Key Takeaways
1. Judgment is the Essential Core of Effective Leadership
With good judgment, little else matters. Without good judgment, nothing else matters.
Defining leadership. Judgment is the essence of effective leadership, a contextually informed decision-making process that encompasses people, strategy, and crisis. It's not merely about making a decision, but about a comprehensive process from preparation to successful execution. The ultimate measure of a leader's success is the long-term outcome of their judgment calls.
Consequences matter. The impact of a leader's judgment is magnified exponentially by its effect on others and the organization. Poor judgments can lead to significant financial losses, damaged reputations, and even the demise of a company.
- Michael Armstrong's strategic missteps led AT&T's $130 billion company to be acquired for a mere $16.9 billion.
- Carly Fiorina's tenure at HP saw a 58% stock drop and a messy firing.
- Conversely, A. G. Lafley at P&G and Jeff Immelt at GE demonstrated consistent good judgment, leading to impressive growth and shareholder value.
Action and results. Leaders are defined by their judgment calls and their ability to see them through. It's not enough to have brilliant ideas; the value lies in achieving the espoused goals of the institution. Good judgment is successful only when the outcome aligns with the organization's objectives.
2. Leaders Make Calls Across Three Critical Domains
While misjudgments in any of the three domains have the potential to be fatal, the one with the most potential is people.
Three vital areas. Leaders must consistently make critical judgment calls in three interconnected domains: people, strategy, and crisis. These domains are interdependent, with success in one often relying on sound judgment in another. Failure in any of these areas can be detrimental to an organization's well-being.
People first. Judgments about people are arguably the most critical, as the right team is essential for effective strategy and crisis management. Poor people judgments can undermine even the most brilliant strategic plans or exacerbate a crisis.
- Ray Gilmartin's questionable hiring as Merck CEO, lacking big pharma experience, contributed to the Vioxx crisis.
- Carly Fiorina's inability to build a cohesive team at HP hindered her strategic execution.
- Mark Hurd's success at HP, largely by focusing on "rebuilding the foundation" with existing strategic assets, highlights the power of people judgment.
Interconnectedness. Strategy judgments define the organization's direction and objectives, while crisis judgments demand rapid, high-stakes decisions under pressure. However, the quality of these judgments is deeply tied to the strength and alignment of the people involved. A leader's ability to select, develop, and mobilize the right individuals is paramount.
3. Good Judgment is a Dynamic, Multi-Phase Process
Despite the implications of the word call, the judgment calls that leaders make cannot be viewed as single, point-in-time events.
Beyond a single moment. Judgment is a complex, constantly morphing process, not a singular "aha" moment. It begins long before a decision is made and continues through its successful execution. This understanding allows for continuous adjustment and learning.
Three phases of judgment:
- Preparation: Involves sensing and identifying the need for a call, framing and naming the issue, and mobilizing and aligning the right people. Leaders must scan the horizon for subtle signals of change.
- The Call: The moment the leader makes a determination about how to proceed, often after extensive input and deliberation.
- Execution: Overseeing the implementation to ensure desired results, which includes managing resources, aligning stakeholders, and adapting to unforeseen challenges.
Redo loops. The process is rarely linear; good leaders utilize "redo loops" to self-correct, revisit, and revise earlier phases if outcomes are not as expected. Carly Fiorina's Compaq acquisition, while a strategic call, failed in execution, demonstrating that a good "call" can become a bad "judgment" if not properly executed. Conversely, Jack Welch's attempted Honeywell acquisition, though ultimately rejected by the European Commission, was a good judgment because GE walked away when the new reality emerged, avoiding a costly mistake.
4. Character and Courage Form the Bedrock of Sound Judgment
Character, without courage, is meaningless, except in tragedy.
Moral compass. Character provides the moral compass for a leader, setting clear parameters for what one will and will not do. It's about having unwavering values and prioritizing the greater good of the organization or society over self-interest. Leaders with strong character are concerned with self-respect more than public esteem.
- Jim Hackett's decision at Steelcase to recall fire-retardant panels, despite financial pressure, exemplified character, which later proved critical during the Pentagon attack on 9/11.
- P&G's choice to close African plants rather than pay bribes demonstrated a commitment to integrity.
Willingness to act. Courage is the ability to act in accordance with one's standards, even in the face of immense pressure, obstacles, or personal cost. It's the guts to make tough calls and see them through, overcoming self-doubt and external resistance.
- Eleanor Josaitis's persistence in building Focus: HOPE despite threats and disownment.
- Joe Liemandt's "Spock and Mother Teresa" framework at Trilogy, emphasizing logical decision-making followed by compassionate execution, highlights the courage to confront difficult people judgments.
