Collective Wisdom

Much of this comes from the book The Wisdom of Crowds by James Surowiecki. The arguments of the book are borne out by my experiences in working with business decision making.

For the business decision-making process, the primary reason to engage in a group decision-making process is that if the parties affected are consulted as a part of making the decision, then those affected will feel more vested in the decision and feel it is more credible, even if they are not in complete agreement with the decision. This will lead to more effective execution of the planning generated by the decision-making.

It is also clear that regardless of the genius and competence of a business leader, the fact that the leader is human and fallible allows the conclusion that aggregation of information in groups results in decisions that are often better than could have been made by any single member of the group.

Not all crowds or groups are wise. Consider any panic situation. There are key elements to effective group wisdom:

Diversity of Opinion – each person should have private information;

Independence – each person’s opinion should not be determined by other opinions;

Decentralization – each person should draw on a unique area of knowledge;

Aggregation – a method exists to collect private decisions and create a collective determination including process (usually structured conversation) to deal with apparent disagreement; and

Trust – each person trusts the collective group to be fair (a value determination) notwithstanding that person may not agree with the determination.

An additional benefit of the group decision-making process is the automatic application of the values of each individual to private decisions, which if recognized by the aggregation process provides a further basis of review.

The decision-making procedure for a business should be an established part of the governance of the business. If the key elements for collective wisdom are observed, then the result will be more effective decisions which are more readily executed.