"With good judgment, little else matters. Without it, nothing else matters."
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In 1999, Jack Welch was named “manager of the century” by Fortune magazine. Through his leadership during his 20 year tenure as CEO, GE “had dramatically outperformed the economy, creating close to $400 billion of new market value”. When he took over in 1981, it was worth $13 billion.
In 1997, AT&T was a $130 billion company when Michael Armstrong became CEO. Unlike Welch though, Armstrong wasn’t able to drive the same change and growth at AT&T. By 2005, it was “nearly dead-broke”.
How was Jack Welch able to transform GE by such a great magnitude? And why wasn’t Michael Armstrong able to do even the fraction of that at AT&T?
Well, as leadership experts, and professors, Noel M. Tichy and Warren Bennis explain in Judgment: How Winning Leaders Make Great Calls, it all comes down to each leader’s judgment calls.
“Whether we’re talking about United States presidents, CEOs, Major League coaches, or wartime generals, leaders are remembered for their best and worst judgment calls. In the face of ambiguity, uncertainty, and conflicting demands, the quality of a leader’s judgment determines the fate of the entire organization. That’s why judgment is the essence of leadership.”
Noel and Warren have “watched hundreds of leaders making thousands of judgment calls”. They’ve witnessed the ability of great leaders like Jack Welch to articulate and share their storyline and vision for the organization with the rest of the company, as they use it to ultimately guide each decision they make.
But perhaps more importantly, through these experiences with leaders such as Jack Welch, they also came up with the Framework for Leadership Judgment; a framework that leaders can use to make better judgment calls.
The Big Idea
Understand The Framework for Leadership Judgment
"Good judgment calls are a process, not an event."
Making judgment calls is an art, not a science. Each judgment call you make sets the stage for the next one you make as a leader, and ultimately the success of your organization.
“Despite the implications of the word call, the judgment calls that leaders make cannot be viewed as single, point-in-time events. Like umpires and referees, leaders do, at some moment, make a call. They make a determination about how things should proceed. But unlike umpires and referees, they cannot – without risking total failure – quickly forget them and move ahead to the next play. Rather, for a leader, the moment of making a call comes in the middle of a process.”
The following two Insights highlight the two key elements of The Framework for Leadership Judgment.
Be Aware of The Three Judgment Domains
"These are the three domains that make the most difference to the survival and well-being of any institution. If they are unattended to or if bad calls are made in these domains, it can be fatal to an organization."
No matter what industry you’re in, you need to be aware of three crucial domains where you will be making judgment calls:
1) People Judgment Calls The way you not only manage, but also hire the people on your team, will have the biggest impact on your success as an organization; especially when it comes to your leadership team. You have to keep your organizations goals and vision in mind, and not let emotions complicate your judgment. Your number one priority is getting the right people on board.
“While misjudgments in any of the three domains have the potential to be fatal, the one with the most potential is people.”
2) Strategy Judgment Calls As the leader of your organization and team, it is your responsibility to direct the strategic direction. Like the saying goes, “You are the captain of your ship.”
“The role of a leader is to lead the organization to success, so when the current strategic road isn’t leading toward success, it is his or her job to find a new path. How well a leader makes strategic judgment calls is a function of both (a) his or her own ability to look over the horizon and frame the right question and (b) the people with whom he or she chooses to interact.”
3) Crisis Judgment Calls The importance of your judgment calls are magnified during crises. Not only will you be under extreme time and/or political pressure, but a misjudgment can be fatal to your organization.
“It’s instructive to look at crisis calls, not only because getting them right is so important, but also because they compress and highlight so many of the important elements of making judgment calls. They require that a leader have clear values and know his or her ultimate goal. There must be open and effective communication among members of the senior team and throughout the ranks. There must be a good process for gathering and analyzing data. And there must be effective execution.”
Follow The Process of Judgment Calls
"Good judgment depends on how you think as much as what you know. It requires intelligence and values. It depends on the ability to gather information and to process it. It draws on experience and knowledge. The ability to shape and guide the judgment process plays out in the context of a lifetime of learning."
In each of the three domains, people, strategy and crisis, good judgment calls always involve a process. This process starts by first recognizing the need to make a judgment call and “continues through to successful execution” as it follows the following four phases:
1) The Preparation Phase The first thing that needs to be done is sensing and identifying the need for a judgment call, which often means facing the reality of the situation at hand. And once you’ve recognized the need for a call, you need to “frame it and name it.”
For example, when it comes to people, it’s identifying the fact that every CEO, every person in every job will leave it someday. You will need to make replacements. So, for example, creating and having a clear CEO succession process in place is crucial to your organization’s success. (You may think this is obvious, but as Noel and Warren point out, several “highly regarded companies aren’t ready when it comes time to name a new CEO.”)
Once you’ve identified the need to make a judgment call (people will leave) and framed it (we need a CEO succession process), you then need to “mobilize and align the right people” to move forward with this judgment call. This means socializing the need for a judgment call with your board, leadership team and other key stakeholders so you can move towards making the call itself.
2) The Call Phase: Making the Judgment Call Once you’ve mobilized and aligned your team in the preparation phase and received sufficient information regarding your judgment call, it’s time to make the go-ahead call itself. For example, in the case of CEO succession, this can mean making the call to create a leadership development program to ensure there is a leadership pipeline for the organization.
This is also where the leadership traits of character and courage are required. Once you’ve completed the preparation, you need to have the courage to make the judgment call that best aligns with the strategic vision and values of the company no matter what the current reality is.
3) The Execution Phase: Action – Make It Happen Now that you’ve made the judgment call, it’s time to actually make it happen – to execute (i.e. go ahead and create the “leadership academy” and when it comes time to name the new CEO, name him or her.)
4) Learn and Adjust: Continuous Adjustment Finally, as you go through the process of making and executing your call, it’s important to learn and adjust as you move forward.
While this summary should give you a high-level introduction to The Framework for Leadership Judgment, what really brings this framework to life is the many case studies from companies like GE, HP, AT&T, Shell, and many more, that Noel and Warren draw on throughout the book. Each case study presented illustrates the benefits of following The Framework for Leadership Judgment, as well as the pitfalls of not following it. And I highly recommend you add it to your bookshelf – I know I’ll be keeping it close by as a reference.
“We offer this framework to help you improve your judgment-making faculties, to do a better job of developing good judgment in others, and to encourage a more vigorous conversation about judgment. We need more leaders with better judgment.”