Organizational Dynamics (2014) 43, 284—293

Available online at www.sciencedirect.com

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journal homepage: www.elsevier.com/locate/orgdyn

Decision-making in a crisis: What every

leader needs to know§
Fred O. Walumbwa a,*, Modesto A. Maidique a,
Candace Atamanik b

a
Center for Leadership, Department of Management and International Business, College of Business,
Florida International University, 11200 SW 8thStreet, Miami, FL 33199, United States
b
Center for Leadership, College of Business, Florida International University, 11200 SW 8th Street, Miami,
FL 33199, United States

INTRODUCTION
Managing is a constant job. It’s never done. There is no sense
of completion, and managers just move from one crisis to
another solving problems and putting out fires. Henry Min-
tzberg argues that managers work at an unrelenting pace;
their activities are typically characterized by brevity, variety,
fragmentation and discontinuity, and they are strongly
oriented to action. Managers need to be able to constantly
switch from highly complex tasks to incredibly mundane ones
on a moment-by-moment basis. Making decisions is a large
part of a manager’s job since he or she is often the one with
the final say. Pulling the trigger on a new project or addres-
sing malfunctioning products are examples of daily decisions
for managers that have far-reaching consequences for
employees, stakeholders, and organizations.
A generation ago, high-level managers and chief executive
officers (CEOs) relied on a team of advisors to help them
make decisions. Organizations often had a room full of
number-crunchers who would spend hours gathering and
analyzing the data needed for strategic planning. Today,
§
We thank and owe gratitude to Mayra Beers for all her invaluable
input and support, Julie Lanz, Jeffrey Thomas, and Andrew Velo for
assistance researching this paper.
* Corresponding author. Tel.: +1 305 348 4982; fax: +1 305 348 4982.
E-mail addresses: owalumbw@fiu.edu (F.O. Walumbwa),
Maidique@fiu.edu (M.A. Maidique), catamani@fiu.edu (C. Atamanik).
technology has placed that same information into the hands
of the decision-makers. Managers can now gather data by
using a simple internet search or accessing the information
stored in their organizations’ internal networks. Walumbwa,
Christensen, and Hailey noted that the Internet and other
technological tools have altered how organizations and
society conduct business. Unfortunately, this new ease of
access has not eliminated all the barriers to decision-making,
especially in times of a crisis.
Because managers function in a fast-paced, whirlwind
environment where decisions must be made quickly and
there is little time for reflection, they need to learn how
to recognize and filter new information and to apply such
information quickly in order to provide effective directions to
the people they manage. Hart, Heyse, and Boin suggests that
due to the inevitability of globalization and new technolo-
gies, distances are shrinking, goods are moving faster, and
people are communicating at lightning speed. However these
advances come at a price. Errors and crises are more likely to
occur, and are more likely to become full-fledged disasters.
Coombs and colleagues argues that how managers make
decisions in crisis is even more important, because crises
can create three related threats for organizations: public
safety, loss of reputation, and financial loss. Not surprisingly,
authors such as Dennis Bakke point out that nothing tells you
more about an organization than the way it makes a decision.
Dealing with a crisis can be a make-or-break situation.
Executives and managers have increasing time constraints,
and information overload may make it harder rather than

http://dx.doi.org/10.1016/j.orgdyn.2014.09.005
0090-2616/# 2014 Elsevier Inc. All rights reserved.
Decision-making in a crisis: What every leader needs to know
easier to find the most reliable fact-based evidence needed
for complex decision-making. This is especially true in a crisis
situation when every moment counts, and hearsay and spec-
ulation are rampant. Managers must lead their organizations
through crises and neutralize potentially explosive situations
by providing enough information to feed public interest and
stop speculation and rumors. Before the ubiquitous Internet,
managers had some time to reflect before they had to act,
since the news only aired once a day and newspapers were
often already printed a day ahead of time. Now, in the 24-h-
a-day news cycle and the Internet, managers need to move
fast to control a crisis and manage the flow of information,
because anyone can become a whistleblower, and damage
control is a required managerial competency.
This article will discuss some good (and bad) examples of
how organizations have dealt with crises and proposes a
method for managers to make decisions quickly and accu-
rately in a crisis. We will also discuss some of the major
pitfalls in managerial decision making and introduce a typol-
ogy of rules of thumb (ROTs) for managers to use based on
examples of ROTs from CEOs.
HIGH STAKES DECISION-MAKING
The leadership team of the United States government is often
forced to engage in crisis management, with varying degrees of
success. In May 2013, a government contractor for Booz Allen
Hamilton leaked highly classified NSA (National Security
Agency) documents to The Washington Post and The
Guardian. These documents revealed the mass surveillance
of American citizens by the U.S. government. The outrage that
ensued was unparalleled, and the repercussions for U.S.
diplomacy around the world were devastating. Shortly after
the leaks, the President addressed the nation and defended
the need for surveillance of citizens in order to prevent
terrorist attacks, but vowed to reform U.S. intelligence gath-
ering measures and increase transparency. In August 2013, the
President announced the creation of an independent panel of
outside experts to review the NSA’s surveillance programs.
