Businessman looking at maze entrance
Feel free to celebrate explorers who found shorter routes from here to there. Marvel at feats of engineering that significantly reduced travel and shipping time. But think carefully and scrutinize those mental shortcuts that speed up decisions. You may be dipping into bias.
Question everyone’s thinking, especially your own. Best intentions and well-crafted plans are undone by bits of flawed thinking. The frustrating thing is that these bumps on the road to deciding usually feel pretty good in our heads.
They make sense and make us feel smart. But cognitive biases can sink our decisions. And with that can go a whole business. Afterall, what is a business but a series of decisions.
First, go ahead and dump the term “cognitive bias” if it feels too technical. It sounds like we need a degree to diagnose it, even in ourselves. You can call it “flawed thinking.” But if reading this is going to be of any value, you should be able to recognize some of these mental flora and fauna when you are done.
Remember that freshman-year-of-college lesson in rhetoric and our passing encounter with logical fallacies? These were the fouls you could commit in the sport of argument. We may remember the ad hominem fallacy, where we skip the issue and attack the person.
Cognitive biases are similar to these fallacies, and they are important to business leaders and decision makers.
Let’s start with confirmation bias. Many regard this as a “gateway” cognitive bias. Try it once and you’ll be well into illusion of transparency fallacy in no time. But you won’t know it.
With confirmation bias, we know what we are looking for, and we see evidence of it where we look. Our expectations help us zero in on the evidence. If it’s a proposal, a project report, a resume, or a promotion and we dive in with our confirmation bias in full effect, what might happen?
Options and possibilities suddenly become narrow (and manageable). We quickly find what we need to mistake our opinions for facts. People and situations conform to our personally held assumptions about their performance and other qualities. We confirm our rightness. And for leaders, that’s always a plus.
If you are on the inside looking out, you may see yourself becoming a better boss. Gain an external or effectively objective point of view, and you will see yourself becoming a danger to your organization. And this is the gateway to other biases.
Here and there, you can find a list of 200 (or more) biases. Those are too many to think about. We can cover a few of them. Overall, reliance on biased thinking is not intentional. In business, leaders do not set out to undermine their decisions by inserting bias. It happens. There may be information overload, clarity deficit, compromised recall, urgency of action, or some other factor impacting the moment of decision.
Bias offers to help, but at what price?
You’re a tech company or engineering firm. You are thirty-seven months into an innovation effort. You don’t want to look, but you are about where you were thirteen months into the project. You’ve poured in unmentionable sums of money. You started with 12% of your people dedicated to the project. Now, nearly a quarter of your workforce has been allocated. It’s going nowhere. The fact that there were so many resources assigned to the effort must mean that those decisions were flawless. Your business always wins, so a breakthrough is right around the corner or the next corner. Nothing else could make sense.
You dig in for another eleven months and only quit when a competing firm announces that they have a marketable solution. You’ve passed the gateway and become the poster child for sunk cost fallacy.
This bias keeps you on task into oblivion and loss. You ignore the warning signs, believe in irrational possibilities, and drive your resources off a cliff. You may be overconfident, but guess what? That’s the overconfidence bias, and it pairs nicely with sunk cost fallacy.
Sometimes, there is a sense of heroism or glamor attached to the project. An undertaking may be high-profile or highly visible. Image and public response can bias decision making. A company and its leaders can misthink their way into biases that keep them from focusing on efforts that promise more likely success.
Decisions rule, literally. In the current economic climate, there is no shortage of poor information and other triggers that can make cognitive bias an attractive go to. Decisions made this way are often quick. After we experience the rush of relief that comes from getting the decision out of the way, fixing bias is not easy.
Individuals and organizations pay the price. Decisions dipped in cognitive bias set businesses on trajectories that harm their people, customers, communities, environments, products, reputations, and earnings.
Be aware of what flawed thinking (cognitive bias) looks like and how you do it. Watch your thinking. List your preconceptions before meeting the person, reading the report, considering the proposal, performing the appraisal, choosing the candidate, or deciding on the promotion. Share your preconceptions and decisions with others and take their feedback seriously. Don’t let it scare you, but where your thinking goes, biased or not, your company has no choice but to come along.
1. Commit to recognizing and addressing, in yourself and in others, those instances of flawed thinking called cognitive biases.
2. Know when flawed thinking is likely to kick in, for example when there is a rush to decide, and remain extra vigilant for the tendency to make misinformed, biased choices.
3. Understand how cognitive biases rob your business of the kinds of decisions that optimize its talents and resources.
