CONQUERING OUR BIASES

Strategies to help make impartial decisions

BY Jayashantha Jayawardhana

The carefully vetted and twice interviewed candidate for the post of country head for your new overseas operation is ushered into your room for the final interview. Her resume is impressive, her responses to your tricky questions are flawless and she has excellent interpersonal skills.

You’re convinced that she’s the best candidate you’ve interviewed so far for this particular job. And yet, you feel something is amiss but can’t quite figure it out. You begin wondering whether you should hire or drop her.

This is where you turn to your intuition and the decision will be dictated by it. But unless you occasionally go against your intuition, you haven’t quite put it to the test. You can’t really tell if it’s helping you make the right choices if you’ve never seen what happens when you ignore it.

We shouldn’t rely solely on ‘System 1’ thinking, which refers to automatic judgements that spring from associations stored in our memory instead of logically working through the information at hand.

System 1 thinking isn’t totally unreliable and is critical for survival. For example, it is what makes us swerve at the last moment to avoid a motor accident. But it’s also a common source of bias that can result in poor decision making – because our intuition could lead us astray.

Another source of bias is flawed ‘System 2’ thinking, which refers to deliberate reasoning that’s gone awry. For instance, cognitive limitations or laziness might prompt people to focus intently on the wrong things or fail to search for relevant information.

In their insightful article headlined ‘Outsmart Your Own Biases: How to Broaden Your Thinking and Make Better Decisions,’ published in the Harvard Business Review (HBR), Jack Soll, Katherine Milkman and John Payne explore strategies for overcoming biases, borrowed from research on the psychology of judgement and decision making.

To debias our decisions, it’s essential to broaden our perspective on three fronts – viz. thinking about the future, objectives and options.

THE FUTURE Most business executives love to make optimistic projections. But nearly all of them think too narrowly about the possible outcomes.

Some make a single best guess and stop there – ‘If we build this factory, we’ll sell 50,000 more cars a year.’ Others try to hedge their bets – ‘There is an 80 percent chance we will sell between 45,000 and 55,000 more cars a year.’

Soll et al observe: “Unfortunately, most hedging is woefully inadequate... Projections are even further off the mark when people assess their own plans, partly because their desire to succeed skews their interpretation of the data.”

So how do we address this?

The authors propose that we work up at least three estimates – i.e. low, medium and high – to improve the accuracy of our projections. Our low and high guesses should be unlikely but still fall within the realm of possibility; and our middle estimate will bring us closer to reality.

We can also make two forecasts and take the average.

Another alternative is to project an outcome, take a break (sleep on it if possible), and return to it and project another.

Yet another way is to rely on ‘premortems’ or prospective hindsight where we imagine a future failure and explain the cause. This will help us identify potential problems that ordinary foresight won’t bring to mind. Viewing our own plans and forecasts as an outsider would also help us stay grounded in reality.

OBJECTIVES We must also cultivate an expansive mindset about our objectives. This will help us focus when it’s time to pick our most suitable options.

Most people unwittingly limit themselves by allowing only a subset of worthy goals to guide them, largely because they’re blind to the full range of possibilities.

Early in the decision-making process, we need to generate many objectives. Later on, we can weigh and sift them, and pick the best. We should also seek advice from outside when examining our objectives and modify them as necessary. The rule of thumb here is to never allow ourselves to get anchored to one option.

OPTIONS A decision can be no better than the best option under consideration. Unfortunately, people rarely consider more than one option at a time.

Managers tend to make decisions based on ‘yes’ or ‘no’ questions instead of producing alternatives. Yes/no framing is only one way through which we can narrow our options.

Others include focussing on one type of solution to a problem (what psychologists call ‘functional fixedness’), and being cons­trained by our assumptions about what works and what doesn’t.

We have to overcome constraints that hold us back, and take stock of our options with a deeper and broader approach. This way, it isn’t hard to fight even the most motivated biases.