Although the President was able to calm public outrage, the
damage had already been done, and the American people
became increasingly distrustful of the government. This is
one example of many where the digital age is increasing the
stakes for leaders and their ability to make the right decisions
in times of crisis.
Another form of organizational crisis in the digital age is
the hacking of company databases. This has become a com-
mon occurrence, where hackers have been able to gain
access to personal information such as passwords, email
addresses or credit card numbers. In July 2013, five men
were charged with running a worldwide hacking scheme
involving more than 160 million credit and debit cards from
2005 to 2012. The men hacked into the networks of more
than a dozen international companies, including J.C. Penney,
7-Eleven, NASDAQ, JetBlue and Dow Jones, to steal and
subsequently sell valuable personal information. In the after-
math of these widespread thefts, the leaders of these com-
panies all needed to utilize their decision-making abilities to
reassure the public and restore faith in their online security
systems. Customers had to be convinced that their personal
credit card information would be kept safe in the future and
285
be persuaded to continue using the companies’ services.
The stakes are very high in these situations. If the leaders
of these companies were unable to assuage the public’s fears,
the future success of their organizations’ could be in jeo-
pardy, as they could lose millions of customers overnight.
For some organizations, product safety issues can cause
widespread panic among consumers and become public rela-
tions nightmares. In 2010, Toyota had to recall 8.8 million
vehicles due to safety defects where the cars’ accelerators
would jam, causing sudden acceleration that resulted in multi-
ple accident-related injuries and deaths. Media outlets criti-
cized Toyota’s slow response to the crisis and accused the
company of ignoring and downplaying hundreds of complaints.
Toyota’s top management was rarely heard from at the begin-
ning of the crisis, which only worsened the public’s perception.
Toyota’s response acts as a cautionary tale to other organiza-
tions: leaders must be prepared to communicate quickly and
honestly with employees and stakeholders, and make sure that
their actions are consistent with their message. Despite failing
to respond to the crisis appropriately at the beginning, Toyota
soon bounced back by increasing marketing campaigns aimed
at reassuring customers that safety was their first priority. The
new ad campaign with the motto ‘‘Moving Forward!’’ was
designed to assuage the public’s fears and remind people of
their previous reputation for high quality cars. In 2012, Toyota
reached a $1.1 billion settlement with customers, the largest
in the auto industry, making the recall a very expensive lesson
in crisis management for the automaker.
Electric car company Tesla experienced a similar incident
when one of its cars caught fire after a battery compartment
was punctured by a piece of metal on the highway. The
incident caused a swift backlash against the company, with
news agencies questioning the safety of electric vehicles, and
resulted in a sharp decline in the automaker’s market value.
Tesla stocks initially fell among the flurry of negative articles
about the hazards of electric cars, but after CEO Elon Musk
issued a statement defending Tesla and explaining that elec-
tric cars are ultimately safer when compared with gasoline-
powered cars, shares quickly rebounded.
Food safety issues can also cripple an organization, espe-
cially if contaminated food leads to sickness and deaths as has
been the case in the past. Recalls for spinach, meat and dog
food have all prompted concerns about the safety of our food
products. A 2011 class-action lawsuit against Taco Bell
alleged that the chain’s beef did not meet USDA (U.S. Dept.
of Agriculture) standards to be called beef because it
includes ingredients other than beef, such as oats and sea-
sonings. Taco Bell quickly mounted a spirited defense of its
beef filling, and spent $3 million to bolster its reputation,
saying the allegations were ‘‘absolutely wrong.’’ In order to
repudiate the claims, Taco Bell revealed the ingredients of
their beef filling, as well as percentages of the ingredients in
their secret recipe. Soon after, the lawsuit was withdrawn,
and the CEO of Taco Bell, Greg Creed, stated that the with-
drawal ‘‘sets the record straight about the high quality of our
seasoned beef and the integrity of our advertising.’’ Taco Bell
was able to turn a potential catastrophe into positive market-
ing for its products, perhaps even converting some consumers
who would have previously avoided the brand due to ques-
tionable food content.
In addition to public relations crises, today’s managers
need to be able to deal with catastrophic or life-threatening
286
events. Horrific acts of violence in schools and workplaces
require leaders to have an increasing awareness about crisis
management. During a crisis, there is a great deal of pressure
on the organization’s leaders to calm their employees and
reach out to the public as spokespeople for the victims of
these terrible events. When terrorism and violence are real
threats in the workplace, managers must learn how to har-
ness their decision-making abilities in order to lead effec-
tively. According to Hannah, Uhl-Bien, Avolio and Cavarretta,
‘‘it appears that an increasing number of organizations may
potentially operate in extreme contexts,’’ be they in private
business or the public sector.
