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06 Intuitive Executive

06 Intuitive Executive

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Published by: pschwendiman on Aug 27, 2009
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The intuitive executive:Understanding and applying‘gut feel’ in decision-making
Eugene Sadler-Smith and Erella Shefy
Executive Overview
Even though the conditions under which executives operate may sometimes limit oreven preclude the use of rational analysis, it is nevertheless the norm in manyorganizational decision processes. Intuition, on the other hand, is often considered to bethe antithesis of this approach and is usually overlooked or disregarded in decision- making. However, in recent years there has been resurgence of interest in intuition, perhaps because of some dissatisfaction with rationality and its limits and also because some psychologists are now arguing that much of cognition occurs automatically outsideof consciousness and in the realm of intuition.Knowledge of intuition has made significant advances in recent years, and it can now be understood as a composite phenomenon involving interplay between knowing(intuition-as-expertise) and sensing (intuition-as-feeling). Furthermore, rather than being set in opposition to each other, intuition and rational analysis are better conceived of astwo parallel systems of knowing. Against this backdrop we consider the significance of the two facets of intuition for executive decision-making processes. From this integrated perspective we offer some guidelines whereby executives can make more effective andintelligent use of intuition in ways that acknowledge its limitations while maximizing its potential in enhancing firm success in complex and fast-moving business environments.
........................................................................................................................................................................
Balancing Intuition and Rationality
Executive intuition is the skill of focusing on thosepotentially important but sometimes faint signalsthat fuel imagination, creativity, and innovationand feed corporate success in globally competitivebusiness environments. A former vice president ofthe leading cosmetic MNC L’Oreal is quoted assaying that decision-making intelligence requiresa fine balancing of two seemingly contradictorycapabilities: intuition and rationality. The first oneallows executives to pick up on important butweak signals; the second enables executives to acton them. The CEO of the same company sees thechallenge for executives as a matter of imagina-tion and intuition in equal parts: “It is intuition[when one asks] ‘What do these brands
have
thatjust might seduce the world?’ But also in terms ofimagination, [one asks] ‘What could they
become
to seduce the world?’”
1
We are only too well aware that businesses areoften contradictory, ambiguous, and surprisingplaces, and that their environments are becomingincreasingly complex and unpredictable. Togetherthese factors make fragmented and multiple de-mands upon executives. Fast, high-quality, strate-gic decision-making in this context represents afundamental dynamic capability in high-perform-ing organizations. The traditional response to thischallenge has been rational analysis: informationis collected, collated, analyzed and interpreted, al-ternatives are formulated, and a logical choice isconsciously arrived at.
2
However, in modern busi-ness environments, a number of factors can affectthe efficacy of an exclusively rational process.Strategies and tactics can be thrown off course byfactors ranging from wars, global terrorism, andnew diseases to more mundane everyday matterssuch as computer glitches and minor accountingfoul-ups. Technological advancement and devel-opments in organizational systems and processeshave contributed to an explosion in the volume of
Academy of Management Executive
, 2004, Vol. 18, No. 4
........................................................................................................................................................................
76
 
data that executives may be required to deal with.The volume and complexity of available informa-tion has the potential to be overwhelming. TheCEO of a major energy corporation recently madethis point quite succinctly:Ignoring them [intuitions] has led to some baddecisions. . .you have to
learn to trust
yourintuition. Otherwise, at the point when you’vegathered enough data to be 99.99 per centcertain that the decision you’re about to makeis the correct one, that decision has becomeobsolete.
3
On the other hand, individuals and firms are oftenexhorted to undertake new venturing opportunitiesin novel and unfamiliar environments where, forthem, there may be an information vacuum.The requirement for fast decisions and the limitsof human beings’ rational information-processingcapacities may combine to impose severe de-mands upon executives’ cognitive capabilities tohandle masses of information at the necessaryspeed. This may result in a combination of volume-induced and/or complexity-induced informationoverload that may limit or even preclude in-depthand deliberate consideration and balancing of al-ternative courses of action.
4
Even when working inoverloaded, uncertain, and fast-moving conditions,rationality is seen as indispensable in many strate-gic management decision processes. Moreover, asfar as the education and training of executives go,rationality is, with a few exceptions, still the norm inthe business and management school curriculum.
 Intuition is a capacity for attaining direct knowledge or understanding without theapparent intrusion of rational thought or logical inference.
Intuition is a capacity for attaining direct knowl-edge or understanding without the apparent intru-sion of rational thought or logical inference. Ourfundamental precept in the context of executivedecision-making is twofold: firstly, intuition is asimportant as rational analysis in many decisionprocesses; secondly, there are ways in which ex-ecutives can improve their intuitive knowledge,understanding, and skill.In this article, we aim to review and synthesizerelevant theory and research in order to suggesthow executives may be able to better focus uponways in which intuition may affect their personaldecision-making behaviors and upon ways inwhich they might use intuition more intelligently.Drawing upon extant theory and research, wepresent an integrated and up-to-date account thatidentifies two principal facets of intuition andwhich explores their relevance for executive deci-sion-making behaviors. Recommendations for howexecutives can put this knowledge into action inorder to enhance their decision-making followeach section. These guidelines are also summa-rized later in Table 1.
Rationality and Decision-Making
Being rational entails the acquisition of knowl-edge through the power of conscious reasoningand deliberative analytical thought. The pre-emi-nence of the rational paradigm in management isoften justified by the assumptions that executivesare inherently rational decision-makers who seekto maximize outcomes in a world where businessenvironments are considered objective entitiesand successful strategies are the product of delib-erate planning.
5
In practice this means: the moreinformation, the better; ‘cool and calm’ strategicthinking should not be debased by feelings; effi-cient thought and behavior must be called upon tosubjugate emotion; and good organizations man-age employees’ feelings or design them out of theprocess.
6
Sticking rigidly to such a position raisesa number of problems.For example, being exclusively rational requiressome measure of agreement about goals sincethese will determine what information should becollected and how it should be analyzed. Agree-ment about cause-and-effect relationships is sim-ilarly important since this will inform plans andpredictions about future actions and their out-comes. There is an inherent assumption thatknowledge is recognizable and valuable onlywhen it is explicit, untainted by feelings, and opento conscious thought and introspection. Againstthis rational backdrop, the significance of uncon-scious mental processes and feelings should notbe underestimated or overlooked since they can bea source of intuitively based judgments that mayprovide an alternative to consciously derived ra-tional choices.An important issue at the root of debates aboutthe utility of rationality is the role of uncertaintyand the availability of information upon whichexecutives may base their decisions. The relation-ship between decision-making and uncertaintyhas been interpreted and explained in a number ofdifferent ways. For example, some have arguedthat uncertainty increases the degree of proce-dural rationality that is required in order that in-
2004 77
Sadler-Smith and Shefy
 
