11-10-2025
Effective business leaders know that committee decisions can be powerful — or perilous. In a new paper, “Policy by Committee,” the Daniels School’s Kaushik Vasudevan, Toomas Laarits (NYU), Ben Matthies (University of Notre Dame) and Will Yang (Yale), mine 40 years of decisions by the Federal Open Market Committee (FOMC). Examining decades of evidence about how experts decide on macroeconomic policy, Vasudevan and his colleagues uncovered actionable business insights on group decision-making, especially when uncertainty and diverse models collide. Here’s what every manager needs to know to harness the benefits of committees while avoiding common pitfalls.
Most organizations form committees to capture a broader set of information. But Vasudevan’s research on the FOMC reveals that productive group decisions come not just from collecting information but from aggregating distinct frameworks — what the paper calls "models" — that members unconsciously or consciously use to interpret shared facts. These models are not simply informational; they reflect each member’s deeply rooted experience and cognitive style.
Actionable takeaways for model diversity
Cultivate diversity explicitly by appointing team members with varying educational backgrounds, professional experiences and regional perspectives. The FOMC mixes business experts with PhDs, all experts in their fields. Structural diversity is not a box-ticking exercise; it means ensuring each member interprets information differently, creating a built-in safeguard against groupthink.
The study finds that most FOMC disagreements arise not because members focus on different issues, but because they interpret the same data differently — a property called "model heterogeneity.” The most effective committees structure discussions so that all voices — including dissent— are surfaced early and are treated respectfully.
Actionable takeaways for structuring discussions
Adopt roundtable formats where participants offer their interpretations first. Then they debate decisions. Rotate the order of speakers. Proactively seek out opinions least aligned with recent data, and present those first to challenge prevailing interpretations. Creating a process that highlights conflicting views helps guard against premature consensus and builds the foundation for robust decision-making.
“The FOMC discussions platform opposing perspectives early in the meeting,” says Vasudevan, an assistant professor of finance at the Daniels School. “They actually put all the disagreements out in the room, so everyone had the full perspective. You might imagine the alternative: if you don't structure the meeting that way, people really just converge. One member may not want to voice a disagreement because five other people have already taken one view.”
Balance responsiveness and overreaction to recent data. The research makes it clear: Committees tend to favor the perspectives of those whose models best fit the most recent data. While this can boost accuracy when recent trends are informative, it also risks “overfitting” — making decisions that are overly sensitive to short-term fluctuations or noise.
Actionable takeaways to avoid recency bias
Managers should recognize this inherent bias and build in mechanisms for reflective review. Encourage periods of introspection: Review past decisions and the rationales behind them, then compare outcomes with initial expectations. When recent data takes center stage, explicitly discuss its reliability and context. Document decisions and reassess them after time has passed to learn whether the weighting was justified.
A core insight from the paper’s theoretical framework is that committees can outperform even their best individual experts — but only under certain conditions: The data must be sufficiently informative, the models must be genuinely diverse, and members must be willing to consider perspectives other than their own. A degree of stubbornness is healthy, buffering the group against knee-jerk reactions to incomplete or noisy data.
Actionable takeaways for valuable ‘stubbornness’
Normalize uncertainty and disagreement. Instead of pushing for premature alignment, name the uncertainty explicitly in meetings. Value participants who challenge consensus for thoughtful reasons. Provide conditions that make dissent safe and clarify that responsible ‘stubbornness’ — rooted in expertise — should be valued, not shunned.
The true power of committees lies not in compromise, but in their ability to harness diverse models and healthy disagreement to reach stronger decisions. By intentionally structuring team discussions, valuing dissent and welcoming uncertainty, organizations can move beyond consensus for its own sake and build a process that adapts to change and complexity. When leaders treat diversity and model heterogeneity as strategic assets, and not as obstacles, they unlock value that no individual could deliver alone.