Some organizational disasters have far-reaching economic
and environmental consequences. On April 20, 2010, an
explosion on the Deepwater Horizon oil rig operated by BP
killed 11 people and caused thousands of gallons of oil to gush
into the Gulf of Mexico. Over 8000 animals were reported
dead just six months after the spill, including many that were
on the endangered species list. After 87 days, BP was finally
able to cap the massive leak, but by then more than 200 mil-
lion gallons of crude oil was pumped into the Gulf, making it
the largest accidental oil spill in history. After the spill, BP
was the target of much criticism when their CEO, Tony
Hayward, made a flippant remark on TV about ‘‘wanting
his life back.’’ In order to save face, BP fired Hayward and
launched a $50 million marketing campaign featuring ads
encouraging tourists to return to the Gulf Coast. BP also
donated millions of dollars to charity and paid $4.5 billion
to settle a lawsuit brought against them by the U.S. Justice
Department. BP’s reputation was forever tarnished by this
incident, but by 2012 their oil contracts with the U.S. gov-
ernment had doubled and their stock price had regained
ground, demonstrating that even the worst disasters can
be successfully addressed with time and a good public rela-
tions (PR) campaign.
THE PITFALLS OF DECISION-MAKING
Decisions are shaped by the interaction of two properties:
how an individual processes the decision information and
making the decision. How an individual processes the deci-
sion information is dependent upon two variables. First,
people have a limited cognitive capacity for processing
information that places a boundary on how much informa-
tion they can process at one time. As a consequence of this
limited capacity, managers must choose carefully the infor-
mation to which they attend. Second, people may have
conflicting goals when trying to make decisions. Payne
and Bettman have argued that these goals work in combi-
nation to motivate individuals to make decisions depending
on their situation, and level of self-awareness about
decision-making. Heuristics in decision-making seek to
maximize accuracy, minimize cognitive effort, maximize
justification of their decision, and minimize negative emo-
tions related to the decision. The downside of heuristics is
that managers may not choose the most relevant informa-
tion to help inform their decisions. Two ways to mitigate the
pitfalls of decision-making are to be aware of the heuristics
and biases to which humans are subject, and to be aware of
ways to reduce these biases, including developing greater
self-awareness.
F.O. Walumbwa et al.
Manager’s self-awareness
Campbell, Trapnell, Heine, Katz, Lavallee, and Lehman
broadly defined self-awareness as the extent to which one
possesses accurate self-knowledge and demonstrates that
he or she is conscious of his or her impact on other people.
Self-awareness has received considerable attention in recent
leadership literature. According to Hannah, Avolio and
Walumbwa, self-awareness also involves managers using
knowledge about themselves to affect their thinking, moti-
vation and choice of behavior, which can enhance their
capacity for leading and developing those they lead.
Acknowledging strengths and weaknesses is particularly
important because it reflects an opportunity to learn, and
more importantly help build trust, from those you lead–—both
of which are likely to increase your credibility when it comes
to decision-making in crisis.
According to Anthony K. Tjan, CEO, managing partner and
founder of the venture capital firm Cell Ball, and co-author of
the New York Times bestseller Hearts, Smarts, Guts, and Luck
published by Harvard Business Press, ‘‘there is one quality
that trumps all, evident in virtually every great entrepreneur,
manager, and leader. That quality is self-awareness. The best
thing leaders can [do] to improve their effectiveness is to
become more aware of what motivates them and their
decision-making.’’ Tjan further argues that without self-
awareness, managers cannot understand their strengths
and weakness, their ‘‘super powers’’ versus their ‘‘krypto-
nite.’’ In other words, it is self-awareness that allows the best
business-builders to walk the tightrope of leadership: pro-
jecting conviction while simultaneously remaining humble
enough to be open to new ideas and opposing opinions.
Borrell-Carrió and Epstein underscored the benefits of self-
awareness in their effort to improve health care systems,
refining physicians’ emotional and cognitive capacities to
reduce clinical errors and to help physicians function better
in clinical situations. They proposed a teaching strategy
based on developing the physician’s self-awareness to detect
the inappropriate use of low-level decision rules, as well as
detecting the factors that limit a physician’s capacity to
tolerate the tension of uncertainty and ambiguity.
Borrell-Carrió and Epstein identified two practical implica-
tions of their model. First, they argued that excellent physi-
cians use their capacity for insight to detect when they are at
risk for cognitive distortion, premature closure, or use of low-
level decision rules. Second, they suggested that excellent
physicians detect moments when it is necessary to reframe the
visit. Further research conducted by Church confirms the
impact of self-awareness on high performing managers.
Church examined 134 high-performing and 470 average-per-
forming managers obtained from four independent datasets
using several different approaches. Results showed that high-
performing managers were significantly more managerially
self-aware compared with average-performing managers, sug-
gesting that self-awareness could influence decision-making.
Avoiding the decision-making pitfalls
According to Gerd Gigerenzer, managers are subject to the
same flaws as everyone else when making decisions. Errors in
thinking can lead us away from purely rational decisions to
Decision-making in a crisis: What every leader needs to know
those based on emotions or cognitive biases. This concept is
termed ‘‘bounded rationality’’ and is the idea that in deci-
sion-making, an individual’s rationality is limited by the
information he or she has, the cognitive limitations of his
or her mind, and the finite amount of time he or she has to
make a decision. This theory was first proposed by Herbert A.
