Decision-making biases accompany us daily, permeating our professional and private relationships and influencing our decision-making process. Even if it’s impossible to be 100% free of biases in thinking and decision-making, being aware of them can help us make more rational and objective choices.
There are different types of biases in decision-making, and each person is more prone to some biases due to their unique personality and experiences.
In this article, we’ll explain what decision biases are and share the most common biases in decision-making, along with examples of how they manifest in the business environment. Finally, we’ll give five simple tips for avoiding decision-making biases.
What are decision-making biases?
Biases in decision-making are systematic errors or mental shortcuts that affect how you interpret information, evaluate options, and make choices. These may be caused by emotions, motivations, beliefs, or social influences.
In other words, if you have a decision-making bias, your judgment is based on subconscious processing of your previous knowledge and experiences instead of objective facts or data.
It’s important to recognize biases in decision-making as they can lead to unfair or inaccurate outcomes in different areas of life, including business. We’ve selected the top 10 most common decision-making biases in management to help you notice these risky mental shortcuts and avoid being influenced by them.
1. Confirmation bias
This bias involves seeking out or interpreting information in a way that confirms your preexisting views while ignoring or downplaying contradictory information. It means finding ways to make your beliefs true by looking for information supporting them.
A very common example of confirmation bias is reading your horoscope in the evening and finding a way to fit what happened to you that day into what the horoscope predicted. However, confirmation bias is widespread in the professional world as well and can lead to ineffective communication and unfair practices.
Example: You’ve come up with an idea and give it to your team to discuss and do market research to test its viability. Then, you cherry-pick the supporting results instead of objectively looking at both sides of the argument.
2. Self-serving bias
Self-serving bias manifests as a tendency to attribute success to yourself and failure to external, situational causes. In other words, we like to take credit for our wins, but we are more likely to blame circumstances or others for our failures.
Self-serving bias often happens in situations when a negative outcome threatens our self-esteem. The reason why we succumb to this bias is that we strive to protect our ego.
At work, this happens often – whenever a project struggles or when we make a mistake, we feel vulnerable and fear that we might lose our status or even our jobs. As a result, we turn to a defense mechanism in the form of self-serving bias.
Example: Last quarter, when your team finalized a profitable project, you took personal credit for it, emphasizing your hard work and management skills. This quarter, your team didn’t reach several important KPIs, and you blamed this on external factors and poor strategic planning at the company management level.
3. Anchoring bias
Having anchoring bias means relying too heavily on the first piece of information encountered on a topic (the “anchor”), regardless of its accuracy or relevance. Anchoring bias can lead to poor decisions in various business situations, from company purchases to salary negotiations.
There can be two types of anchors:
- External anchors are reference points provided by others (e.g., a car vendor shows you expensive new cars first to make you regard used cars in the dealership as cheap);
- Internal anchors are reference points based on beliefs, experiences, or contextual clues (e.g. behavior you learned from your parents as a child).
Example: You are in the process of hiring a new teammate. You notice the candidate’s experience with a specific software program, ask several questions about that topic, and overlook other essential skills or qualities the candidate possesses.
4. Availability bias
Availability bias makes us give greater importance to information we can easily access or remember. The classic example here is having a fear of flying because of plane crashes. While the likelihood of dying in a car accident is much higher, there aren’t many people afraid of using cars as a means of transport.
In the professional realm, this mental shortcut can prevent us from considering all the facts when making decisions. As a result, we risk making uneducated decisions or unfair judgments based only on the information we already have or can easily get.
Example: You decide to purchase a certain staff management software without researching when you hear that several competitor companies are already using it. Just because it’s trendy and used by the competition, you decide it must be the best employee management software out there.
Groupthink is a psychological phenomenon where people support dominant opinions while concealing their own views to avoid conflict or maintain consensus. Groupthink is more prevalent in smaller groups where cohesion outweighs individual thinking.
This bias leads to making decisions without critical evaluation or contradicting viewpoints – sometimes ignoring warning signs and making detrimental mistakes.
In addition, groupthink can impair the company’s creativity due to a lack of new ideas and approaches. To avoid groupthink, companies should intentionally hire people with different backgrounds and values and urge everyone to voice their opinion – especially when they think the organization is adopting a bad idea.
Example: Your company is about to launch a marketing campaign about a sensitive topic. Several teammates have reservations about it but don’t voice them since most colleagues are excited about this idea. When the campaign is launched, it gets considerable backlash, and the company is blamed for wanting to make sales from a sensitive subject.
6. Status quo bias
Status quo bias refers to the preference for the present state of affairs and the resistance to change, even when better options are available. Change potentially involves risk, and we are often uncomfortable putting ourselves in situations where the outcome is uncertain.
This emotional bias negatively affects our ability to make decisions. Our deep-rooted preference for stability keeps us from weighing different options equally. Subsequently, it may cause us to miss out on valuable opportunities and even slow down the growth of a business.
Example: A new software is available that would eliminate many mundane tasks and speed up your team’s workflow. You choose to stick to the old way of doing things, thus stalling your team’s productivity.
