A young banker asked a retiring banker what the secret of success was in banking, and he responded, “Good judgment.”

The rookie then said, “How do you get good judgment?”

The older banker said, “Experience.”

To which the youngster asked, “How do you get experience?”

And the retiring banker said, “Bad judgment.”

Or as Mark Twain famously said, “Good judgment comes from experience, and experience comes from bad judgment.”

Anyone who has ever been in business can identify with that statement.

As a business leader and parent, the one attribute that I value most is a person’s good judgment. Judgment is the result of a person’s decision-making. When your values are clear, making decisions becomes much easier.

Nothing replaces good judgment. International Judgment Day is January 17 every year.

Good judgment is the ability to make reasonable decisions in a set point of time. It is evaluating circumstances, weighing the positives and negatives and considering alternatives.

“In the face of ambiguity, uncertainty, and conflicting demands, often under great time pressure, leaders must make decisions and take effective actions to assure the survival and success of their organizations,” said leadership expert Warren Bennis. “This is how leaders add value to their organizations. They lead them to success by exercising good judgment, by making smart calls when especially difficult and complicated decisions simply must be made, and then ensuring that they are well executed.”

Judgment comes into play in many ways. People can make judgments about you by the company you keep. When young Steve Jobs was desperately trying to get funding for Apple Computer, he was seen in a restaurant with a representative of the Rockefeller venture capital firm. The person who saw him had already turned him down but reconsidered and invested $150,000 in Apple Computer, helping them get up and running.

A variety of challenges confront leaders and team members every day: budgets, mistakes, delays, staffing, conflicts, safety, profits – all call for making decisions that can affect an organization’s future. When decisions must be made quickly with limited information, being able to trust your good judgment is central to making the right call.

What are the skills you need to improve your judgment?

• Ethics is all about knowing what is right and wrong. Is it fair and legal? When I talk about ethics in my speeches, I introduce the subject by saying, “Act like your mother is watching.”

• Consistency is expected. You can’t let emotions or intense situations affect your judgment. Even the best business plans will fail without a dedication to consistency.

• Listen to learn. Listening to others allows you to collect and assess important information, rather than relying on your opinion or personal bias. Good judgment is about making the best decisions., rather than relying on your opinion

• Accept your mistakes. Everyone makes mistakes. Accept responsibility and move forward. The important thing is to learn from your mistakes, figure out what went wrong and don’t repeat them.

• Learn from experience. As the opening story says, nothing beats experience in improving your judgment. If something went wrong, do things differently the next time, and if things went right, learn from your decisions.

In addition to those skills, John Spacey, writing on Simplicable.com, emphasizes the need for pragmatism and situational awareness. Accepting “difficult real-world conditions such as uncertainty, grey areas and imperfections” is a must for making sensible and sound decisions. Equally important is the “ability to be highly observant and diligent to respond to fast moving situations,” he writes.

A business owner who was nearing retirement invested her life savings in a business enterprise which had been elaborately explained to her by a swindler.

When her investment disappeared and the wonderful dream was shattered, she went to the office of the Better Business Bureau. They asked, “Why on earth didn’t you come to us first? Didn’t you know about the Better Business Bureau?”

“Oh yes,” said the businesswoman sadly. “I’ve always known about you. But I didn’t come because I was afraid you’d tell me not to do it.”

It’s a sad story we’ve heard over and over again. Too bad her judgment didn’t lead her to ask questions that she might have asked about the proposed investment: Is this a risk I can afford to take? Is this person honest and trustworthy? Is this the right time to take such a gamble? What if it doesn’t work out as planned?

Simple but necessary questions could have saved her a life of regret.

Mackay’s Moral: Judgment is knowing which door to open when opportunity knocks.