Intertwined qualities. Character without courage is inert; courage without character can be dangerous, leading to self-serving or destructive outcomes. Leaders like Bob Knowling, who faced racial discrimination and career risks, channel their experiences into courageous, value-driven leadership, demonstrating that these qualities are essential for sustained good judgment.
5. Winning Leaders Guide Decisions with a Clear Storyline
These points of view set the direction and provide the guiding principles for the organization. But these “points of view” can’t be just dry intellectual concepts.
Narrative framework. Winning leaders possess clear mental frameworks, or Teachable Points of View (TPOVs), which they weave into compelling narrative storylines for their organization's future. These storylines animate the vision, connect disparate elements, and provide a dynamic map for navigating complexity and uncertainty.
- Jim McNerney's storyline for Boeing, emphasizing high ethical standards and a new partnership with stakeholders, guided his judgment in resolving the Justice Department settlement.
- Martin Luther King Jr.'s "I Have a Dream" speech transformed a TPOV into an inspirational storyline that mobilized millions.
Organic and adaptive. Storylines are not static; they are organic and evolve in response to changing circumstances, allowing leaders to plug in options and test possible outcomes. They provide a solid foundation for "planful opportunism," enabling leaders to turn unexpected events into opportunities.
- McNerney leveraged Boeing's ethical crisis into a driving force for cultural transformation, aligning the settlement with his long-term vision for the company.
- A storyline answers three critical questions: Where are we now? Where are we going? How will we get there?
Cascading vision. The leader's overarching storyline serves as a platform for subplots and individual stories at all levels of the organization. This ensures alignment and empowers leaders throughout the company to make judgments consistent with the broader vision, fostering a shared sense of purpose and direction.
6. People Judgments, Especially CEO Succession, are Foundational
Whenever a company has to go outside for a CEO, they are exhibiting bad people judgment; the company has failed to build a leadership pipeline that produces the leadership talent to successfully guide the company in the future.
Ultimate people call. The selection of an institution's CEO is the single most critical people judgment, as all other organizational judgments flow from this choice. A company forced to hire an external CEO often signals a systemic failure in its leadership pipeline and succession planning.
- HP's repeated need to hire external CEOs (Carly Fiorina, then Mark Hurd) after failing to develop internal candidates highlights a broken pipeline.
- Merck's hiring of Ray Gilmartin, lacking big pharma experience, after its "crown prince" successor left, led to significant organizational struggles.
Building a pipeline. Winning organizations prioritize building robust leadership pipelines, preparing multiple internal candidates over many years. This long-term commitment ensures a deep bench of talent capable of guiding the company through future challenges.
- GE's disciplined succession process under Jack Welch, which prepared Jeff Immelt, Jim McNerney, and Robert Nardelli, is a prime example.
- PepsiCo's development of Indra Nooyi through programs like Roger Enrico's leadership academy showcases successful internal succession.
Transparency and discipline. Effective CEO succession processes are transparent, clearly framing the job requirements and engaging the board and senior leadership in rigorous assessment and debate. The goal is to select a leader who embodies the organization's future needs, not just its past successes, and who can build a loyal, aligned team.
7. Strategic Judgments Require a Blend of Logic and Intuition
In the environment we’re in, good execution and good operations aren’t enough to fix a business with a flawed strategy.
Beyond rational models. Strategic judgments are not merely linear, rational processes based on static data; they are dynamic, evolving narratives that blend intellectual rigor with intuitive feel. Overly simplistic, by-the-cookbook models of strategy often fail in complex, rapidly changing environments.
- Jack Welch famously dismantled GE's large strategic planning staff, emphasizing that leaders, not staff bureaucrats, must own strategy.
- Jeff Immelt's strategic shifts at GE, post-9/11, were informed by a blend of market analysis and an intuitive sense of societal needs (e.g., Ecomagination).
Continuous evolution. A leader's strategic storyline is a work in progress, constantly revised by new information, market shifts, and the outcomes of previous judgments. Each major acquisition, divestiture, or R&D investment reshapes the company's position and future possibilities.
- Immelt's "growth process" at GE, with its six parts and various tools like "customer dreaming sessions," is a systematic approach to continuous strategic judgment and knowledge creation.
- Best Buy's shift from product-centric to customer-centric strategy under Brad Anderson involved extensive engagement of hundreds of leaders to redefine market segments and value propositions.
Execution is strategy. Ultimately, a strategy's success is measured by its execution. Leaders must not only formulate brilliant strategies but also ensure the organizational capability and alignment to implement them. Strategic judgments are only good if they lead to successful outcomes in the marketplace.
8. Crisis Judgments Demand Preparedness and Rapid Adaptation
A 75 percent plan executed now is always better than a 99 percent plan executed an hour late.
