Decision Quality in Complex Organisations: Why Governance Alone Is Not Enough
In complex and high-accountability environments, organisational outcomes are shaped less by formal governance structures and more by the quality of decisions made under uncertainty. Many organisations operate with sound policies, well-defined committees, and comprehensive compliance frameworks, yet still experience decisions that fail to hold when pressure increases or conditions change.
This gap highlights a critical issue for boards and executive teams: governance compliance does not guarantee decision quality.
Decision quality concerns how leaders frame problems, test assumptions, weigh trade-offs, and exercise judgement when information is incomplete and consequences are real. It is not simply a matter of process adherence. It is a leadership capability that determines whether decisions remain defensible over time.
Decision quality as a leadership capability
Research on strategic leadership systems shows that high-quality decisions are more likely when boards and executive teams operate as an integrated decision system, rather than as siloed or hierarchical actors. Thys et al. (2024) demonstrate that behavioural integration — shared understanding, open dialogue, and coordinated action between top management teams and boards — is positively associated with strategic decision-making quality.
This finding challenges a common assumption in governance practice: that clearly defined structures alone will produce good decisions. Structures matter, but they are only effective when accompanied by disciplined interaction and shared ownership of judgement at critical decision points.
Cognitive bias, noise, and the limits of experience
Even highly experienced leaders are vulnerable to systematic cognitive bias and decision “noise”. Decades of behavioural research show that human judgement is influenced by factors such as overconfidence, anchoring, confirmation bias, and contextual variability, particularly under time pressure (Kahneman, 2011).
More recently, Kahneman, Sibony, and Sunstein (2021) have highlighted the problem of noise: unwanted variability in judgement where different decision-makers reach different conclusions when presented with the same information. In governance and executive contexts, this can lead to inconsistent or fragile decisions that appear reasonable at the time but do not hold under scrutiny.
Experience does not eliminate these risks. In some cases, it can reinforce them. Leaders who have navigated past challenges successfully may rely too heavily on pattern recognition, even when circumstances differ in subtle but important ways.
Decision hygiene: strengthening judgement without paralysis
Improving decision quality does not require slowing organisations to a halt or introducing excessive bureaucracy. Instead, it involves what Sibony and colleagues describe as decision hygiene: deliberately designing decision processes to reduce bias and noise while preserving momentum (Kahneman et al., 2021).
Practical decision hygiene techniques include:
explicitly stating assumptions before decisions are made
separating idea generation from evaluation
structured challenge and dissent
premortems and scenario testing
clear ownership of final decision authority
These practices do not remove uncertainty or risk. Rather, they reduce avoidable error and make judgement more explicit. Importantly, they help leaders slow thinking without delaying action, a critical distinction in high-consequence environments.
Boards, executives, and structured dialogue
Decision quality is also shaped by how boards and executives engage with one another. Practitioner guidance consistently emphasises that diversity of perspective improves decisions only when combined with structured dialogue, role clarity, and disciplined challenge (Cottrell & Mander, 2023).
Without these conditions, differences in perspective can increase friction rather than insight. Effective governance therefore focuses not only on what decisions are made, but how those decisions are surfaced, tested, and owned in practice.
The Australian Institute of Company Directors similarly notes that psychological traps are most damaging when dissent is muted and assurance activity replaces genuine deliberation (AICD, 2024).
Investing in decision capability, not just frameworks
Organisations that consistently make sound decisions invest in decision capability as a core leadership function. This includes:
a shared language around risk and consequence
clarity of accountability at decision points
explicit protocols for complex or high-stakes decisions
regular reflection on decision effectiveness, not just outcomes
These capabilities sit beneath strategy, compliance, and performance. They are rarely visible externally, but they strongly influence how organisations respond to disruption, allocate resources, and maintain trust with stakeholders.
Decision quality as a strategic advantage
In environments characterised by regulatory scrutiny, public accountability, and ongoing change, decision quality is a strategic differentiator. It affects not only organisational outcomes, but credibility and resilience over time.
Leaders who treat decision-making as a deliberate capability — rather than an assumed by-product of experience or governance structures — are better positioned to navigate uncertainty and make choices that remain defensible long after the moment has passed.
References
Australian Institute of Company Directors. (2024). Overcoming the psychological traps of decision-making.
https://www.aicd.com.au/good-governance/organisational-strategy/business-innovation/overcoming-the-psychological-traps-of-decision-making.html
Cottrell, S., & Mander, L. (2023). Three actions to support effective decision-making for your board. Institute of Directors New Zealand.
https://www.iod.org.nz/news/articles/three-actions-to-support-effective-decision-making-for-your-board
Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.
Kahneman, D., Sibony, O., & Sunstein, C. R. (2021). Noise: A flaw in human judgment. Little, Brown Spark.
Thys, K., Vandekerkhof, P., Steijvers, T., & Corten, M. (2024). Top management team and board of directors as the strategic leadership system: The effect of behavioural integration on strategic decision-making quality. European Management Journal.
https://www.sciencedirect.com/science/article/abs/pii/S026323732300052X