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Why smart people can make bad business decisions

By Larry J. Bloom

Every organization consists not only of individuals, but a hierarchy of power among those individuals. No matter how noble the group’s goal, there is often a struggle for power beneath the surface.

Companies in the pool and spa industry are facing an ironic problem. Success depends on the quality of everyday decisions made by people in the company. However, people have hardwired flaws in their thinking that are reinforced by a multi-tasking, time-constrained environment. In fact, many companies are doing little to help improve their employees’ quality of thinking and instead, in some cases, are making matters worse.

After more than 30 years in the industry, many as the president and CEO of a water treatment products manufacturer, this author retired and started working on his life goal—understanding why otherwise bright business people (himself included) can unknowingly make bad decisions when they simply should have known better.

Bugs in the thought process

In any business activity there is one component that is not completely understood—the human element. From psychology to cognitive social neuroscience, research points to shortcomings in how people gather and process information and experiences to answer questions, solve problems, determine judgments, and make decisions. Many people are simply unaware of the flaws that plague some of their own resolves.

Pool companies rely on people at all levels who can systematically pursue important goals, recognize and analyze significant problems, communicate essential meanings, and assess their own performance on the job. After all, employee decision-making ultimately impacts revenues, costs, customer loyalty, safety, reputation, and more

Unfortunately, just like computers can have bugs, humans can have flaws in the way they think and make decisions. This author refers to these flawed decisions as mind-bugs. They cause information to get filtered, even in good-faith ways. Left unchecked, they contribute to greater risk and poor performance because they cause important decisions to be based upon flaws in the way information is gathered and processed.

No one is immune

From large pool manufacturers to small retailers, no one is immune to flawed thinking. This is because mind-bugs are a pervasive part of human nature. They are hardwired in the brain and are highly resistant to feedback. Many problems businesses face today are not the result of factors that occur outside of their control, but are rather ‘self-inflicted’ as a result of these mind-bugs.

Over the years as a business executive and industry insider, this author has observed bad decision-making and business failures in the pool and spa industry from a unique vantage point. Problems rarely developed overnight; instead, they were gradual negative changes that ultimately resulted in a serious problem that could have been avoided. The two most common contributors to these problems are:

  1. The leader’s attitude, ability to be objective, and his/her willingness to bring in needed help and share power.
  2. Failure to anticipate or react to competition, technology, or other significant changes in the marketplace.

So, what causes business owners and leaders to convince themselves their thinking is sound when problems exist? Look no further than mind-bugs.

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