Blog: How We See the World is How We Manage our Company

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As good leaders and managers within our businesses, we make hundreds of decisions each day. Those decisions typically revolve around strategy, execution, cash, and people.

We read articles and books on how to grow our companies or teams, we attend seminars on strategy and execution, and we faithfully listen to the latest podcasts on people management. We are committed to knowing more, so that we can do our jobs better.

Whether we are willing to admit it or not, oftentimes we make the wrong decisions, yet we consider ourselves to be smart leaders. Why is it that smart leaders make dumb decisions? It’s because they rely on Cognitive Bias.

What’s a cognitive bias, and how does it work? A cognitive bias is a systematic error in thinking that affects how decisions and judgments are made. It is usually a result of our brains trying to simplify information processing or, simply put, the brain’s rule of thumb that helps us quickly make decisions.

Things like social pressures, individual motivations, emotions, and limits on one’s ability to process information can all contribute to biases. Memory and attention span can also have a major impact on cognitive bias.

There are several types of cognitive bias. Here is a small sample:

Confirmation Bias: People like what they like. A confirmation bias is when a person listens only to information that confirms what they already believe, instead of being open to another viewpoint.

Self-Serving Bias: A self-serving bias is the tendency to blame others when bad things happen and give yourself credit when positive things happen. When you get a raise, it’s because you’re a stellar employee, but when you don’t get the raise, it’s because your boss is a jerk.

Availability Heuristic: People often ignore research or access to information that is readily available to them. For instance, one might argue about the effects of driving without a seat belt by saying he or she knew someone who survived two car accidents because they did not buckle up.

Choice-supportive Bias: When someone makes a choice, they often defend it, even if it is ultimately a flawed or the wrong choice. For instance, you may believe your dog is the best in the world, although it has a history of biting people.

While it is very normal to rely on your biases for your decisions, psychologist Daniel Kahneman has shown that reliance on cognitive bias decision making often results in poor decisions being made. Our intuitions lead us astray, or deliberate reasoning is absent from the decision-making process when we are stressed or tired.

To get away from relying too heavily on our biases, we need to broaden our scope of decision-making thoughts. Here are some ideas to shake up your cognitive bias thinking:

Think about the future and make three estimates: To improve your accuracy, work up at least three estimates — low, medium, and high — instead of just stating a range. People give wider ranges when they think about their low and high estimates separately, and coming up with three numbers prompts you to do that. Your low and high guesses should be unlikely, but still within the realm of possibility. With this approach, you’re less likely to get blindsided by events at either extreme — and you can plan for them. Chances are, your middle estimate will bring you closer to reality than a two-number range would.

Seek advice: Outline objectives on your own before seeking advice so that you don’t get “anchored” by what others say. And don’t anchor your advisers by leading with what you already believe (“I think our new CEO needs to have experience with acquisitions — what do you think?”). If you are making a decision jointly with others, have people list their goals independently and then combine the lists.

Use joint evaluation: In separate evaluation mode, people pay attention to what they can easily evaluate — for example, previous employment history — and ignore what they can’t. They make a decision without considering all the relevant facts.  A proven way to snap into joint evaluation mode is to consider what you’ll be missing if you make a certain choice.

Vanishing Options Test: In their book, Decisive: How to Make Better Choices in Life and Work, authors Chip and Dan Heath suggest you assume you can’t choose any of the options you’re weighing and ask, “What else could I do?” This question will trigger an exploration of alternatives. When people imagine that they cannot have an option, they are forced to move their mental spotlight elsewhere — really move it — often for the first time in a long while. If more than one idea looked promising, you might split the difference.

If you want to have different results within your company, you must continue to learn beyond our biases.  Different information, and thinking, can create better results.

Todd Palmer is founder and president of Troy-based Diversified Industrial Staffing and Diversified PEOple LLC, and a regular contributor to DBusiness Daily News.​