What does it mean to be smart when making decisions? We usually take that to mean that there is a situation with some goals to fulfill and some constraints and risks to consider, and the decision is one that weighs these factors to give a good chance of fulfilling the main goal and preferably also other goals. Football is a good example. The goal is to win, a sub-goal that helps the goal of winning is to advance the ball by running and passing, and the risks and constraints are that the opposing team can stop runs, prevent pass completion or intercept the pass, sack the quarterback, and so on.
These risks and the associated rewards are why
we enjoy watching football, in addition to the spectacular athletic
performances we see on the offence and defense. We also recognize that football
can be a model of life. Maybe there isn’t an opposing team, but there are
certainly goals and risks. Indeed, business has the same match of goals,
sub-goals, actions that can help accomplish the goals, and risks associated
with each goal.
Research on business firms has produced a
depressing conclusion when it comes to managers and executives pursuing firm
goals. It is not unusual to see them pursue one goal to the exclusion of other
goals, including sub-goals that would help the main goal be accomplished. That
strikes researchers as being slightly less smart behavior than we would like to
see.
What about football? This is where the contrast
gets even bigger. We know that football teams are a bit like organizational
teams. The offensive coordinator calls the play, but the quarterback can modify
the play either before or after receiving the ball when observing the defensive
formation or the offensive and defensive movement. The sub-goal of advancing
the ball to get a first down is prominent, but it is scoring that matters. Can
they do smart tradeoffs between these goals? Absolutely. In a paper published
in Journal of Management Studies, Xavier Sobrepere and Henrich Greve show thatt hey make tradeoffs between these goals that are intelligent and effective for winning the game.
Why, then, do sports teams seem to be smarter
than firms? Maybe it is because they practice their plays a lot and repeat them
over and over again, so they actually have more learning and more experience
embedded. But there is also another explanation. It is hard for researchers to
observe exactly how goals are ranked into main goals and sub-goals in firms,
and it is especially difficult to find goals that have a sequence as natural as
we see in football. First downs come before scoring, scoring comes before
winning. Firms are more interdependent. So, maybe executives are equally smart
and we just have not discovered it yet.
