Professional Documents
Culture Documents
Five Fifty Decision Making
Five Fifty Decision Making
IN THIS EDITION:
McKinsey Quarterly
1 The case for behavioral strategy
18 Untangling your organization’s decision making
30 A case study in combating bias
The case
for behavioral
strategy
Dan Lovallo and Olivier Sibony
2
its power.1
1
mckinsey.com/quarterly
and Dan P. Lovallo and Olivier Sibony, “Distortions and deceptions in strategic decisions,”
mckinsey.com/quarterly, February 2006.
2
See “Flaws in strategic decision making: McKinsey Global Survey Results,”
mckinsey.com/quarterly, January 2009.
3
See Dan Lovallo, Patrick Viguerie, Robert Uhlaner, and John Horn, “Deals without
delusions,” Harvard Business Review, December 2007, Volume 85, Number 12, pp. 92–99.
4
See John T. Horn, Dan P. Lovallo, and S. Patrick Viguerie, “Beating the odds in market
entry,” mckinsey.com/quarterly, November 2005.
5
See Bent Flyvbjerg, Dan Lovallo, and Massimo Garbuio, “Delusion and deception in large
infrastructure projects,” California Management Review, 2009, Volume 52, Number 1,
pp. 170–93.
Behavioral strategy print exhibits
Exhibit 1 of 2
Glance: The research analyzed a variety of decisions in areas that included
investments in new
Theproducts, M&A, strategy
case for behavioral and capital expenditures. 4
What we did
1,048
Number of decisions analyzed
76%
Share of decisions related to M&A,
organizational change, or expansion
into new geographies, products,
and services
51%
Proportion of decisions that
could be attributed to a single,
specific business function
(sales, R&D, marketing,
manufacturing, or supply
chain/distribution)
Process,
Share analysis,
of performance and by
explained industry variables
given element explain
Process,
decision-making
(based analysis,
on multivariate and industry
effectiveness
regression analysis), % variables explain
decision-making effectiveness
Share of performance explained by givenQuantity element and detail of analysis
(based
Share on of multivariate
performance regression
explainedanalysis), %
by given performed—eg,
element detailed financial
(based on multivariate regression analysis), % modeling, sensitivity analysis, analysis of
financial reaction of markets
Quantity and detail of analysis
performed—eg,
Quantity detailed
and detail financial
of analysis
8
modeling, sensitivity analysis, analysis of
performed—eg, detailed financial
financial
modeling,reaction of markets
sensitivity analysis, analysisofofprocess to exploit
Quality
financial reaction of marketsanalysis and reach decision—eg,
Industry/company variables—eg, 8 explicit exploration of major uncertainties,
number of investment opportunities, 8 53
39 inclusion of perspectives that contradict
capital availability, predictability of Quality of process
senior leader’s point of to exploit
view, allowing
consumer tastes, availability of resources analysisofand
Quality reach to
process decision—eg,
exploit
Industry/company variables—eg, participation in discussion by skill and
to implement decision explicit
analysis exploration
and of major
reach uncertainties,
decision—eg,
number of investment opportunities, experience rather than by rank
Industry/company variables—eg, 53 inclusion of perspectives thatuncertainties,
contradict
capital availability, predictability of 39 explicit exploration of major
number of investment opportunities, 53 senior leader’s point of view, allowing
consumer tastes, availability of resources 39 inclusion of perspectives that contradict
capital availability, predictability of participation in point
discussion byallowing
skill and
to implement decision senior leader’s of view,
consumer tastes, availability of resources experience
participationrather than by rank
in discussion by skill and
to implement decision
experience rather than by rank
Quantity
Quality ofand detailto
process ofexploit
analysis performed
5.3 6.9
and reach decision
Quality of process to exploit
we used and
analysis regression analysis to calculate how much of the variance 6.9
reach decision
in decision outcomes
Quantity and detail of
analysis
5.3
Quantity performed
and detail of
analysis performed
5.3
of people to believe that when their companies are successful or a decision turns out well,
mckinsey.com/quarterly,
the halo effect by asking respondents to focus on a typical decision process in their
how much by the quantity and detail of the analysis. The answer:
process mattered more than analysis—by a factor of six. This
finding does not mean that analysis is unimportant, as a closer look
at the data reveals: almost no decisions in our sample made
through a very strong process were backed by very poor analysis.
Why? Because one of the things an unbiased decision-making process
will do is ferret out poor analysis. The reverse is not true; superb
analysis is useless unless the decision process gives it a fair hearing.