Pre-crisis preparation. While crises are by definition unexpected and time-pressured, effective leaders prepare for them in advance. This involves building aligned and trusted teams, having a clear Teachable Point of View, and establishing protocols for rapid response.
- Kathy Gallo's proactive preparation of North Shore–LIJ Health System for a terrorist attack, based on FBI warnings, enabled a more effective response on 9/11.
- General Wayne Downing's "METT-T" (Mission, Enemy, Terrain, Troops available, Time) framework provides a systematic approach to rapid judgment in chaotic military situations.
Rapid response and adaptation. When a crisis hits, winning leaders respond immediately, engaging the appropriate people and mobilizing their aligned teams for quick execution. They understand that the initial plan may need radical adjustment as new information emerges.
- Downing's "redo loop" during the Noriega raid, where he quickly changed the tactical plan to capture the dictator, exemplifies rapid adaptation.
- David Novak's response to the avian flu and E. coli scares at Yum! Brands involved immediate action (removing green onions) and a clear communication strategy to educate the public.
Opportunity in chaos. Crises, while dangerous, can also present unexpected opportunities for change and transformation that might not be possible in normal times. Leaders who can "zone out" from the chaos and identify these opportunities can turn adversity into advantage.
9. Crises Offer Unique Opportunities for Leadership Development
The worst thing that can happen in a crisis is to have some jerk sitting there saying, “We should have done this, we should have done that.”
Beyond crisis management. Effective leaders not only navigate crises successfully but also leverage them as powerful leadership development opportunities. They role-model necessary behaviors, explicitly teach and coach their teams in real-time, and strengthen the organization's capacity for future challenges.
- David Novak uses food safety crises at Yum! Brands to teach his leaders about rapid response, clear communication, and the importance of trusting local leadership.
- Phil Schoonover at Circuit City turned the flat-panel TV pricing crisis into an "Acceleration Initiative," mobilizing eleven teams of leaders to develop solutions while simultaneously enhancing their judgment capabilities.
Learning from setbacks. Even bad judgments or initial missteps in a crisis can be turned into learning experiences if leaders are non-defensive and committed to self-correction. The "redo loop" becomes a mechanism for growth.
- Novak's early mistake in hiring a CFO who was a poor cultural fit reinforced his commitment to trusting his gut in people judgments.
- Schoonover's decision to make difficult layoffs, though controversial, was framed as a necessary step in the company's long-term transformation, teaching his team about tough choices.
Building future capacity. By engaging a broader social network in crisis judgment and explicitly focusing on leadership development during turbulent times, leaders build a more resilient and capable organization. This prepares the next generation of leaders to handle inevitable future crises with greater skill and confidence.
10. Continuous Knowledge Creation Fuels Superior Judgment
The first imperative to being a good leader who makes good judgments is a commitment to be a learner, to keep building one’s knowledge and wisdom.
Lifelong learning. Good leaders are committed learners, constantly striving to enhance their self-knowledge, seeking feedback, and reflecting on their experiences to improve their judgment. This "intense journey into yourself" is a paradoxical blend of self-confidence and humility.
- Jack Welch's relentless use of Crotonville (GE's leadership institute) for mutual learning, gathering unfiltered feedback, and challenging his own assumptions.
- Jeff Immelt's "wallowing in ideas" before making big strategic calls, and his continuous self-reflection on how to be a better leader.
Multi-level knowledge. Leaders must foster knowledge creation across all constituencies:
- Social Network: Building diverse teams of trusted advisors who provide varied perspectives and challenge assumptions.
- Organizational: Creating operating mechanisms (e.g., GE's operating system, Best Buy's "chalk talks") that enable learning and judgment-building at all levels, including frontline employees.
- Contextual: Engaging external stakeholders (customers, suppliers, community, board) as sources of knowledge and partners in problem-solving.
Empowering frontline. A new breed of "knowledge workers" at the customer interface, like Best Buy associates or Intuit call center agents, are empowered to make local judgments and innovate. This requires senior leaders to invest in their training, provide business acumen, and create systems that support their autonomy. This continuous cycle of learning, teaching, and adapting is what truly differentiates organizations with superior judgment.
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Review Summary
Judgment received mixed reviews, with an average rating of 3.70 out of 5. Readers appreciated the extensive case studies and insights on leadership decision-making, particularly in people, strategy, and crisis situations. Some found the book's concepts valuable, including the "teachable point of view" and emphasis on character and values. However, critics felt the book was repetitive, outdated, and oversimplified complex issues. The handbook section was considered unnecessary by some, while others found the real-world examples fascinating. Overall, opinions varied on the book's effectiveness in addressing leadership judgment.
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