Simon as an alternative to the mathematical modeling of
decision-making used in economics and related disciplines.
Bounded rationality suggests that because decision-makers
often lack the ability and resources to arrive at the optimal
solution, they instead apply their rationality only after having
greatly simplified the choices available. The decision-maker
becomes a satisfier, seeking a satisfactory solution rather than
the optimal one. Herbert Simon used the analogy of a pair of
scissors, where one blade is the ‘‘cognitive limitations’’ of
individuals and the other is the ‘‘structures of the environ-
ment.’’ Managers with limited cognitive resources can thus be
successful decision-makers by exploiting pre-existing systems
in the environment and relying on organizational experience or
cognitive shortcuts. This is especially useful in high-cognitive
load environments where information may be limited or dis-
torted, such as in a crisis situation. Leaders need to utilize their
cognitive tools to arrive at the most satisfactory solution given
the complexity of the situation. In a crisis, the optimal solution
may not be possible; therefore, the least detrimental option
may be the most likely objective. The good news is that we are
provided with mental shortcuts to help optimize our decision-
making ability. Gerd Gigerenzer termed this The Adaptive
Toolbox, which attempts to impose more order and coherence
on the idea of bounded rationality. We believe this is what
managers need in order to be more effective decision-makers
in today’s crisis-laden and ever-unpredictable business envir-
onment.
Why and when do simple heuristics work?
Simple heuristics work when there are real-world situations
involving multiple goals (speed, accuracy, frugality, consis-
tency, accountability) that have no known common denomi-
nator, which pose serious problems to optimizations, but can
be handled by models of bounded rationality. For example,
‘‘Don’t be evil’’ is the unofficial corporate motto of Google,
which informs their decision-making and ultimately, their
business model. The idea is simply to not exploit their users or
misuse the vast amount of information they have about them.
The motto was first stated in a letter from Google’s founders,
written for the prospectus of their 2004 initial public offering
(IPO): ‘‘Don’t be evil. We believe strongly that in the long
term, we will be better served — as shareholders and in all
other ways — by a company that does good things for the
world even if we forgo some short term gains.’’ Google claims
that they have made ‘‘Don’t Be Evil’’ a central pillar of their
identity as a part of their core values. The sixth item in their
core values states: ‘‘Do the right thing: don’t be evil. Honesty
and Integrity in all we do. Our business practices are beyond
reproach. We make money by doing good things.’’
THE ADAPTIVE TOOLBOX
Leadership excellence is not something we are born with, but
is derived from our years of accumulated knowledge about
287
how to make the best decisions in crisis situations. This is not
an easy task and we are constantly confronted with cognitive,
social, and emotional barriers that we must overcome. Deci-
sion-making is not a rational process; it is subject to personal
biases, mental shortcuts and heuristics that can be used to
quickly sort through the myriad of information being thrown
at someone on a daily basis. By understanding these sources
of distortion we can strengthen the reliability of our decision-
making strategies in times of crisis, and mitigate potential
risks manifesting from these decisions.
The Adaptive Toolbox refers to a collection of cognitive,
emotional, and social strategies that can help managers
make accurate, fast, frugal, and computationally cheap
decisions. Research has shown that such simple heuristics
frequently lead to better decisions than the theoretically
optimal procedure. Gigerenzer promotes a specific vision of
decision-making based on three premises: (1) Psychological
plausibility (humans experience constraints in knowledge
and time based on their cognitive, social, emotional, and
behavioral repertoire); (2) Domain specificity (heuristics are
composed of cognitive and emotional building blocks that can
be part of more than one heuristic and allow the composition
of new heuristics); and (3) Ecological rationality (the success
of decision-making heuristics lies in their degree of adapta-
tion to the environment, both physical and social).
We propose four rules that will help leaders use their
toolbox more effectively. According to Gigerenzer, there are
three rules that are critically important when applying the
cognitive component of the adaptive toolbox: search, stop,
and decision rules. We suggest that beyond the cognitive
facet of decision-making is the social and ethical component
(e.g. how stakeholders react to the decision), which we refer
to as social rules.
Search rules
In search rules, managers are expected to search for
alternatives and cues to evaluate the alternatives. Search
can be random, ordered, or search by imitation of speci-
fics, such as stimulus enhancement, response facilitation,
and priming. However, there are situations where there is
no trade-off between simplicity and accuracy. The study of
these conditions is part of the study of ecological ration-
ality. When deciding among alternatives, there is rarely an
option that stands above the rest. Usually all decisions
have pros and cons, so when there is no option that meets
all of our objectives, it can make decisions more difficult
to make. One solution to this hurdle is to weigh the
alternatives.
Consider the following example: A real estate company
owns an old, downtown office building. Tenants are com-
plaining that their employees are frustrated and upset
because there is always a long wait for the elevator in the
lobby at rush hour. The management team of the real estate
company are responsible for coming up with a solution to this
problem, but as with most situations there are several ways
to define the issue and several alternative solutions that can
be explored. The management team brainstorms possible
alternative solutions and lists them all:
(1) Better elevator controls: each elevator would be used
more efficiently.
