Improving decision-making by understanding cognitive biases
Introduction
As Senior Managers, decision-making is one of the most important and challenging aspects of our roles. We are, on a regular basis, faced with multiple problems. Some of which can be complex and have many connected and dependent parts. In this article, we explore some of the cognitive biases that often stand in the way of effective decision-making. We look at how we tend to overemphasize information that fits our world view, how we love to jump to conclusions and why we still think that one single leader can or will fix it all. We will also explain the following three suggested high-level strategies for overcoming these biases.
Invite a troublemaker to the table
Make guesses, not predictions
Shift the spotlight from heroes to context
Background
How do I know I have a good solution for my complex problem?
The short answer is:
- You don't.
Less complex problems usually come with known patterns and natural solutions while complex problems, on the other hand, often have many connected and dependent parts. They also have the tendency to affect other areas of the business and in some cases even amplifying the problem itself. There is simply no way of knowing in advance if the solution will work.
There is no best practice or even good practice to lean on, and digging into conventional analysis usually does not help much either. More so, complex problems are categorized by their lack of visible cause and effect, meaning that even after the problem is solved, it might be hard to pinpoint what actually fixed it.
Sounds scary, right?!
This is where things get interesting when it comes to the traditional way of thinking in decision-making. Tackling a complex problem with a linear mindset, might solve the problem, but honestly, it is most likely pure luck. We do want to trust our instincts and listen to our gut feelings, but we do not want our Management Team to solely base their decision-making on luck. Trust me.
Now, let’s add a couple of biases to the mix.
We are often led by traditional ways of reasoning and the fact that we’re human comes with consequences (speaking of complex). By seeing and understanding how our minds work and what affects us, we start to see how difficult decision-making in complex situations can be.
But wait, my problems aren’t complex.
You are right, not every problem is complex. However, we can with a high degree of certainty say that most problems that you and your Management Team face will be - at some point, to some degree. The reason for this is that the problems are often characterized by multiple stakeholders, intricate causal relationships and a high degree of uncertainty. In such an environment, even seemingly simple problems can quickly morph into complex ones, requiring a more nuanced approach to decision-making.
So, buckle up and let’s explore three strategies you can use for radically improving your decision-making process.
Strategy 1: Invite a Troublemaker to the table
A Management Team decided to bring in consultants from two different companies to work together on one common problem. They believed that the consultants had complementary skill sets that could lead to better solutions for the complex issues they were facing. However, some members of the company were skeptical:
What happens if they don’t agree with each other and give us contradictory advice?
But that’s the thing. When dealing with complex issues, we need to view the problem from different perspectives. Contradictory advice can be a blessing in disguise. However, not any perspective will do; we need perspectives that diverge from the norm and highlight information that we might have missed or simply ignored (consciously or unconsciously).
Psychologists call this the Confirmation Bias and it confirms our disability with narrow perspectives. It refers to our preference to look for information that confirms our existing beliefs while disregarding contradictory evidence. This bias affects not only our decision-making but also the way we interpret and process information, leading to flawed conclusions (Nickerson, 1998).
This may seem trivial, but a study found that companies with diverse management teams had a 19 percent higher innovation revenue compared to those with less diversity (Lorenzo et al., 2018). Encouraging diverse perspectives helps overcome confirmation bias and fosters environments for better decision-making.
Enter the troublemaker.
A troublemaker is a person who dares to challenge established norms. The one who asks the tough, and many times uncomfortable, questions and is not afraid to propose unconventional ideas or solutions. They can serve as the antidote for group thinking where the desire for a groups’ conformity and self-censorship leads to dysfunctional decision making (Janis 1972). It doesn’t matter if the troublemakers’ ideas are right or wrong, raising the opposite view and new perspectives encourages debate and critical thinking as well as improving your way of making decisions (Nemeth 2018). You may see this person as the devil's advocate, or just someone who loves to stir the pot. Regardless, their role is crucial in promoting new perspectives, pushing boundaries and overcoming confirmation bias.
Strategy 2: Make guesses not predictions
As humans, we love jumping to conclusions, looking for quick-fixes and thinking that one single solution will fix everything. This is the hallmark of linear thinking and the belief that all problems have one single cause and have one clear and defined path from A→B, that can be planned, measured and neatly managed.
We’re sorry to break it to you, this is not how it works.
I get it, though.
Management Teams are under a lot of pressure a lot of times and when you have a one hour-meeting and decisions need to be made, it is easy to jump to conclusions too fast or accept the first viable solution – a quick fix.
But how do I know it’s the right solution?
Truth is, for complex problems it is impossible to know. What is certain, however, is that the process of making that decision was most definitely not effective. In situations like these we need a process that helps us explore multiple alternatives and challenges our assumptions as quickly and cost-efficient as possible.
In other words, we need to swap our tunnel vision for a highway of possibilities to avoid the temptation of looking for quick-fixes and thinking that each problem has one single cause that can be easily fixed with one single solution. We need to start making guesses instead of predicting an outcome that is impossible for us to predict at that stage.
I, and many others with me, call these guesses experiments.