8
This analysis covers the subset of 673 (out of all 1,048) decisions for which ROI data
were available.
7 March 2010
9
Caroline E. Preston and Stanley Harris, “Psychology of drivers in traffic accidents,”
Journal of Applied Psychology, 1965, Volume 49, Number 4, pp. 284–88.
The case for behavioral strategy 8
10
For more on misleading experiences, see Sydney Finkelstein, Jo Whitehead, and Andrew
Campbell, Think Again: Why Good Leaders Make Bad Decisions and How to Keep It from
Happening to You, Boston: Harvard Business Press, 2008.
11
WebTV is now MSN TV.
9 March 2010
12
Thomas E. Ricks, Fiasco: The American Military Adventure in Iraq, New York: Penguin
Press, 2006, pp. 393–94.
The case for behavioral strategy 10
13
See John T. Horn, Dan P. Lovallo, and S. Patrick Viguerie, “Learning to let go: Making
better exit decisions,” mckinsey.com/quarterly, May 2006.
14
For more on reviewing the growth opportunities available across different micromarkets
ranging in size from $50 million to $200 million, rather than across business units
as a whole, see Mehrdad Baghai, Sven Smit, and Patrick Viguerie, “Is your growth strategy
Harvard Business Review, May 2009, Volume 87, Number 5, pp. 86–96.
11 March 2010
for individual managers to change the terms of the debate to make their
preferred actions seem more attractive. Similarly, populating
meetings or teams with participants whose interests clash can reduce
the likelihood that one set of interests will undermine thoughtful
decision making.
15
The Asch conformity experiments, conducted during the 1950s, are a classic example
of this dynamic. In the experiments, individuals gave clearly incorrect answers to
simple questions after confederates of the experimenter gave the same incorrect answers
aloud. See Solomon E. Asch, “Opinions and social pressure,” 1955,
Volume 193, Number 5, pp. 31–35.
The case for behavioral strategy 12
Most crucially, debate calls for senior leaders who genuinely believe
in the collective intelligence of a high-caliber management team. Such
executives see themselves serving not only as the ultimate decision
makers but also as the orchestrators of disciplined decision processes.
They shape management teams with the humility to encourage
If, as you read these lines, you have already thought of three reasons
these techniques won’t work in your own company’s culture, you
are probably right. The question is which ones will. Adopting behavioral
strategy means not only embracing the broad principles set forth
above but also selecting and tailoring specific debiasing practices to
turn the principles into action.
The case for behavioral strategy 14
4Embed
By embedding these practices in formal corporate operating procedures
(such as capital-investment approval processes or R&D reviews),
executives can ensure that such techniques are used with some regularity
and not just when the ultimate decision maker feels unusually
practices in uncertain about which call to make. One reason it’s important to embed
formal these practices in recurring procedures is that everything we know
processes
about the tendency toward overconfidence suggests that it is unwise to
rely on one’s instincts to decide when to rely on one’s instincts!
Another is that good decision making requires practice as a management
team: without regular opportunities, the team will agree in principle
on the techniques it should use but lack the experience (and the mutual
trust) to use them effectively.
Action-oriented biases
drive us to take action less thoughtfully than we should.
Interest biases
arise in the presence of conflicting incentives, including nonmonetary
and even purely emotional ones.
1
Sydney Finkelstein, Jo Whitehead, and Andrew Campbell, Think Again: Why Good
Leaders Make Bad Decisions and How to Keep It fromHappening to You, Boston: Harvard
Business Press, 2008.
Pattern-recognition biases
lead us to recognize patterns even where there are none.
Stability biases
create a tendency toward inertia in the presence of uncertainty.
Social biases
arise from the preference for harmony over conflict.
Untangling your
organization’s
decision making
Any organization can improve the speed and quality of its decisions
by paying more attention to what it’s deciding.
It’s the best and worst of times for decision makers. Swelling stockpiles
of data, advanced analytics, and intelligent algorithms are providing
organizations with powerful new inputs and methods for making all manner
of decisions. Corporate leaders also are much more aware today than
they were 20 years ago of the cognitive biases—anchoring, loss aversion,
confirmation bias, and many more—that undermine decision making without
our knowing it. Some have already created formal processes—checklists,
devil’s advocates, competing analytic teams, and the like—to shake up the
debate and create healthier decision-making dynamics.
