Understanding the elements and outcomes of executive wisdom: A strategic approach

The purpose of this paper is to: (a) offer rationale for the importance of an increasingly important organizational management topic – the wisdom of top managers – what we call executive wisdom; (b) develop a theoretical framework for the construct, including core components and outcomes, and (c) provide implications for practice. The research in several related literatures is reviewed and synthesized to provide the foundation for the development of this theoretical framework. Applying the extant literature on wisdom to the specific context of a top-level business manager, we argue that there are four foundational characteristics of executive wisdom: (1) Knowledge, developed by prior learning and experience, (2) moral maturity, (3) reflective strategic decision-making, and (4) ability to manage uncertainty. Executives possessing such characteristics are: (a) able to make enlightened strategic judgments that are (b) implemented as principled actions. The effectiveness of such implementation is contingent upon, among other moderators, the executive's leadership skills. We view each of the characteristics as necessary but not sufficient to possess and benefit from executive wisdom. The principled actions undertaken by those possessing executive wisdom will, when compared to other executives, have a greater likelihood of leading to valued outcomes indicative of organizational effectiveness, including enhanced stakeholder trust and loyalty, reputational capital, and stronger financial and social performance. We believe that the main arguments developed in this paper will help improve managers’ understanding of how to become a wise executive and to realize the benefits of doing so. From a theory perspective, this paper adds to the growing body of literature in a new and increasingly valued area of research.