Experiments are the scientific way of thinking where we narrow down the problem into a set of hypotheses. These hypotheses are nothing more than guesses about a possible future reality (and our solution to the problem). The exciting part begins when we decide to instead of speculating on what might work, we go out and try a couple of experiments. Each experiment is a small trial that aims either to justify our assumption of what we thought was a good idea or verify that idea. In either way we are looking for knowledge and proof that we are heading the right way. Experiments act as a compass for your journey. Unlike a traditional map that can show you the shortest path between point A and B, the compass will inform you if you are heading in the right direction or if you need to try another path or maybe just adjust your position a bit.
Similarly, for complex problems, there is no map to rely on.
By adopting a culture of experimentation in your Management Team, you acknowledge that the world we operate in is complex, uncertain and non-linear and that there is no perfect map to follow in uncharted terrains. Instead, you focus on testing various ideas, learn from the outcomes and iterate until you discover the best way forward (McGrath 2013) – which may be the best possible solution for a while, until context changes again. This process will not only make your decision-making better in terms of navigating complexity and avoiding biases, but it also makes it much more innovative and fun.
Strategy 3: Take the hero down from the pedestal
“Ten things Elon Musk does every morning!”
“Five lessons from Steve Jobs!”
“Seven traits of great leaders…” and so on.
We have all seen headlines like this. They are intentionally designed for you to click. But why do they even work? Why do we care what type of breakfast cereal Mr. Musk eats and how is that even remotely useful for Senior Managers trying to navigate complex problems in their organizations?
- It’s not! Not even close.
Our fascination with these headlines is twofold; one, being the concept of Hero Management or Great Man Theory that places a strong emphasis on the abilities of a single charismatic leader to solve complex problems, someone to drive the organization to success. The other aspect is that it is deeply rooted in our history and social fabric that we like to copy successful people, in hope that we too will be successful. Look at Jeff Bezos and Amazon, he banned PowerPoint in meetings and therefore many other companies did the same and saw this as their way to success. The belief that one single person (often Senior Managers) possesses unique and almost mythical skills and qualities that drastically creates outstanding results is unrealistic and often create more problems and uncertainty than it solves.
Both Hero Management and Great Man Theory are closely related to the concept of Fundamental Attribution Error. This bias causes us to overemphasize personal characteristics and underestimate the situational factors when explaining someone’s behavior and success in a given situation. Put simply, it is like crediting the quality of a great wine solely to the winemaker’s expertise, while ignoring the contextual factors such as the type of grape, quality of the soil and the weather conditions of that vintage.
Similarly, in organizations this can result in an imbalanced understanding of the factors that drive complex problem-solving such as the importance of collaboration, diverse perspectives, experimenting with new possibilities and holistic thinking.
Shifting focus from individuals to context requires us to gain a deeper and more nuanced understanding of circumstances, relevant factors, people’s values, and conditions surrounding the problem. This involves engaging, finding and interpreting signals from the organization as well as, fostering diverse perspectives and exploring the different assumptions and constraints that are influencing the problem. Understanding contexts can at times be tricky and a bit messy, but boy is it worth it.
Not only does it help us break away from the hero-centric mindset and allow us to recognize the true complexities of our organizational challenges, but also it helps us create better, more balanced solutions that will actually solve the problem.
Conclusions and Recommendations
In conclusion, effective decision-making for complex problems requires a shift in mindset and approach. Senior Managers are best advised to be aware of the cognitive biases that can hinder their ability to navigate complexity and adopt strategies that foster diverse perspectives, experimentation and a focus on context.
Strategy 1: Invite troublemakers to the table. Encourage individuals who think differently or challenge the norm to participate in the decision-making process. Focus on creating a safe space for open dialogue, promoting divergent thinking, and recognizing the value these individuals bring to the organization.
Strategy 2: Make guesses not predictions. Instead of focusing on quick-fixes or single-solution thinking, formulate a hypothesis about the problem. Design a couple of experiments on possible solutions, launch and evaluate the results. Remember that learning from both successful and unsuccessful attempts is crucial to refining your approach.
Strategy 3: Take the hero down from the pedestal. Strive to understand the context surrounding the problem. Assess the factors that influence and are influenced by the issue and consider how these elements interact with one another.
Embracing these strategies will help organizations become more adaptable, resilient and innovative, ultimately leading to better outcomes and long-term success in an increasingly complex world. Remember, the key to tackling complex problems lies in challenging assumptions, embracing diverse perspectives and remaining open to alternative solutions.
Credits
Before wrapping this up, I must acknowledge Anna Christina Günster, whose keen insights and unique viewpoints have greatly enriched this article. Her invaluable input has illuminated some of those tricky corners of complex decision-making we often miss, adding a critical depth to our discussion. So, Anna, a massive thank you for being part of this journey and for making our conversation that much richer.
References
Nickerson, R. S. (1998). Confirmation bias: A ubiquitous phenomenon in many guises. Review of General Psychology, 2(2), 175-220.
Lorenzo, R., Voigt, N., Tsusaka, M., Krentz, M., & Abouzahr, K. (2018). How diverse leadership teams boost innovation. Boston Consulting Group.
Janis, I. L. (1972). Victims of Groupthink. Houghton Mifflin.
Nemeth, C. J. (2018). In defense of troublemakers: The power of dissent in life and business. Basic Books.
Rita Gunther McGrath 2013, "The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business,
