ET CITINGS

Debiasing Decisions

By Philip Meissner et al
Good managers — even great ones — can make spectacularly bad choices. Some of them result from bad luck or poor timing, but a large body of research suggests that many are caused by cognitive and behavioural biases. While techniques to ‘debias’ decision making do exist, it’s often difficult for executives, whose own biases may be part of the problem, to know when they are worth applying.
Our early research suggests that is the case roughly 75% of the time. Two particular types of bias weigh heavily on the decisions of large corporations — confirmation bias and overconfidence bias. The former describes our unconscious tendency to attach more weight than we should to information that is consistent with our beliefs and hypotheses, and to discount information that contradicts them.
Overconfidence bias frequently makes executives misjudge their own abilities, as well as the competencies of the business.
It leads them to take risks they should not take, in the mistaken belief that they will be able to control outcomes. The combination of misreading the environment and overestimating skill and control can lead to dire consequences.
Fortunately, debiasing techniques can help organisations overcome such biases. These techniques aim to limit the effects of overconfidence by forcing the decision-maker to consider downside risks that may have been overlooked.

(From: Are You Ready to Decide?)

ET Citings 15 July 2016

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