By Melissa J. Anderson

In their new book, Judgment Calls: 12 Stories of Big Decisions and the Teams that Got Them Right, authors Thomas H. Davenport and Brook Manville explain the importance of organizational judgment, or leveraging an organization’s wealth of knowledge and culture to make smart decisions – rather than simply relying on one leader’s sense of judgment.

The book describes twelve case studies on how a company relied on the “wisdom of the crowd.” Moreover, they continue, it’s about using that wisdom to move toward an effective decision and make it stick. They explain, organizational judgment is: “…tapping not just the wisdom of the crowd, but the leadership of the crowd. While hierarchy and leadership from CEOs and presidents are not going away, there are increasing settings in which ‘collective leadership’ is being employed.”

Organizational judgment is an acknowledgment that culture plays a part in now how and why companies change – and the grassroots has become an implicit player in those changes.

Here’s how one corporate culture recognized the need to change itself. By leveraging its own cultural values, it managed to achieve more diversity and improve its decision making abilities.

Collective Movement

In his forward to the book, Laurence Prusak explains that organizational judgment is “the collective capacity to make good calls and wise moves when the need for them exceeds the scope of any single leader’s direct control.”

The authors explain that organizational judgment is the ability for a company to make new decisions not based on a single leader’s desire for change, but based on an organizational understanding of what needs to happen. For example, they continue, throughout the 1900s, McKinsey and Company distinguished itself as the employer of choice for Ivy League MBAs. This created a somewhat homogeneous culture. Davenport and Manville explained, “Not surprisingly, many at McKinsey who went on to become partners perpetuated the profile of what made for a successful new hire – someone who could, to put a find point on it, be just like them.”

And around the 1960s, the strategy of mainly recruiting MBAs became problematic. The firm realized it needed specialist experience in some areas, but because of the homogeneous MBA culture, experienced recruits from other industries felt pushed out and closed off – unable to get interesting assignments and professionally held back. On top of that, new competition from other professional firms began heavily dipping into the MBA talent pool as well. The firm just wasn’t getting the top quality anymore, and it had begun to realize that other kinds of knowledge and experience could be a valuable asset as well, particularly with the growth of new industries in science and technology.

In the end, the authors describe, McKinsey’s deep-seated values of problem solving and continual self-improvement won the day. The company enacted a campaign to recruit high achieving professionals like PhDs as subject mater experts – and very carefully analyzed their success.

Davenport and Manville write:

“Once more, the McKinsey bent for analytical-based thinking also extended the success of the program, as the recruiting team rigorously tracked which institutions were providing the most successful candidates, and how new hires of the program in different offices with different kinds of supervising partners in different kinds of client work were performing. The model of what the firm was looking for, where to find such people, and how to make them successful got more refined every year.”

It was hard to change the MBA culture, but the organization understood that it needed to happen. By focusing on this change through the lens of analytical self improvement – what it values most– the firm was able to implement an ultimately successful and sustainable talent strategy. The authors conclude:

“So while the decision to pursue and implement a new talent strategy represented some degree of cultural change for the MBA-heavy McKinsey in those days, it was also the broader cultural tradition that allowed the firm to explore, test, and ultimately adapt to the change.”

Leadership and Organizational Judgment

The authors write that one of the key factors in organizational judgment is reliance on data as a means for problem solving – which provides a clear and transparent rationale for implementing a change. This is important because organizational judgment is driven by  participative buy-in, rather than simple top-down “gut” proclamations.

That’s not to say that leadership is not part of organizational judgment, the writers emphasize.

“Great organizations expand the number of people involved in important decisions, because they know that while individual humans are fallible, in the aggregate they are usually more effective. They tap into their employees’ (and customers’ and partners’) broad range of expertise, and they ask for their opinions; they deliberate and problem-solve toward a better answer, instead of ‘going with the gut.’”

Leaders in today’s complex business environment can’t ignore the facts or their employees – by focusing on organizational judgment, they can work with their organization’s culture and tap its valuable sources expertise.