Two Studies to Understand and Improve Executive Decision-Making in a VUCA World

Executives make decisions in an environment characterized by volatility, uncertainty, complexity, and ambiguity. The decisions they make often have large stakes, and there is little diagnostic feedback about whether the decisions they made were good or bad. I am requesting funding for two studies that examine the psychology of executive decision-making. The first aims to examine how executives develop a sense of understanding, and how that sense of understanding relates to their true understanding. In other words, what makes an executive believe that s/he made a good or a bad decision? And how does that belief relate to the objective quality of decision-making? I hypothesize that exogenous trends, that are not under control of the executive, create an illusory sense of understanding of how the world works. This is because executives come to believe that their actions are responsible for the trend they observe. This illusory understanding can lead executives to make objectively worse decisions. The second study builds on an article I published in Harvard Business Review in September 2019, entitled "The Dangers of Categorical Thinking." The article describes four negative consequences of simplifying complex/continuous environments by dividing it into discrete buckets. For instance, when marketers divide their customer base into a smaller group of segments, they simplify their environment. This facilitates decision-making, but it also implies loss of information, which may harm decision-making. The predictions we make in Harvard Business Review are based on existing research in cognitive science, but have not been empirically examined yet in the context of segmentation and targeting decisions. Segmentation and targeting is at the heart of marketing. There has been much research examining quantitative/statistical aspects of it, but no research has examined it through a psychological/behavioral lens. That's the goal of the second study I am asking funding for.