and acquisitions, and new competitive threats. Six years later, Finkelstein followed up that book with “Think Again” (co-authored by Jo Whitehead and Andrew Campbell), which used research from neuroscience, cognitive psychology, and management to take a closer look at managerial decision-making. They discovered that bad decisions have two parents: a judgment error by someone in power, and the failure of others to identify the error and correct it before it’s too late. These flaws, in turn, were traced back to cognitive biases that trick our brains into making false judgments, and the lack of a system to help executives slow down and think through complex decisions. “We’re funny,” Finkelstein said. “We don’t like to be criticized, we procrastinate, we don’t want to try new things. These human tendencies can get you into a lot of trouble when you’re a CEO.”
Finkelstein brings these lessons into his classrooms—he teaches the core course Analysis for General Managers, and the elective Strategic Leadership, and serves as faculty director for the Tuck Executive Program—and gives students the opportunity to put themselves in the position of a CEO making a decision. “We focus a lot on diversity and self-awareness,” he said. “Are you ignoring an emotional bias? Do you have a diverse team that deliberates and makes careful decisions?”
If strategy comes from people, and not amalgams known as corporations, then it makes sense that a firm’s longevity is based on finding and training the right leaders. This topic—talent development— is the subject of Finkelstein’s next book, which will be published later next year. He’s not saying much about it yet, but expect the same hard-won insights from Finkelstein’s previous books, and the opportunity to assess whether your boss is really interested in developing your career.
Learn from Associate Dean Sydney Finkelstein in these upcoming Executive Education Programs on Strategy
Read the entire series!
Part 1 - Tuck Strategists: The history of “strategy”
Part 2 - Vijay Govindarajan
Part 3 - Richard D'Aveni
Part 4 - Constance Helfat
Part 5 - Sydney Finkelstein
Part 6 - Giovanni Gavetti
Part 7 - Ron Adner
Part 8 - Andrew King
Article originally published on Tuck.edu, December 12, 2014.
Key Lessons for Leaders in Managing Crisis and Change: In Conversation with Sydney Finkelstein