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7. Authority bias
Authority bias makes us give greater credibility to the opinions or actions of people we perceive as authoritative. We often assume that those in authority are smarter, more experienced, or more informed; therefore, their judgments and recommendations are more trustworthy. Authority figures could include our company leaders, experts in a particular field, or celebrities.
The authority bias can lead us to accept information without critically evaluating its validity or accuracy simply because it comes from an authoritative source. In reality, of course, this information may be incorrect or biased. It can also contribute to groupthink and conformity within the team or organization.
Instead, we should critically evaluate information from authoritative sources, seek diverse perspectives, and avoid blind obedience to authority figures, promoting more rational and independent decision-making.
Example: Your boss asks you to perform an assignment where you see many flaws. As your boss is an authority figure to you, you do this task, overlooking the issues and staying silent about your concerns.
8. Overconfidence bias
Overconfidence manifests as a tendency to overestimate our abilities or the accuracy of our beliefs and predictions. In other words, this mental shortcut causes us to think we’re better in certain areas than we actually are.
Overconfidence at work can lead to high-risk decisions and actions and detrimental outcomes for an individual or the whole team.
Planning fallacy – the tendency for people to overestimate how long it will take them to get work done – is a common type of overconfidence bias.
Example: You’ve taken up a complicated assignment and refused assistance, being confident you’ll be able to finish the task alone and within a tight deadline. As a result, you’ve worked overtime for a week and handed in a sub-par result.
9. Sunk cost fallacy
This phenomenon occurs when people continue to invest resources (such as time, money, or effort) into a decision or project because they have already invested in it rather than objectively evaluating whether it’s still a sound decision.
“Sunk costs” are expenses that can no longer be recovered, and they don’t necessarily have to be financial resources. People with this bias may remain in failing relationships because they feel they have already invested too much to leave. Or it can be something as simple as overeating at a restaurant – just because you’ve already paid for the food.
Example: You’re keeping an incompetent employee rather than replacing them because the company has already invested significant resources into training them.
10. Similarity bias
Similarity or affinity bias occurs because we are motivated to see those similar to ourselves in a favorable light. We subconsciously create categories of people we consider close to us and others who are “different”. We generally have a favorable view of our in-group but a negative or skeptical view of the out-group.
At work, similarity bias can influence a manager’s decision regarding people: who to hire, who to promote, and who to assign to projects.
Example: When hiring a new team-mate, you favor one candidate because you are a similar age, went to the same uni, and come from a similar social background. You hire this candidate while another candidate would be a better professional fit, despite being older than you and coming from another culture.
5 ways to avoid being influenced by decision-making biases
Biases in decision-making are extremely difficult to overcome because they are coded in our thinking and guide our social behavior. The first step to becoming a more critical thinker and a fair manager is learning to recognize biases – starting from your own decision-making process.
If you’re in a leadership position, it may be up to you to stir up debate and help transform your team into a more rational and successful organization by diminishing the power of decision biases.
1. Don’t make impulsive decisions
Following your gut may not always be the best tactic in decision-making. When we make rash decisions, we don’t have time to look at the issue from different sides and evaluate it critically; thus, we’re much more likely to succumb to decision-making biases.
2. Seek opposing opinions
To make more informed decisions, it’s smart to look for information sources that don’t necessarily line up with your personal views. To make the right decision, gather a group of colleagues, including those likely to have the courage to voice their concerns or contradicting thoughts.
3. Look at the bigger picture
In our social network, certain phenomena happen more frequently than in the general population, distorting our perception of how common that phenomenon is. For example, if you have three tattooed acquaintances who are unemployed, it doesn’t mean that most people with tattoos are jobless.
It’s important to distinguish our cognitive shortcuts from facts or general statistics. Before basing your decision on an occurrence in your private or professional networks, research its frequency in the general population.
4. Examine phenomena over time
Recent events may skew your perception of reality. To make an informed decision, you should examine the long-term patterns and trends instead of only considering recent events.
For example, one of your employees may be showing poor performance lately. Before telling them off or firing them, evaluate their performance over a longer period. Maybe they’re currently going through a rough patch in their personal life and need some help or guidance.
5. Consider the negative scenario
Before making the final decision, try to confront yourself, doubting the grounds on which you base your decision. For example, before taking up a new project, ask yourself, “What happens if I’m overconfident and can’t handle it alone?” Then, go through the potential pessimistic scenario in your head. This will make you think twice if you are up to the task.
Facing your decision bias is the first step to overcoming it
As much as we’d like to think of ourselves as independent decision-makers, the truth is we are all biased in one way or another. Decision-making biases are like false friends – they make our lives easier but don’t always lead to the best decisions and outcomes.
These ten examples of bias in decision-making are just the tip of the iceberg. Still, they are the most widespread in the business environment, where making judgments and decisions is a part of daily life. One thing we can all do is learn to recognize our own biased judgment and try to prevent it from influencing our objective decision-making.
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