288
(2) Faster elevators: allowing each elevator to carry more
people in a given time period.
(3) Encourage employees to use the stairs: fewer people
would use the elevators.
(4) Elevator banks: each elevator would only stop on certain
floors, increasing efficiency.
(5) Flexible work hours: all the employees wouldn’t be at
the elevators at the same time.
(6) Improved elevator maintenance: elevators would be
more efficient.
After examining each alternative, the management team
realizes that several different definitions of the problem
exist. The solution ‘‘flexible hours’’ is derived from the
problem of too many people getting off work at the same
time. ‘‘Faster elevators’’ is based on the belief that
the elevators are too slow. ‘‘Elevator banks’’ results from
the belief that the elevators are inefficient. The manage-
ment team ultimately defined the problem as ‘‘people having
to wait’’ and devised a solution to alleviate employees’
frustration by piping classical music into the elevator lobbies.
Subsequently, the complaints stopped. It is unlikely that
the eventual solution could have been reached if the man-
agement team hadn’t taken the time to explore all the
alternatives.
Stop rules
Searching for alternatives and cues must stop at some point
and a decision or inference must be made. While there are
complex combination schemes available to make a choice,
sometimes simple decision tools are superior. This is known
elsewhere as the ‘‘principle of parsimony.’’ If there is a time
pressure to search alternatives, decision makers tend to
think through the problem faster and be more selective about
the information they process. However, due to the complex-
ity of most decisions, decision makers can reach a point
where they can no longer accept new information about
their options. At this point, the quality of their decisions
can decrease. One well established effect in decision-making
research is the impact of the number of choices an individual
has on their decision-making strategies. There is a less-is-
more effect, whereby simply having more information
doesn’t necessarily translate into making the best decision.
Possessing a moderate amount of information about your
alternatives tends to yield better decisions.
Decision rules
Gigerenzer and colleagues describe the following scenario: A
man is rushed to the hospital in the midst of a heart attack.
The doctor needs to quickly decide whether the victim should
be treated as a low risk or high risk patient. The man is
considered high risk if his life is in danger and therefore will
be treated immediately. Although this is a life or death
decision, the doctor must decide using only the available
cues, each of which is an inexact predictor of the patient’s
risk level. Traditional methods would dictate that the best
way to assess the patient’s risk level is to examine the results
of each of the diagnostic measurements taken, rank them
according to their importance, and then combine those using
statistical methods. An alternative diagnostic method is the
F.O. Walumbwa et al.
decision tree developed by Breiman and colleagues to classify
heart attack patients according to risk levels using only three
variables. If a patient has a systolic blood pressure of less
than 91 he is immediately classified as high risk; no additional
information is required. If that’s not the case, then the
decision moves to the next cue, age. If the patient is less
than 62.5 years old, he is classified as low risk; if he is older,
then the final cue is whether he has a heart rate greater than
100 beats/min. The decision tree requires the doctor to
answer a maximum of three yes-no questions to reach a
decision rather than to consider all of the possible predictors,
allowing her to proceed to life-saving treatment much faster.
According to Gigerenzer, the decision tree is a remarkably
simple yet effective decision-making tool because it defies
conventional diagnostic methods. It ignores the majority of
commonly measured predictors and peripheral information
by using only yes/no answers. The strategy is a step-by-step
process which may end after the first question and does not
need to combine the values of the three predictors. The
decision tree is a fast and frugal strategy for making a
decision. It is fast because it involves no computation, and
it is frugal because it only searches for the most pertinent
information. Its simplicity raises the question of whether it
might be inaccurate compared to standard classification
methods, yet it is actually more accurate in classifying heart
attack patients according to risk status than other more
complex statistical classification methods. The decision tree
demonstrates that fast and frugal decision-making can be as
accurate as strategies that use all available information and
expensive computation.
Social rules
While the process of making a decision is important (the
cognitive component), considering the social consequences
of the decision is equally important (the social and emotional
components). We propose that the social environment in
which decisions are made acts as an influence on decision
makers, and may be classified as social rules. Not only is the
cognitive process of making a decision important, but how
that decision impacts the employees, stakeholders, and
organization is important as well. The adaptive toolbox
contains rational strategies for making decisions that con-
sider social norms, social imitation, and social emotions in
addition to cognitive building blocks. Humans are one of the
few species that cooperate for mutual benefit. Social imita-
tion is particularly effective because it can help managers
make decisions with limited time and knowledge, and it can
speed up decision-making by reducing the time spent on
information search. Social emotions are useful because they
can narrow down choice sets more effectively and for a
longer time than cognitive search tools.
For example, SpaceX, the first privately held company to
send cargo to the International Space Station, collaborates
and contracts with NASA to develop launch systems based in
part on NASA’s previous successes and failures. This has
benefited SpaceX greatly, such that that during a launch in
2012, when one of the nine Merlin engines on the Falcon
9 rocket shut down, the rocket could (and did) continue on its
primary mission to deliver a payload to the International
Space Station (ISS). According to SpaceX, no other rocket
currently in flight has this engine capability.