Now for the bad news. In many large global companies, growing
organizational complexity, anchored in strong product, functional, and
regional axes, has clouded accountabilities. That means leaders are less
able to delegate decisions cleanly, and the number of decision makers has
risen. The reduced cost of communications brought on by the digital age has
compounded matters by bringing more people into the flow via email, Slack,
and internal knowledge-sharing platforms, without clarifying decision-
making authority. The result is too many meetings and email threads with
too little high-quality dialogue as executives ricochet between boredom and
disengagement, paralysis, and anxiety (Exhibit 1). All this is a recipe for poor
decisions: 72 percent of senior-executive respondents to a McKinsey survey
said they thought bad strategic decisions either were about as frequent as good
ones or were the prevailing norm in their organization.
18
QWeb 2017
Decision making
Exhibit 1 of 7
Exhibit 1
1
ee Wouter Aghina, Aaron De Smet, and Kirsten Weerda, “Agility: It rhymes with stability,” McKinsey Quarterly,
S
December 2015, McKinsey.com.
19
QWeb 2017
Decision making
Exhibit 2 of 7
Exhibit 2
Level of familiarity
•D
elegated decisions. These frequent and low-risk decisions are effectively
handled by an individual or working team, with limited input from others.
20
organization. For example, what might be a delegated decision for the
enterprise as a whole could be a big-bet decision for an individual business
unit. Regardless, any fundamental change in decision-making culture needs
to involve the senior leaders in the organization or business unit. The top
team will decide what decisions are big bets, where to appoint process leaders
for cross-cutting decisions, and to whom to delegate. Senior executives also
serve the critical functions of role-modeling a culture of collaboration and of
making sure junior leaders take ownership of the delegated decisions.
BIG BETS
Bet-the-company decisions—from major acquisitions to game-changing
capital investments—are inherently the most risky. Efforts to mitigate the
impact of cognitive biases on decision making have, rightly, often focused
on big bets. And that’s not the only special attention big bets need. In our
experience, steps such as these are invaluable for big bets:
• Break things down, and connect them up. Large, complex decisions often
have multiple parts; you should explicitly break them down into bite-size
chunks, with decision meetings at each stage. Big bets also frequently
have interdependencies with other decisions. To avoid unintended
consequences, step back to connect the dots.
21
An example of a company that does much of this really well is a
semiconductor company that believes so much in the importance of getting
big bets right that it built a whole management system around decision
making. The company never has more than one person accountable for
decisions, and it has a standard set of facts that need to be brought into
any meeting where a decision is to be made (such as a problem statement,
recommendation, net present value, risks, and alternatives). If this
information isn’t provided, then a discussion is not even entertained. The
CEO leads by example, and to date, the company has a very good track record
of investment performance and industry-changing moves.
It’s also important to develop tracking and feedback mechanisms to judge the
success of decisions and, as needed, to course correct for both the decision
and the decision-making process. One technique a regional energy provider
uses is to create a one-page self-evaluation tool that allows each member of
the team to assess how effectively decisions are being made and how well
the team is adhering to its norms. Members of key decision-making bodies
complete such evaluations at regular intervals (after every fifth or tenth
meeting). Decision makers also agree, before leaving a meeting where a
decision has been made, how they will track project success, and they set a
follow-up date to review progress against expectations.
Big-bet decisions often are easy to recognize, but not always (Exhibit 3).
Sometimes a series of decisions that might appear small in isolation
represent a big bet when taken as a whole. A global technology company we
know missed several opportunities that it could have seized through big-bet
investments, because it was making technology-development decisions
independently across each of its product lines, which reduced its ability to
recognize far-reaching shifts in the industry. The solution can be as simple
as a mechanism for periodically categorizing important decisions that are
being made across the organization, looking for patterns, and then deciding
whether it’s worthwhile to convene a big-bet-style process with executive
sponsorship. None of this is possible, though, if companies aren’t in the habit
of isolating major bets and paying them special attention.
CROSS-CUTTING DECISIONS
Far more frequent than big-bet decisions are cross-cutting ones—think
pricing, sales, and operations planning processes or new-product launches—
that demand input from a wide range of constituents. Collaborative efforts
such as these are not actually single-point decisions, but instead comprise
a series of decisions made over time by different groups as part of an end-
to-end process. The challenge is not the decisions themselves but rather
22
QWeb 2017
Decision making
Exhibit 3 of 7
Exhibit 3
A belated heads-up means you are not recognizing big bets.
