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Recently, Howard Schultz announced “sweeping changes” at Starbucks to help, he hopes, redirect the company whose stock has lost half its value in less than 1½ years. Said the CEO, “We have somehow evolved from a culture of entrepreneurship, creativity and innovation to [one of] mediocrity and bureaucracy.”¹ How did experienced managers, including Schultz, allow this to happen?

Kishore Sengupta, designer of a computer simulation that assesses project management skills, has found that users with more than 10 years of experience perform worse (generate higher costs, make more errors, and miss more deadlines) in the simulation than less-experienced users.² This seems counter to the common belief that “experience is the best teacher.”

Is experience overrated based on these results? Did experience work against managers at Starbucks who chose to focus on building stores and automating the coffee-making process at the expense of meeting customer needs?

There are different kinds of experience. Every day, employees make operating decisions related to their work. Often, these decisions rely on expertise in areas such as accounting, engineering, sales, and IT. Specific experience in these fields can prove invaluable, enabling people to draw quick conclusions that are accurate and efficient. Experience also allows people to smartly eliminate options that inexperienced workers will explore unnecessarily. When outside their expertise, however, people often try to map prior experience to new situations, leading to the results found in the project management simulation. When working in new situations, experience has the potential to get in the way.

For managers, relevant experience comes from making decisions that supersede operational ones. That is, experience for the general manager can be valuable if it includes deciding not only how to perform various operational activities, but also how to decide the actual outcomes that determine those activities.

For Starbucks, experienced employees effectively doubled the number of stores in 2 years. They also effectively automated production in the stores. Given the outcomes to add new stores and create operational efficiencies, these decisions were made consistent with experience related to real estate, construction, acquisition, operations, and IT. The problem was with poor judgments among the senior managers determining the appropriateness of those outcomes, which were disconnected from the vital customer experience associated with product branding.

For general managers, judgment is at the heart of making good decisions. Tichy and Bennis³ assert that judgment is the basis for good decision-making and that leaders must develop judgment in three areas: people decisions, strategy decisions, and crisis situations. In the Starbucks case, poor strategy judgment resulted in dehumanizing stores. Judgment usually involves not just making a call on the decision but also predecision analysis and postdecision execution.

Good judgment can be learned. Managers can develop this judgment by making decisions related to people and strategy. Moreover, judgment should be developed down the chain—the best-led companies are the ones able to diffuse good judgment to people at all levels. Among the things that will help your firm or unit improve its collective judgment:

• Value critical thinking skills. It is easy to lock into old mindsets and accept false assumptions based on prior experience. Be skeptical of old solutions to new situations. A takeaway for one participant of Mr. Sengupta’s simulation was to question his assumptions more. In fact, suspending judgment is often counter to successful businesspeople’s preferred mode of taking immediate action.
• Embrace learning. Here, experience is essential; managers will learn from mistakes if there is a reflective mechanism in place and a culture that values using it. One way to do this is to provide consistent feedback on results and to focus coaching discussions on how those results were obtained.
• Delegate decisions involving people, strategy, and crisis to subordinates. The benefits of experience are enhanced when it involves judgments related to outcomes, not just technical expertise or operational tasks.

In fact, experience is not the critical factor for decision-making; judgment is. Good judgment, however, requires experience—if it is the right experience. Mr. Shultz might wonder whether he has enough managers with strong judgment experience regarding their decisions about people, strategy, and crisis.

¹ Stone B. Starbucks plans return to its roots. The New York Times. March 20, 2009:B1.
² Dvorak P. Dangers of clinging to solutions of the past. The Wall Street Journal. March 2, 2009:B4.
³ Tichy N, Bennis W. Judgment: How Winning Leaders Make Great Calls. New York: Portfolio, 2007.