The Routines of Decision Making

Conscious control enables human decision makers to override routines, to exercise willpower, to find innovative solutions, to learn by instruction, to decide collectively, and to justify their choices. These and many more advantages, however, come at a price: the ability to process information consciously is severely limited and conscious decision makers are liable to hundreds of biases. Measured against the norms of rational choice theory, conscious decision makers perform poorly. But if people forego conscious control, in appropriate tasks, they perform surprisingly better: they handle vast amounts of information; they update prior information; they find appropriate solutions to ill-defined problems.

Corporate divestitures can be a strategic tool for value creation when approached proactively. Despite their high managerial relevance, however, divestiture decisions are often made on a relatively unstructured and irrational basis, lacking routines and professional management. The entire field is very opaque and has been under-researched up to now - especially the behavioral limitations that play an important role as a managerial barrier to timely exits. Jan-Hendrik Sewing makes a significant contribution to opening the black box of current divestiture decision-making. He uses detailed case studies, including numerous interviews with corporate executives and experts from management consulting, private equity, and investment banking. The author develops a conceptual framework to identify remedies to behavioral pathologies and their origins. The study highlights multiple techniques for pursuing divestitures proactively and formulates best-practice recommendations.

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