Decision-making in a crisis: What every leader needs to know
Social rationality adds a further class of goals to decision-
making: social goals that are important for creating and
maintaining social structure and cooperation in an organiza-
tion. These social goals include transparency (making deci-
sions that are understandable and predictable by the group
with which one associates), fairness (making decisions that
do not violate the expectations between people of equal
social standing), and accountability (making decisions that
can be justified and defended). Violating these social goals
can have devastating consequences for an organization.
For example, in one of the BBC’s worst crises in its 90-year
history, it was reported in 2012 that the late public service
broadcaster Jimmy Savile had sexually abused hundreds of
underage boys and girls over a period of 50 years. While
reports claim that BBC employees were aware of the abuse
back in the 1970s, the BBC claimed that they found no
evidence of allegations of misconduct. It later came to light
that BBC had prepared a report investigating Savile’s actions
in 2011, but that the program had been shelved two months
after his death. After this information became public, the
director-general of BBC apologized and said an internal
investigation would take place. BBC was criticized by the
U.K. parliament for how it handled the affair, and some
politicians claimed that the allegations ‘‘cast a stain’’ on
BBC. An inquiry into the scandal concluded that confusion
and chaos, a lack of leadership from the top, and adhering to
strict management chains had rendered BBC incapable of
dealing with the situation. By attempting to cover up the
scandal, the BBC violated the social rules of transparency,
fairness and accountability. This led to a much greater
negative long-term impact than if they had been forthcoming
with information when they initially became aware of the
situation. BBC’s response to this crisis suggests that while
leaders may have applied the cognitive rules to their deci-
sion-making process, they did not account for how stake-
holders would react to such a gross violation of social rules.
A TYPOLOGY OF RULES OF THUMB
Managers possess a unique set of tools based on their years of
experience in a particular industry, profession or organiza-
tion. This accumulated knowledge allows them to form an
Adaptive Toolbox which they can utilize to make better
decisions in crisis situations. Rudi Giuliani in his book Leader-
ship, in which he explained his philosophies on leading in
crisis wrote, ‘‘Sometimes when you see someone that has
been a truly great leader — whether it’s in business, a great
military leader or a great political leader — you think that it’s
all intuitive. They must have great natural talent, but the
reality is that most often when you analyze that you’ll find
that those are things they developed over a period of time‘‘–—
experience.
Every leader comes to the job with a personal toolbox. The
toolbox doesn’t contain a wrench set or a blood pressure kit
as it might for a plumber or a doctor; rather, it contains a
series of experiential rules of thumb (ROTs). A rule of thumb
is a principle derived from personal experience that provides
almost immediate guidance for behavior in certain situa-
tions. When an exasperated executive comes to a CEO with a
seemingly unsolvable conundrum, the CEO can easily recom-
mend a solution derived from having experienced a similar
289
problem many times before. We thus suggest that for man-
agers to be effective decision-makers, they need some guide-
lines, or rules of thumb. Rules of thumb come in many
variations, but they can be divided into two basic types:
constructive and destructive.
Constructive ROTs
Constructive ROTs can either be portable or contingent.
Portable ROTs travel with you across industries and contexts,
whereas contingent ROTs, as the name implies, depend on
your environment, the nature of the industry you are com-
peting in, its stage of development and the position of your
enterprise in that industry. One example of a portable ROT is
to focus on long-term goals as well as the short-term.
The CEO of Panera Bread, Ron Shaich, uses his 30 years
of experience in the restaurant business to forecast the
future direction of his company to ensure it stays compe-
titive in a notoriously fickle industry. Shaich commissioned
a study on the profitability of restaurant companies from
2006 to 2011 and found that 80 percent of the largest
restaurant companies were less profitable in 2011 than
they were in 2006. In addition, he found that half of the
top 50 restaurant companies of 30 years ago were no longer
in business. He realized the restaurant business is a very
difficult environment to operate in successfully long-term,
and that if he didn’t make some drastic changes, at some
point he was no longer going to be competitive. Using this
information, he began incorporating and tracking consu-
mer data using loyalty cards. Panera can now customize
their marketing campaigns to different markets–—making
every store a little different. Because Panera focused on
the long-term, they harbored resources before the
2009 recession and kept their growth slow. When the
recession hit, the company used it as an opportunity to
invest in growth, which allowed them to increase revenues
and margins at a time when most companies were laying
off employees and closing stores.
In 1970, The CEO of Analog Devices, a manufacturer of
printed circuit electronics, faced what was arguably the
defining decision of his career–—whether or not to make a
‘‘bet the company’’ investment in a new technology, linear
integrated circuits, that threatened to replace the analog
modules that the company produced. Analog’s board did not
support the move, nor did the company’s other founders.
Faced with this opposition, the CEO took the extraordinary
step of borrowing the money personally and committing to
Analog that if the investment prospered, Analog could pay
him back and they would own the firm in its entirety. If it
failed he would forgo the money. Over the next decade, the
firm prospered and registered $4 billion in sales, virtually all
of Analog’s revenues. Underpinning this story is an ROT for
long-term strategic planning which explains why the CEO was
willing to stake his own money on the venture.
