When Decisions Go Wrong
The Two Biases That Distort Everything
A leader makes a careful call. They weigh the evidence, consult the right people, and consider the risks. And then it goes badly wrong.
What happens next is predictable. The colleagues who nodded along in the planning meeting suddenly have a clear view, in hindsight, of exactly what was going to go wrong and why it should have been obvious. And the leader, if they’re honest, often starts to believe them.
This is one of the most damaging patterns in leadership. The moment a decision produces a poor outcome, we rush to declare it a poor decision. We work backwards from the wreckage. We reconstruct the story so that the failure feels inevitable, the warning signs feel obvious, and the person who made the call feels foolish.
The problem is that the reconstruction is almost always wrong.
Two Biases You’ve Probably Never Named
Two psychological biases corrupt our evaluation of past decisions in ways we rarely acknowledge and almost never correct for. Understanding them properly is one of the most practically useful things a leader can do.
The first is outcome bias. Research by psychologists Baron and Hershey, dating back to 1988, demonstrated this with elegant simplicity: when the exact same decision was presented to participants, identical reasoning and identical information, they rated it as competent when the outcome was good and poor when the outcome was bad. Most striking of all, when asked beforehand whether outcomes should influence the evaluation of decision quality, the vast majority said no. Everyone agreed on the principle. And then, when the outcome was revealed, they broke their own rule anyway.
The second bias is hindsight bias, the ‘knew-it-all-along’ effect. The research, which goes back to Fischhoff in 1975 and has been replicated extensively ever since, shows that once people know how something turned out, they consistently overestimate how predictable it always was. The event feels retrospectively inevitable in a way it genuinely was not at the time. I go into the research in considerably more depth in the podcast episode, if you want to explore the evidence further.
The two biases work in tandem. Outcome bias says: because the result was bad, the decision must have been bad. Hindsight bias says: the result was always going to be bad, and the decision-maker should have seen it coming. Together, they rewrite history into a story where the failure was foreseeable and the leader was at fault. Neither is usually true. Both feel completely natural.
The Poker Table and the Supermarket
Annie Duke, former World Series of Poker champion and author of ‘Thinking in Bets’, calls this habit ‘resulting’: judging the quality of a decision purely by how it turned out. In poker, you can make the statistically correct decision with the right odds and the best available information, and still lose the hand. If you then change your strategy based on that single outcome, you’re not learning from experience. You’re abandoning sound reasoning in response to bad luck.wisdomtree+1
It’s a powerful metaphor for leadership. Consider Tesco’s entry into the United States market with ‘Fresh and Easy’. Under CEO Terry Leahy, Tesco was the third-largest retailer in the world. The team spent roughly two years conducting on-the-ground research before a single store opened. The strategic logic was credible: growing American appetite for convenience and fresh food, combined with Tesco’s deep supply chain capability and operational expertise. Fresh and Easy launched in late 2007 and never made a profit. Tesco sold the business in 2013 at a total cost of well over £1 billion.
In the aftermath, the post-mortem was brutal. Commentators identified everything that had gone wrong, and it all felt obvious. But the financial crisis that arrived in 2008, precisely as the new stores were trying to build a customer base, was not a variable that any strategic plan from 2005 could reasonably have accounted for. Was this a bad decision? Or was it a well-reasoned, properly researched strategic call by an outstanding executive, which ran into factors that couldn’t be fully predicted? The degree to which it is now described as obviously doomed is almost entirely a product of hindsight bias. Leahy was not reckless. He was bold, well-prepared, and wrong about some things that turned out to matter enormously. Those are not the same thing.
Now consider the flip side. In 1964, IBM’s president Thomas Watson Junior committed the company to developing the System/360 family of computers at a cost of $5 billion, roughly twice IBM’s total annual revenue at the time. Industry observers called it ‘IBM’s $5 billion gamble’, and not affectionately. The project was chaotic, the engineering challenges enormous. And then it worked: in the first three months after launch, IBM received over $1.2 billion in orders, and the System/360 went on to generate over $100 billion in revenue. Watson is now celebrated as a visionary. But if it had failed, the same decision, made with the same reasoning and the same genuine uncertainty, would have been remembered as reckless overreach. Outcome bias works in both directions. It punishes sound decisions that go wrong, and it canonises bold decisions that happen to go right. Neither verdict is reliable on its own.
What Good Decisions Actually Look Like
If outcomes are an unreliable measure of decision quality, what should we use instead? The honest answer is the quality of the process.
In practical terms, that means asking a specific set of questions at the time of making a decision, and revisiting them honestly in review. Not ‘did it work out?’ but: what information did we have, and was it the best we could reasonably have obtained? Did we actively seek out the case against our preferred option? Did we build genuine challenge into the process, or create an echo chamber? Were we clear-eyed about the uncertainty we were operating in?
The pattern I see most often when working with leaders is that they’ve made reasonable decisions, but they haven’t made the reasoning visible. They haven’t documented the information state at the time. They haven’t created a record of the challenge they built in. And so when something goes wrong, there’s no process to point to, and the narrative fills the vacuum, usually unfairly. Building a transparent, auditable decision-making process protects the integrity of good leadership when outcomes disappoint.
This matters in both directions. A good outcome from a poor process can be more dangerous than a bad outcome from a good one, because it reinforces exactly the wrong habits.
The Single Outcome vs. the Pattern
None of this means bad outcomes don’t matter. Of course they do. The consequences are real, for your organisation and for the people affected. You have to attend to them seriously and with genuine accountability.
But here is the most important distinction: a single bad outcome, even a severe one, is not a reliable verdict on your decision-making process. It may simply mean you made a reasonable call and encountered variables that sat outside any reasonable prediction. That is not a character flaw. It is the reality of operating in a complex world where the range of possible futures is always wider than the one you’re planning for.
A pattern of bad outcomes is a different matter entirely. A consistent pattern of poor results is a signal that deserves rigorous attention, a genuine review of how decisions are actually being made. But the crucial difference is this: a pattern calls for a process review, not a crisis of identity.
If every bad outcome triggers a collapse in your confidence, you’ll eventually stop making the bold, necessary calls that leadership demands. You’ll drift towards timid, consensus-driven decisions designed not to produce the best outcome, but to give you somewhere to hide if things go wrong. The antidote to outcome bias is not paralysis. It is a clear, honest, time-efficient process that you can complete and then stand behind.
For Coaches: What to Listen For
When a client comes to a session carrying the weight of a bad outcome, the first task is to help them separate two questions that often get tangled: was their process sound, and was their outcome good?
Listen for language that tells you they’re doing this. Phrases like ‘I should have known’ or ‘it was obvious in hindsight’ are early markers of hindsight bias in action. Push back gently. Ask them to reconstruct what they actually knew at the time of the decision, not what they know now. Ask them to describe the process they followed: who they consulted, what challenge they built in, what they acknowledged they didn’t know.
The goal is to help them reach a precise, honest verdict. If the process was genuinely flawed, there’s something specific and real to work on. If the process was sound and the outcome was shaped by factors they couldn’t have predicted, help them carry that clearly, so they don’t allow one bad result to become a story about their fundamental capability.
The leaders who handle this best have an almost forensic ability to keep these two conversations separate. They carry their failures without being crushed by them, and their successes with appropriate humility. That kind of grounded confidence is what holds up under pressure.
The question I’d like you to carry from this is a simple one: when you look back at your most recent significant decision, are you evaluating the quality of your process, or are you just counting the score?