formation gaps can be filled and uncertainty maybe removed by further analyses.
7
Some studiessuggest that rational decision-making does havesituational superiority under particular sets of cir-cumstances.
8
Other research has revealed a nega-tive relationship between uncertainty (the extent towhich the problem is similar to others that havebeen dealt with in the past) and rationality (theextent to which information search, analysis, anduse of quantitative techniques contribute to a de-cision choice).
9
The rational method can undeni-ably lead to effective decisions.
10
However, whenoutcomes are difficult to predict through rationalmeans, executives need to acknowledge the uncer-tainties, be more tolerant of ambiguities, be able torespond to complexities in pragmatic, intelligentand fast ways in the face of the unknown, andrecognize the potential that their intuitive judg-ments may offer. Moreover, where decisions dohave to be taken speedily and with cognitive econ-omy in the face of an overwhelming mass of infor-mation or tight deadlines, executives may have nochoice but to rely upon intelligent intuitive judg-ments rather than on non-existent or not-yet-in-vented routines.When deliberative rational thought is notachievable or desirable (for example, where un-ambiguous or sufficient ‘hard’ data is not immedi-ately at hand, might never be available at all, orwhere creative solutions to problems are needed),one way of managing and coping with uncertaintyand complexity and of ‘thinking outside of the box’is by relying upon intuition. As an outcome of anunconscious process in which there is little or noapparent intrusion of deliberative rationalthought, intuitions can be considered ‘soft datathat may be treated as testable hypotheses (“Dothe facts and figures back up my intuition?”) orused to check out a rationally derived choice (“Howdo I feel about the decision I’ve made?”). In thisrespect, a carefully crafted intuitive knowledge,understanding, and skill may endow executiveswith the capacity for insight, speed of response,and the capability to solve problems and makedecisions in more satisfying and creative ways.There are those who offer the view that
affect isdata
, albeit of a rather special kind
11
but with theimportant caveat that unconscious mental pro-cesses and affect should not be treated as direc-tives, but neither should they be ignored or dis-missed as irrelevant. There are also those whoargue that it is not possible to make effective de-cisions
without
using intuition. We prefer to arguethat executives need to be able to recognize andunderstand intuition, accept it, establish ways inwhich they can be comfortable with it, and lever-age its potential for success and well-being bothfor themselves and for those whom they lead. Thisknowledge, understanding, and skill constitute anintuitive awareness, and in our view the questionof how this may be developed is important both forexecutives themselves and for those educators andconsultants whose aim it is to improve executives’decision-making skills. This is especially impor-tant given that management education and train-ing in general appear to be lacking in this regard(there are of course notable exceptions). Research-based knowledge allied to our own experiences intraining and developing executives’ intuitive skillsleads us to the view that executives can begin tounderstand and craft their individual intuitive de-cision-making capabilities by following somefairly straightforward guidelines.
Intuition and Management
The subject of intuition has figured in philosophy,psychology, and the social and natural sciencesover the ages from Aristotle and Ovid, throughSpinoza, Michael Faraday, and William James, tothe 20
th
century where Henri Bergson, Carl Jung,Bertrand Russell, Jonas Salk, and Albert Einsteinall attested to the value of intuition as a uniqueway of knowing. Intuition in management was dis-cussed explicitly as far back as Chester Barnard’s
Functions of the Executive
in 1938, but over theintervening decades, despite occasional bouts ofrhetoric, it has (with a few exceptions) tended to bedownplayed or overlooked. However, in recentyears there has been something of a resurgence ofinterest in intuition among academics and practi-tioners, perhaps because of a dissatisfaction withrationality and its limits,
12
perhaps because it res-onates with the more holistic and spiritual
Zeit-geist
of the late 20
th
and early 21
st
centuries, andalso because some psychologists are now arguingthat much, if not most, of cognition occurs automat-ically outside of consciousness.
13
Intuition is difficult to describe but easy to rec-ognize. Many of us will be intimately familiar withour own intuitions and will probably be able toidentify, and may even envy or admire, those indi-viduals who confidently display a ‘gut feel’ forcomplex situations and who appear to have an‘instinct’ for grasping key issues quickly. They canoften instantaneously recognize in a highly con-vincing manner whether an investment is likely toturn sour, whether a potential hire is good or bad,whether a new product will make it or not; butfrustratingly they may find it difficult to articulatethe reasons behind these decisions which may just‘feel right.’
78 November
 Academy of Management Executive

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