A Simple Rule is Born: How CEOs Distill Heuristics

Managerial heuristics play an important role in decision-making and positively contribute to strategy, innovation, organizational learning, and even the survival of a firm. Little is known, though, about the process through which heuristics emerge. Following a grounded theory approach, we develop a process model of how managers create and develop heuristics from experience. The 4-step model - dissonancing, realizing, crystallizing, and organizing - captures the sequence of cognitive schemata that start with a flawed assumption, give rise to heuristics that tend to be born in pairs, and end with mature and shared heuristics. With these findings, we contribute to the literature on heuristics by offering a model for the process of their emergence, a view on how feelings initiate, guide, and strengthen this process, and a description of the role played by the environment, enriching the ecological rationality perspective.