In today’s uncertain and volatile environment, leaders have to make a proliferation of good decisions to ensure the business continues to succeed and move forward. What sets a good leader apart is their ability to make significant decisions with speed and accuracy. Isn’t good leadership all about making good decisions?
We make decisions every day, some more critical, others a little less so; however, do you know if your decisions are good or if they were influenced by your own biases? Each of us makes decisions based on a myriad of information sources, including our own experience, data gathered, and other individuals’ inputs. The fact is we all have personal biases that have influenced those decisions.
So, when we think of decision-making, the classical approach uses decision trees, looking at probabilities, and arriving at a conclusion. This has worked well in the past decades; however, given the rapid chance pace of change in our VUCA (volatility, uncertainty, complexity and ambiguity) world, this approach alone may not be enough. In recent years, a lot of work has been done on behavioral biases that have impacted the decision-making process and how methods of the past may not guarantee the same results in the future, and I so happened to have a discussion with Nikhil Raval on this very subject.
Why Is It So Hard to Make Good Decisions?
Nikhil is a Leadership, Learning, and Change-OD Expert. He harbors more than 25 years of experience and works with senior leaders and firms across the globe on challenges at the intersection of Business and People. He spent fifteen years working in the US, which included nearly ten years in Financial Services with firms like Charles Schwab, Franklin Templeton and American Express. More recently, he was also the Managing Director of Duke CE in India.
In my interview with him, I asked; Why is it so hard to Make Good Decisions, and how does the brain impact those decisions?
He responded by relating that all good leaders need an excellent decision-making process and method(s) to ensure precision while making those decisions. However, despite having a great approach, your decisions might still get hijacked because of one biases.
He related that three common biases impacting Decision Making in the Business World:
Sunk Cost Bias
The first is sunk cost bias; here is where our deep-seated prejudices make choices that justify past choices even those choices no longer seem valid. The expense has already been incurred and can’t be changed going forward and it is probably irrelevant to decision-making.
The next is confirmation bias; this describes our underlying tendency to notice, focus on, and give greater credence to evidence that fits our existing beliefs. For example, if we think drinking eight glasses of water is good, we tend to look and find the reports supporting this notion. This could be true for many other beliefs, from investing to parenting or leadership style.
The third bias is anchoring bias; this is a cognitive bias that causes us to rely too heavily on the first piece of information we are given about a topic. Then we use it as the primary piece of information that heavily influences our choices.
So the logical question is, how do you overcome these biases if you have them, and what are some of the methods to overcome the three common biases?
Nikhil went on to share the three previous biases and the strategies to overcome them:
Biases and Strategies
- Sunk Cost Bias: Sometimes trying to avoid the fear of failure or having the pressure get a result, you start to question yourself. You don’t want to be that black sheep or fail when everyone is looking to you for results.
STRATEGY: Look for someone who has a fresh pair of eyes or a different perspective that could be a counterbalance to your view.
- Confirmation Bias: You only find data that supports your point of view or hypothesis.
STRATEGY: Look for contradicting evidence (you know it exists) and ensure you review them. You may still make the same decision; however, you would have done your homework and got a more balanced perspective.
- Anchoring Bias: Making decisions based on early information, or we become anchored by values that aren’t even relevant to the decision at hand.
STRATEGY: Question the assumptions beyond the first piece of evidence by asking How and Why questions.
Ending our discussion, Nikhil mentioned three additional points to consider in making better decisions; firstly, you have to be self-aware of your style; secondly, make a decision diary to track outcomes of your previous decisions; and thirdly, just slow down, take a step back and reflect especially for crucial decisions.
So here are three questions for you to reflect on about decision making:-
- How do you tend to make your decisions?
- Which biases( if any) have impacted your business decisions?
- Which strategies should you use to overcome your biases?
ABOUT THE AUTHOR:
Global Speaker, Facilitator, Best Selling Author and Business Communication Coach