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Behavioral Strategy is Basic to All Management

There is a new topic that learning professionals should acquaint themselves with if they have not already. It is behavioral strategy. This topic is a fundamentally new approach to management and decision-making.

Many people may have already have met this issue under a different guise, namely behavioral finance and behavioral economics. Some might have been misled into thinking that is just another form of economics and finance and therefore have not pursued the issue.

Behavioral finance and economics embody a new concept in social science, namely that all decisions incorporate some degree of irrationality. Behavioral strategy merely generalizes this insight to all areas of social science, management and decision- making. This has crucial implications for the learning and training functions.

Traditionally management disciplines have been based on the idea that when we make choices, we make the best choice according to rational considerations. These choices might be to take the most profitable route, the choice with the best payoff, the decision that has the most and best data supporting it and so on.

But increasingly the real world has demonstrated that this is simply not the case. We all tend to feel we are making rational decisions when in fact a good part of the time we are not. This insight has now been formally incorporated into economics and finance via the new disciplines of behavioral economics and finance. These disciplines examine economic and financial phenomena under the conditions of mixed rationality. That is, when we sometimes make decision for non-rational reasons.


Read full article now. CLO Magazine, August 2011,