Good business judgment—how crucial is it?

The underlying skills that contribute to good business judgment can be identified and learned to some degree. The leadership consulting group, DDI, recently pulled together assessments on over 15,000 high-potential leaders and determined 4 common skills on those exhibiting a high level of good business judgment: business savvy, entrepreneurship, establishing strategic direction, and operational decision-making.

But these effective skills are often at the mercy of underlying personality traits, which can either enhance or derail a high-potential leader, especially in a volatile, complex, or uncertain business context. The DDI findings found that those with higher ambition and as well as a higher learning orientation had significantly better business judgment during the crunch times.  “Leaders with higher learning orientation are more likely to embrace ambiguity, complexity, and paradigm shifts and to positively engage in both practical and intellectual challenges.”

Conversely, those leaders that were argumentative, avoidant, and risk-averse tended to perform poorly when their good judgment was most needed.  “Under pressure, leaders with these dysfunctional tendencies can disproportionally fear failure, become insecure, and be myopically focused.”

On your leadership team, self-awareness and an openness to feedback are key to good business judgement. Promote your team’s judgment skills by learning to manage those personality traits that can possibly derail them. Discuss in tangible terms what a risk-averse or avoidant leader would decide and look realistically at the downstream consequences of their decisions. For instance, a risk-averse leader may act too conservatively, won’t make needed changes quickly enough, and miss opportunities for growth.

Consider ways to increase your team’s understanding of their strengths as well as potential derailers, for themselves and each other.  Assessments to measure learning orientation and personality factors from Leadership Alliance can be key to this knowledge.  Finally, have written action plans to manage these behaviors. Action plans could include support from internal coaches or targeted coaching support from Leadership Alliance, but should ultimately be designed to minimize the risk of bad business decisions at the top levels for your organization.

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