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10 views

Biases+and+Errors+In+Decision+Making

Uploaded by

njsmajun
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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This sheet is a handout material from Udemy course:

Organizational Behaviour
All rights reserved (Robert Barcik, [email protected]).

Biases and Errors In Decision Making


Making decisions can sometimes be very challenging, filled with unexpected difficulties. In
our minds, there are hidden shortcuts, known as cognitive biases and errors, that can lead
us off track without us even noticing. To avoid these mistakes, we need to understand what
they are, how they can affect us, and what we can do to manage them. Let's explore some
of these mental obstacles and come up with strategies to improve our decision-making.

Imagine your brain as a magician's hat, brimming with various tricks to help you navigate
through life's complex illusions. These mental tricks, or cognitive biases, can sometimes
make our decisions easier, but can also often mislead us. Let's take a peek at some of the
usual suspects:

● Confirmation Bias: Think of this as our mind's tendency to hear what it wants to
hear. We all have a habit of paying more attention to information that supports our
existing views and ignoring the rest. For instance, if a boss already has an idea in
their mind that employees working from home are less productive, they may only
pay attention to missed deadlines, conveniently ignoring instances when the remote
team outperformed their in-office counterparts.
● Next, Anchoring Bias: This bias is like going shopping and getting stuck on the first
price you see. Our minds tend to rely too much on the first piece of information we
receive (that's the "anchor") and then adjust our decisions around it. It's like that first
salary offer in a negotiation that sets the bar for all following discussions,
regardless of whether that bar was set too high or too low.
● Overconfidence Bias: This is like the overconfident character in movies who thinks
they can't fail – only to end up in a fix. We all sometimes overestimate our abilities
or the accuracy of our predictions. For example, a project manager might
underestimate how long a task will take due to overconfidence, leading to missed
deadlines and stressful last-minute adjustments.
● Next we have Availability Heuristic: This bias is our mind's tendency to predict the
future based on what movie is currently playing in our mental theater. We
overestimate the likelihood of events that are fresh in our memory or that evoke
strong emotions. Like a manager who overestimates the risk of a data breach just
because they recently heard about a high-profile cyber attack in the news.
● Then we have Escalation of Commitment: This bias is a bit like a gambler who,
after losing a few hands, keeps playing in the hopes of winning back the money
already lost. We tend to stick to a failing plan simply because we've already
invested so much into it. Picture a company that keeps pouring money into a sinking
project just because they've already spent so much on it, even though all signs point
to impending failure.
● Hindsight Bias: This bias is like watching a movie for the second time and saying, "I
knew that was going to happen!" In reality, there was no way we could have
predicted the outcome. After a business plan fails, for example, team members
might claim they knew all along it was doomed, although no one could've foreseen
the failure.

Now that we know the mind's tricks, how can we counteract them? Here's the game plan:

● First, Know Your Tricks: Recognize that these biases exist. Be mindful of them and
look out for situations where they might mislead you.
● Invite More Players: Get different perspectives. Encourage diversity of thought, ask
for feedback, and consider opinions that challenge your own. It's like getting a
second, third, or fourth opinion before making a big decision.
● Also Use Your Mind Tools: Don't just go with your gut or what feels right. Apply
critical thinking, evaluate the evidence at hand, and be willing to change your mind if
the facts support it.
● Then Replay Your Moves: Reflect on your past decisions. Try to spot when and
where these biases might have influenced your decisions. Just like an athlete
reviewing game tapes, this can help you understand and improve your
decision-making process.
● And finally Follow the Rulebook: Use structured decision-making frameworks.
These can help guide your decisions and prevent them from being influenced by
biases. For instance, a SWOT analysis can help provide a balanced view of a
situation.

In conclusion, while biases and errors lead us off track in the complex game of
decision-making, being aware of them and understanding how to minimize their influence
can help us make smarter, more rational decisions. The key isn't to achieve perfection – it's
about learning to navigate our mind's maze with a sharper awareness of the tricks and
turns that might mislead us.

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