Symptoms Example
Senior leaders are surprised when Wealth-management company where
they hear about the decision business-unit leaders made significant,
independent commitments of capital
Decision has big implications for the
in M&A decisions, constraining options
organization, but some relevant senior
for rest of business
leaders are not in the room
It’s easy to err by having too little or too much choreography. For an example
of the former, consider the global pension fund that found itself in a major
cash crunch because of uncoordinated decision making and limited
transparency across its various business units. A perfect storm erupted when
different business units’ decisions simultaneously increased the demand for
cash while reducing its supply. In contrast, a specialty-chemicals company
experienced the pain of excess choreography when it opened membership
on each of its six governance committees to all senior leaders without
clarifying the actual decision makers. All participants felt they had a right
(and the need) to express an opinion on everything, even where they had
little knowledge or expertise. The purpose of the meetings morphed into
information sharing and unstructured debate, which stymied productive
action (Exhibit 4).
23
QWeb 2017
Decision making
Exhibit 4 of 7
Exhibit 4
Too many cooks get involved in the absence of processes
for cross-cutting decisions.
Symptoms Example
Decisions have major implications for parts Specialty-chemicals company where
of business whose stakeholders aren’t every R&D stage-gate decision went
involved, resulting in poor decisions to executive team for review, though
the team lacked the expertise to make
Important decisions get slowed down by
a reasoned call
largely unnecessary committee meetings
and approvals
•Map out the decision-making process, and then pressure-test it. Identify
decisions that involve a cross-cutting group of leaders, and work with
the stakeholders of each to agree on what the main steps in the process
entail. Lay out a simple, plain-English playbook for the process to define
the calendar, cadence, handoffs, and decisions. Too often, companies find
themselves building complex process diagrams that are rarely read or used
beyond the team that created them. Keep it simple.
•Run water through the pipes. Then work through a set of real-life scenarios
to pressure-test the system in collaboration with the people who will
be running the process. We call this process “running water through
the pipes,” because the first several times you do it, you will find where
the “leaks” are. Then you can improve the process, train people to work
24
within (and, when necessary, around) it, and confront, when the stakes are
relatively low, leadership tensions or stresses in organizational dynamics.
Symptoms Example
Decisions create value for 1 part of Financial company where 1 business
business at the expense of others or unit changed its product without
the entire enterprise considering impact on profit and
loss for other product business units
Executives feel they don’t know the
organization-wide strategy or what
different parts of business are doing
25
making. Product launches often cannibalized the products of other market
groups. When the revenue shifts associated with one such decision caught
the attention of senior management, company leaders formalized a new
council for senior executives to come together and make several types of
cross-cutting decisions, which yielded significant benefits.
DELEGATED DECISIONS
Delegated decisions are far narrower in scope than big-bet decisions or cross-
cutting ones. They are frequent and relatively routine elements of day-to-day
management, typically in areas such as hiring, marketing, and purchasing.
The value at stake for delegated decisions is in the multiplier effect they can
have because of the frequency of their occurrence across the organization.
Placing the responsibility for these decisions in the hands of those closest
to the work typically delivers faster, better, and more efficiently executed
decisions, while also enhancing engagement and accountability at all levels
of the organization.
In today’s world, there is the added complexity that many decisions (or
parts of them) can be “delegated” to smart algorithms enabled by artificial
intelligence. Identifying the parts of your decisions that can be entrusted to
intelligent machines will speed up decisions and create greater consistency
and transparency, but it requires setting clear thresholds for when those
systems should escalate to a person, as well as being clear with people about
how to leverage the tools effectively.
26
QWeb 2017
Decision making
Exhibit 6 of 7
Exhibit 6
Drawn-out and complicated processes often mean more
delegating is needed.
Symptoms Example
Decisions that should be quick Energy company where changes to
seem to take forever and involve HR or finance policies were governed
more alignment than needed by executive committee instead of
delegated to head of HR or CFO
Decisions become unnecessarily
complex because of efforts to
incorporate all stakeholder input
27
• Establish a clear escalation path. Set thresholds for decisions that require
approval (for example, spending above a certain amount), and lay out a
specific protocol for the rare occasion when a decision must be kicked up
the ladder. This helps mitigate risk and keeps things moving briskly.
• Don’t let people abdicate. One of the key challenges in delegating decisions
is actually getting people to take ownership of the decisions. People will
often succumb to escalating decisions to avoid personal risk; leaders
need to play a strong role in encouraging personal ownership, even (and
especially) when a bad call is made.
Symptoms Example
Senior executives (want to) control High-tech company that required CEO
decisions that should rightfully be to sign off on all new hires at any level of
made lower in the organization the organization
Escalation of decisions to top of
organization is common
What skills and capabilities are needed “I can’t make a decision on my own,
to make this decision? because that’s not how we do things here”
28
went because the organization was too slow to act, the CEO decided she had
to decentralize decisions again. This time, she reinforced the decentralized
system with greater leadership accountability and transparency.
