Poor decisionmaking is commonplace.

• Position: Corporations

With the recent rash of corporate scandals, investors and others may wonder if company managers are able to make sound decisions. The answer will not soothe their nerves. About half of all business decisions end in failure, according to Paul Nutt, professor of management, Ohio State University, Columbus, author of Why Decisions Fail: Avoiding the Blunders and Traps That Lead to Debacles, who conducted a multidecade study of organizational decisions. "Vast sums of money are spent to make decisions that realize no ultimate value for the organization, and managers make the same mistakes over and over again as they formulate the decisions."

Nutt found that failed decisions share three common blunders. Managers rush to judgment, misuse their resources, and repeatedly employ failure-prone tactics to make decisions. His database contains more than 400 decisions made by top managers in private, public, and nonprofit organizations across the U.S., Canada, and Europe. His research includes a wide variety of decisions spanning 20 years, from purchasing equipment to renovating space to deciding which products or services to sell. He found that about half of the decisions ware not fully used after two years--one of his key indicators of failure. One-third ware never used. Nutt believes these failure figures would be even higher if it were possible to study a random selection of decisions.

The common theme in failed decisions is that most seem preventable, he contends. "Failure cannot be blamed on events we can't control such as fickle customers and bear markets. Failure stems from blunders that point unsuspecting decisionmakers toward traps that ensnare them." Some of the most well-known debacles include: Euro Disney; the Firestone tire recall; Denver International Airport; Quaker's acquisition of Snapple; and Shell's disposal of the Brent Spar oil platform. The garden-variety failures made at organizations every day were found to have the same features as the debacles, except the notoriety.

Nutt further explains the three...