Contingent ROTs are industry-specific, flexible and
depend on the nature of the crisis. The Red Cross deals with
crises every day, so when an unintentional tweet caused them
to become the center of a possible scandal, they dealt with it
swiftly and with a little humor. One of their employees
accidentally tweeted from the Red Cross official account,
rather than their private account, a rather inappropriate
comment, ‘‘Ryan found two more 4 bottle packs of Dogfish
290
Head’s Midas Touch beer . . ..When we drink we do it right
#gettngslizzerd.’’
An hour after the tweet, the Red Cross social media
director, Wendy Harmon, acknowledged the error and
responded by tweeting ‘‘We’ve deleted the rogue tweet
but rest assured the Red Cross is sober and we’ve confiscated
the keys.’’ While the initial errant tweet generated a lot of
buzz in the Twitterverse and on the blogs, so did the compa-
ny’s humorous response which acted to diffuse the situation.
Not only did Red Cross look like they have a good sense of
humor, Dogfish Head beer embraced the tweet and encour-
aged followers to donate to the Red Cross, turning a potential
PR crisis into a chance to connect with people.
Another example of a contingent ROT is the response by a
group of global retailers to safety concerns in Bangladesh
factories. The garment industry in Bangladesh has been
rocked by a number of industrial accidents over the last year
that have led to large-scale protests by garment workers. For
example, in April 2013, garment workers walked off the job
after cracks were discovered in an eight-story commercial
building in Rana Plaza. The next day, workers were ordered to
return to work or be fired. According to one employee,
management told workers, ‘‘’Don’t worry, nothing will hap-
pen. If you die we’ll die too.’ But they didn’t go inside. They
made us start work and then left.’’
During the morning rush hour that day, 1129 people died
when the building collapsed, and it is now considered to be
the deadliest garment industry accident in history. As a
result, a number of high profile retailers that buy garments
from these factories, such as H&M and the parent company of
Zara, Inditex, responded by stating that they would help
finance safety upgrades at factories in Bangladesh, and sign a
legally binding document to ‘‘guarantee safe working condi-
tions in the Bangladeshi garment industry.’’ This agreement
calls for rigorous inspections of factories, public reports of
these inspections, mandatory repairs, and requires retailers
to stop doing business with factories that do not make safety
improvements. The retailers demonstrated a ROT of concern
for safety that will ensure their long-term success.
Destructive ROTs
At the other extreme of the continuum are destructive ROTS.
The most frequently found destructive ROTs are the product
of entangling potentially destructive emotions — hatred,
revenge, lust — with major decisions. Thus, a rule of thumb
can also be destructive if it is simply misguided or just plain
wrong and lead people to take mistaken action. Even worse
are corrupt or evil ROTs that encourage employees to bilk or
defraud their customers, steal from their employers, or
victimize one or more groups of people. Unfortunately, it
is the latter two types of ROTs that often make headlines in
the business world (e.g., Jeff Skilling’s unwritten rule: ‘‘Insi-
der trading is permissible,’’ Bernie Madoff’s implicit ROT:
‘‘Defraud your customers until they catch up with you’’); the
many lives that lived by this evil ROT makes it perhaps a
‘‘worst in category.’’
A decision made by Warren Buffett in his early career,
which he called his $200B blunder, illustrates the potential
detrimental effect of a destructive rule of thumb. While
searching for opportunities for investment, Warren Buffett
noticed that Berkshire Hathaway, a textile company, was
F.O. Walumbwa et al.
gradually selling off its mills. The company would sell off a
mill and use the cash to buy back its stock and the stock would
experience a corresponding increase in value in the months
after the sale of the mill. Buffett watched as this process
repeated itself, and shortly before the sale of another mill,
he took a substantial position in the company’s stock. Sub-
sequently, he met with the CEO and shook hands on a deal to
tender his stock at $11.50, making a tidy short-term profit.
Soon after, a letter came in from the CEO, Mr. Seabury
Stanton, offering to buy Buffett’s shares for $11 and three-
eighths, just an eighth of a point below what they had
agreed. Buffet, the kind of man whose word is his bond, felt
he had been ‘‘chiseled’’ by an eighth of a point, and began to
accumulate Berkshire Hathaway stock until he had the major-
ity control, and then fired Stanton. Buffett now regrets his
youthful, emotional mistake and the immense amount of
money that it cost him and his shareholders.
ADVICE FROM CEOS
To provide some real-world examples of constructive and
destructive ROTs, we interviewed 25 CEOs to discuss what
heuristics they use in making high-stakes decisions. One CEO
explained that his abiding rule was: ‘‘Hire well and let them
do their jobs.’’ Another CEO, the former head of a major
software firm, followed this stricture, ‘‘About a quarter of
your R&D budget should be dedicated to long term projects.’’
One CEO suggested to ‘‘not get distracted by trivial details.’’