Instead of pulling back decision power after a slipup, hold people accountable
for the decision, and coach them to avoid repeating the misstep. Similarly,
in all but the rarest of cases, leaders should resist weighing in on a decision
kicked up to them during a logjam. From the start, senior leaders should
collectively agree on escalation protocols and stick with them to create
consistency throughout the organization. This means, when necessary, that
leaders must vigilantly reinforce the structure by sending decisions back
with clear guidance on where the leader expects the decision to be made
and by whom. If signs of congestion or dysfunction appear, leaders should
reexamine the decision-making structure to make sure alignment, processes,
and accountability are optimally arranged.
None of this is rocket science. Indeed, the first decision-making step Peter
Drucker advanced in “The effective decision,” a 1967 Harvard Business
Review article, was “classifying the problem.” Yet we’re struck, again and
again, by how few large organizations have simple systems in place to make
sure decisions are categorized so that they can be made by the right people
in the right way at the right time. Interestingly, Drucker’s classification
system focused on how generic or exceptional the problem was, as opposed
to questions about the decision’s magnitude, potential for delegation, or
cross-cutting nature. That’s not because Drucker was blind to these issues;
in other writing, he strongly advocated decentralizing and delegating
decision making to the degree possible. We’d argue, though, that today’s
organizational complexity and rapid-fire digital communications have
created considerably more ambiguity about decision-making authority than
was prevalent 50 years ago. Organizations haven’t kept up. That’s why the
path to better decision making need not be long and complicated. It’s simply a
matter of untangling the crossed web of accountability, one decision at a time.
29
May 2017
The Quarterly: Tell us a bit about the circumstances that motivated RWE’s
management to undertake a broad debiasing operation.
Bernhard Günther: In the second half of the last decade, we spent more
than €10 billion on big capital-expenditure programs and acquisitions in
conventional power plants. In the business cases underlying these decisions,
we were betting on the assumptions of ever-rising commodity prices, ever-
rising power prices. We were not alone in our industry in hitting a kind of
investment peak at that time. What we and most other peers totally under-
estimated was the turnaround in public sentiment toward conventional power
generation—for example, the green transformation of the German energy
system, and the technological progress in renewable generation and related
production costs. These factors went in a completely opposite direction
compared to our scenarios.
Bernhard Günther: Actually, it was the supervisory board asking, “Where has
the shareholders’ money gone?” and we in the executive board wanted to learn
our lessons from this experience as well. So we embarked on a postmortem
analysis to understand what went wrong and why, by looking at a sample of
these €10 billion investments. We asked ourselves, “Is there anything we could
30
have done differently, and if so, how can we learn from this in the future?”
The spirit of it was not about shaming and blaming, but about learning from
our own mistakes.
The Quarterly: What were the main contributing factors that you identified in
your investigation?
We also saw champion and sunflower biases, which are about hierarchical
patterns and vertical power distance. Depending on the way you organize
decision processes, when the boss speaks up first, the likelihood that
anybody who’s not the boss will speak up with a dissenting opinion is much
lower than if you, for example, have a conscious rule that the bigwigs in
the hierarchy are the ones to speak up last, and you listen to all the other
evidence before their opinion is offered.
31
And we certainly overestimated our own abilities to deliver, due to a good
dose of action-oriented biases like overconfidence and excessive optimism.
Our industry, like many other capital-intensive ones, has had boom and
bust cycles in investments. We embarked on a huge investment program
with a whole generation of managers who hadn’t built a single power plant
in their professional lives; there were just a few people left who could really
remember how big investments were done. So we did something that the
industry, by and large, hadn’t been doing on a large scale for 20 years.
The Quarterly: On the sunflower bias, how far down in the organization do you
think that went? Were people having a hard time getting past their superiors’
views just on the executive level, or all the way down?
The Quarterly: So, what kind of countermeasures did you put in place to tackle
these cultural issues?
32
So, for example, when making big decisions, we now appoint a devil’s
advocate—someone who has no personal stake in the decision and is senior
enough in the hierarchy to be as independent as possible, usually a level
below the executive board. And nobody blames the devil’s advocate for
making the negative case because it’s not necessary for them to be
personally convinced; it’s about making the strongest case possible. People
see that constructive tension brings us further than universal consent.
