If intuition is the muse in CEO decision-making, does it make for better decisions?
That's the subject of an article by Dr. Modesto Maidique appearing on the Harvard Business Review Blog Network. Dr. Maidique, President Emeritus of Florida International University (FIU) and Executive Director of FIU's Center for Leadership, also serves as a visiting professor at Harvard University.
First, Dr. Maidique shares with readers how top CEOs often cite "I trust my gut" as a key part of the decision-making process. For instance, Carnival CEO Micky Arison told Dr. Maidique that he used intuition to make the most important decision of his career: the $5.45 B acquisition of Princess Cruises.
As Dr. Maidique was interviewing twenty leading CEOs about two major decisions in their careers -- one that turned out well and one that did not -- in virtually every case, the CEOs said they mostly relied on "gut feel" or "intuition" to make those decisions.
Does intuition, then, make for better decisions? As Dr. Maidique asks readers to contemplate this question, he also offers that expert, or domain, knowledge is also a key factor in the decision-making process of CEOs. When asked to estimate how knowledgeable they were in the area in which they had made the decisions, not surprisingly, CEO success rate was several times higher for decisions made in the fields where they had expert knowledge.
It turns out, then, that it is not simply a question of whether a decision-maker should trust his or her "gut" or not. It depends, and experience is one differentiator.
Dr. Maidique gives examples:
- Arison and his extensive knowledge of the cruise industry
- Micron CEO Steve Appleton acquiring the Texas Instruments' memory division
- Ray Stata's decision to fund Analog Devices Semiconductor
In each of these cases, intuition worked. All three were experts in their field; all three decisions were wildly successful.
Yet Dr. Maidique describes how each leader had failures early in their careers, when intuition failed them and they were also outside their expertise zone.
Successful and consistent deployment of intuition, however, requires more than just domain knowledge, Dr. Maidique tells the HBR Blog Network readers. It also requires deep introspection, "an intense journey into yourself." His description of a $200 billion blunder that Warren Buffett made early in his career illustrates the point.
CONCLUSION: Dr. Maidique concludes his writing by telling readers that the effectiveness of intuition, then, is relative. The "sweet spot" for business decisions, he adds, is when both domain knowledge and self knowledge are high.
His full article can be found at Harvard Business Review