A Roadmap to Better Decision Making: Reducing Cognitive Biases

This week, we're taking a look at heuristics and cognitive biases and how they can short circuit the development of sound corporate and business strategies. We'll also look at ways you can train yourself to spot these traps and keep progressing toward your goals.

For starters, what are heuristics and cognitive biases? Well, in simple terms, they are shortcuts your brain uses to help you make decisions faster. The problem is, faster doesn’t always mean better, or even right.

They can be especially troublesome in a business setting.

To help illustrate, let’s take a look at five common ones.

You can find many more, along with explanations, in the links below.

Availability Bias – Availability bias appears when you give too much weight to a piece of evidence or data because it occurred recently, or is easy to recall.

In a business setting, this can appear as reactionary behavior. "X occurred, therefore we must do Y now." You're not taking action because it is a deliberate part of your strategy. Rather, you're reacting to some event, making a good business outcome uncertain.

Availability bias is often paired with our second example.

Confirmation Bias – Confirmation bias appears in two common ways. First, when we actively seek out information that validates our hypothesis, and avoid (even passively!) conflicting information.

Second, this bias can cause us to misinterpret or confuse data. When we do this, we're at risk of drawing conclusions that are not actually supported by the data.

Overload – Information overload is our third example, and it is exactly what it sounds like. We can only process so much information in a given period of time, and handle data sets to certain limits.

This bias can cause "Paralysis by Analysis" in your business in any number of ways.

When choosing key metrics for a project, when considering how many vendors you need, when reviewing data for market or other research.

There will always be more data, but you must stick to your deadlines and make a decision.

There is also a tradeoff between the volume of data you choose to review, and the depth of your understanding of that data.

Framing – Framing is how we look at an issue, and how choices are presented to us. For example, framing can be used to make a particular outcome look desirable, playing on our natural Loss Aversion Bias.

Also, consider how many issues are presented as "yes or no" or some other binary construction. Next time you see one, pause. Ask, "Are those really the only two options?" More often than not, there are other options available if you take the time to discuss them and consider additional perspectives.

Groupthink - Groupthink is a herd mentality. "Everyone else is doing it!" was not a reason you could use as a kid. You definitely shouldn't use it in your business.

You can see how these - and the many other - heuristics and cognitive biases can wreak havoc on your operations and strategic planning. But there is good news.

A strong organizational culture and good decision-making architecture (systems, separation of duties, and more) will help keep cognitive biases and heuristics at bay.

At the individual level, mentors, coaches, and an advisory board are also good options for leaders to reduce the effect of biases.

Check out the video, and the links for more reading and information.

https://www.youtube.com/watch?v=k0Dt9aJl2nw

Additional Links, for more reading:

https://thedecisionlab.com/biases/

https://www.businessinsider.com/cognitive-biases-2015-10#anchoring-bias-means-people-rely-too-heavily-on-the-first-piece-of-information-they-hear-when-making-decisions-2

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About the Author:

Matt Beckmann is the Founder & Managing Director of Ascent Consultants. In addition to experience as a former Chief of Staff to the Missouri Auditor and as a Corporate Vice President and General Counsel, he has advanced training and certifications in law, business, coaching, athletics, and leadership. His blog content, inspired by his deep passion for unlocking his reader's best potential, consistently equips business owners and individuals with the knowledge and resources to overcome obstacles that may be hindering growth.

Ascent Consultants provides business and strategy consulting, executive and leadership coaching, and leadership assessments. By converting client growth goals into an actionable "game plan," we help companies and individuals unlock their full potential.