Another CEO suggested to ‘‘listen carefully, thoroughly, and
well.’’ We found that the successful decisions in our sample
were made in areas where the CEOs were extremely knowl-
edgeable (many years of experience), while the level of
familiarity with fields where the bad decisions were made
was no better than average. These ROTs, however, do not
emerge in a vacuum; rather, they are forged by experience
and generally under an umbrella of core values.
In order for decision-makers to optimally leverage ROTs
when facing a major decision, ROTs should be in perfect
alignment with the higher-level values that serve as the
leaders’ moral and professional compass. The set of values
and rules of thumb that an executive brings to his job are
critical because, among other things, they form the ‘‘DNA’’
that shapes the decisions — especially the major decisions —
that executives make. And it is such decisions, above any-
thing else, that determine whether an executive will be
successful in propelling his or her organization forward.
Importantly, all ROTs are not created equal. On occasion,
rules of thumb will conflict and a choice has to be made as to
which to follow. Everyone’s ROTs follow a hierarchy. However,
we suggest that the most important thing in building effec-
tive ROTs in managers is being self-aware of their decision-
making style, and how this interacts with a constantly chan-
ging environment. According to Crowe and Higgins, heuristic
rules of thumb are not immutable. Sadrieh and colleagues
argue that the best decision-makers adapt their rules to their
continuously changing ecology. In other words, for optimal
decision-making, ROTs need to be dynamic. After all, they are
not meant to be precisely accurate or reliable for every
situation; they need to be tested against realities every step
of the way. This is especially true in a crisis, where ROTs
developed in a stable environment will not likely hold true.
Decision-making in a crisis: What every leader needs to know
Therefore, decision makers’ understanding of themselves
and their experiences may often serve to raise awareness
of how heuristics are developed and when they should (or
should not) be used.
CONCLUDING REMARKS
Many decisions that leaders face are computationally com-
plex, and often the input variables are characterized by a
high degree of uncertainty. To make such decisions, senior
executives can rely on heuristics that have been vetted by
their life experience and are consistent with their values and
personality. The task for a leader is to identify and under-
stand the origins of his or her personal set of decision-making
tools and continuously challenge the validity of those tools in
a changing environment.
There are several paths on the route to self-awareness.
The main one is the life journey audit. We can learn a great
deal about ourselves by plotting the key events and formative
experiences in our upbringing and our business experiences,
identifying crucibles in our life and asking how they have
shaped us. We can also learn a great deal about ourselves by
taking a personality test — such as the NEO-FFI-3 — or having a
291
session with a clinical psychologist or coaching specialists.
Avolio and Luthans describe in their High Impact Leader book
how leaders can learn from the mistakes and successes of
themselves and others to build a positive strength initiative
within their organizations, and suggest what leaders can do
to develop and leverage their own leadership strengths into
positive, lasting improvement for themselves and their orga-
nizations.
Leaders are well advised to evaluate the personal rules of
thumb (ROTs) that inhabit their adaptable leadership tool-
box. These ROTs are critical, because in this uncertain and
ever-changing world, where life-altering decisions must be
made every day, the default decision-making tools should be
the leader’s ROTs. Rules of thumb can bound, incline and
ultimately shape our major decisions. For those reasons a
major objective of leader introspection should be to bring
your ROTs to the surface while continuously challenging their
validity and adapting them when necessary in the face of new
knowledge and experience.
292
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Decision-making in a crisis: What every leader needs to know 293

Arizona State University and University of Nebraska-Lincoln (Center for Leadership and Department of Manage-
ment and International Business, Florida International University, Modesto A. Maidique Campus, 11200 SW 8th
Street, Miami, FL 33199, United States. Tel.: +1 305 348 4982; fax: +1 305 348 4982, e-mail: owalumbw@fiu.edu).

Modesto A. Maidique is executive director of the Center for Leadership in the College of Business at Florida
International University (FIU) and the Alvah H. Chapman Jr. Eminent Scholar in Leadership. From 1986 to 2009, he
served as president of FIU and led its transformation from a comprehensive university to a major research
university classified in the highest ranking awarded by the Carnegie Foundation. Prior to FIU, Maidique held
academic appointments at MIT, Harvard, and Stanford Universities. He is the co-author or contributing author
of ten books and numerous articles (Center for Leadership, Florida International University, Modesto A. Maidique
Campus, 11200 SW 8th Street, Miami, FL 33199, United States. Tel.: +1 305 348 5323; fax: +1 305 348 0524,
e-mail: Maidique@fiu.edu).

Candace Atamanik is research manager with the Center for Leadership in the College of Business at Florida
International University (FIU). Her research focuses on leadership development using a framework of personality,
values, and decision-making. Candace has co-authored articles and presented her research at academic
conferences such as the Society for Industrial and Organizational Psychology and the International Leadership
Association. Previously, Candace was an adjunct professor of research methods and psychological assessment
for the Department of Psychology at Florida International University. (Center for Leadership, Florida
International University, Modesto A. Maidique Campus, 11200 SW 8th Street, Miami, FL 33199, United States.
Tel.: +1 305 348 5323; fax: +1 305 348 0524, e-mail: catamani@fiu.edu).