ABSTRACTOur purpose is to understand more fully the role of managerial cognition in organizations. As such, we adopted an experimental approach in studying the use of expert processing in the categorization of organizational problems. We compared the problem categories of 38 chief executive officers (CEOs) in the machine tool industry (experts) with those of 30 MBA students (novices). The results of a problem sorting task indicated that experts tended to categorize the ill‐structured problems significantly faster than novices. Experts also had greater variance in the number of categories used and they incorporated more problem information. Follow‐up analyses revealed that the number of categories was negatively related to experts’age and positively related to the number of processes and services offered by their respective organizations. These findings are consistent with the contention that experts rely on well‐developed, context‐dependent heuristics in the early stages of their decision‐making. It is argued that such heuristics allow organizational experts to make sense of strategic issues quickly, and respond in an efficient and effec