Bernhard Günther: There were two areas of focus. First, over a period of
two years, we sent the top 300 of our company’s management to a two-week
course, which we had self-assembled with external experts. The main
thrust of this program was self-awareness: being more open to dissent, more
open to a certain amount of controlled risk taking, more agile, as with rapid
prototyping, and so forth.
RAPID REFLECTIONS
FROM BERNHARD GÜNTHER
1 ADVICE
IN YOUR EXPERIENCE, WHAT PIECE OF COMMON LEADERSHIP
IS WRONG OR MISLEADING?
People development based on weaknesses—or gaps versus “ideal candidate”
profile—instead of building on strengths
33
Then we also launched a training program for managers and experts,
especially those involved in project work—for example, the financial
controllers that have to run the models for big investment decisions. This was
a combination of a training course, some desktop training you could do on
your own, and some distributed materials.
The Quarterly: Could you tell us about an example or two where you made a
different decision as the result of debiasing practice, where it went the other way
from what you initially thought was the right answer?
The internal team came up with the kind of solution that I think everybody
was initially leaning toward, which was more incremental. And the external
team came up with a more disruptive solution. But because it was consciously
pitched as an independent view, everybody on the board took their time
to seriously consider it with an open mind. It planted the seedling of the
strategy that we adopted to split the company into two parts, which now,
34
a good year later, has successfully concluded with the IPO of Innogy. If we
hadn’t taken this approach, maybe months later or years later, somebody
would have come up with a similar idea, but it wouldn’t have happened that
fast, with that kind of momentum.
We had the project team make the case first in the board meeting. Then we
had the devil’s advocate put forward analysis of the risk–return trade-offs.
All of this was in written form, so everybody had to read it before the meeting.
This certainly helped our discussion a lot and made it much easier to have a
nonemotional debate around the critical issues. And we came out of it with a
different and I think better decision than we would have if we had just taken
the proposal of our internal project team at face value.
The Quarterly: Now that these decision-making changes have taken hold, how
do you see things running differently in the organization?
Bernhard Günther: Looking back at where we were three or four years ago,
I’d say that this practice of awareness and debiasing has now become almost
a part of our corporate decision-making DNA. But it’s something you have
to constantly force yourself to practice again and again, because everyone at
some point asks, “Do we really need to do it? Can’t we just decide?” It’s a very
time-intensive process, which should be utilized only for the most important
decisions of strategic relevance. About 30 percent of our board’s decisions
fall into this category—for example, major resource-allocation decisions—
and it’s similar elsewhere in the company.
Also, people’s general awareness of the complex set of issues around cognitive
biases has grown dramatically. Before this, things easily degenerated into
blaming exercises going both ways. The naysayers were critiquing the others
for wanting to push their pet projects. And the people promoting these
projects were saying that the naysayers were just narrow-minded financial
controllers who were destroying the company by eternally killing good
business ideas. But now there’s more mutual respect for these different
roles that are needed to ultimately come up with as good a decision outcome
as possible. It’s not just about debiasing; it’s given us a common language.
35
It’s now routine for somebody to say in a meeting, “I think we need some
debiasing here.” And then everybody can agree to this without any need to
get emotional. When in doubt, we just go through the process.
The Quarterly: Do you have any recommendations for other senior leaders who
might be reading this interview?
Bernhard Günther: I think when you read about these issues, it can seem a
bit esoteric. You might say, “Well, maybe it’s just their problem, but not mine.”
I think everyone should just do it; just start with it even on a pilot basis. You
don’t have to start rolling it out across 1,000 people. You can start with your
own board, with a few test examples, and see if you think it helps you. But if
you do it, you have to do it right; you have to be serious about it. Looking back,
there were a few key success factors for us. For one, top management has to
set an example. That’s true of any kind of change, not just debiasing. If it’s not
modeled at the very top, it’s unlikely to happen further down the hierarchy.
Second, everyone has to be open to these ideas or it can be difficult to really
make progress. At first glance, many of the tools might seem trivial to some,
but we found them to have a very profound effect.
Bernhard Günther joined RWE in 1999 and served as the company’s chief financial officer
from 2013 until the 2016 spin-off and IPO of Innogy, where he is now CFO. This interview was
conducted by Sven Heiligtag, a partner in McKinsey’s Hamburg office, and Allen Webb,
McKinsey Quarterly’s editor in chief, who is based in the Seattle office.
36
GET YOUR WEEKLY DOSE OF SMART
Sign up for weekly email insights
from the Five Fifty
Subscribe
Or go to:
mckinsey.com/Quarterly/The-Five-Fifty