At every step of decision making misperceptions based on incorrect input, biases, lack of information, and other traps can corrupt the choices we make. We are particularly vulnerable to traps involving uncertainty because most of us are not good at judging chances. Complex and important decisions are the most prone to distortion because they tend to have many assumptions, estimates, and influence by misaligned parties.Research has shown that overtime we develop unconscious routines to cope with the inherent intricacy in most decision making. These thinking patterns known as heuristics can help us in many situations. We are nimble at judging distance, time, weight, and volume. For example, in judging distance our minds rely on a heuristic that associate clearness with closeness. The better the visibility of an object, the closer it must be.
These thinking routines are not fool proof, however. Flaws are inherent in the way we think, and some heuristics like clarity get distorted as misperceptions. Others muddle our thinking as biases and irrational preferences. The danger with these traps is that they are invisible to most of us.
"Over Relying on First Impressions—the Anchoring Trap" (Hammond et al. 191-193)
In weighing a decision, we tend to accept initial information as factual. First impressions, estimates, ideas, or data tend to anchor ensuing thoughts. How would you answer the following questions?
Is the population of Brazil greater than 30 million?
What is your best estimate of the population of Brazil?
The number mentioned in the first question always influences the second question. Studies have proven that changing the first question to a larger number influences the answer to the second question to be much larger. This demonstrates the anchoring trap, and how polls or surveys can be manipulated by spin doctors and negotiators.
Maintaining the Old Ways—the Status Quo Trap" (Hammond et al. 193-195)
Most decision makers have a strong bias towards choices that maintain the status quo. There is a great deal of experiments that prove this magnetic attraction to the status quo. The pull of the status quo is even stronger when there are multiple choices. Choosing amongst too many options creates uncertainty and fear, and it is much easier to stay with the status quo.- "Protecting Past Decisions—the Sunk Costs Trap" (Hammond et al. 195-198)
Most of us realize that sunk costs are irrelevant to new decisions; however, we seem to hang on to earlier choices leading us to bad decisions. Why do we protect past decisions? Sometimes is careless choices, other times is conscious unwillingness to admit mistakes. Admitting that a decision was a mistake can have dire consequences sometimes, so it is safer to some to protect earlier choices. This obviously proliferates the problem in the long-run.
"Seeing What You Want to See—the Confirming Evidence Trap" (Hammond et al. 198-200)
There are a couple of forces at work here. First, we all have a tendency to subconsciously decide what we want to do before we figure out why we want to do it. Second, our tendency to be motivated by things we like than by things we dislike. Consequently, we are attracted to decisions that confirm our natural leanings, alikeness, and preferences. For example, we tend to hire after our own image.
"Posing the Wrong Question—the Framing Trap" (Hammond et al. 200-204)
Psychologists have shown that when the same question is framed two different ways that people choose differently. Each framing makes different options more salient and the focus of the problem is misguided. If you frame a problem inadequately, it is difficult to make a good decision.
"Being Too Sure of Yourself—the Over Confidence Trap" (Hammond et al. 204-206)
Setting too narrow a range of possibilities, and uninformed decisions lead to anchoring, overconfidence, and inaccurate decisions. Counting on a sale to close because the customer accepted to play golf; yet, ignoring the fundamentals of value creation and alignment with customer needs is a recipe for disappointment.
"Focusing on Dramatic Events—the Recallability Trap" (Hammond et al. 206-208)
Anything that distorts your ability to recall events in a balanced way will distort your assessments. Dramatic events in your life in the form of actual or witnessed experiences will cause you to assign a higher probability of that event happening.
"Neglecting Relevant Information—the Base-Rate Trap" (Hammond et al. 208-209)
When asked a hypothetical question about Dave being a librarian or a salesman, if his personality type is introverted, most people conclude that Dave is a librarian. The problem with this choice is that salesmen outnumber librarians 100 to 1 in the US. The base rate is only 1% that Dave will be a librarian.
"Slanting Probabilities and Estimates—the Pygmalion Trap" (Hammond et al. 209-210)
In business the cascading nature of this trap can add up to missed estimates and short careers. For example, line managers are asked to turn in their forecasts. However, after the estimates cascade through a couple of layers of management the numbers are unreasonably increased to drive high performance. Not surprisingly, the estimates are missed and many folks become unhappy with the performance.
"Seeing Patterns Where None Exist—the Outguessing Randomness Trap" (Hammond et al. 211-212)
We all have a tendency to imagine winning patterns. For example, greed and fear lead investors to bet the farm on an apparent hot company. Only to see it fizzle because the industry group was not hot, the earnings growth was weak, and the multiple was too high.
"Going Mystical—the Surprised-by-Surprises Trap" (Hammond et al. 212-213)
People sometimes believe themselves to be so good or lucky because they have had successes. In business or life we should not be impressed by these accomplishments. Just because your business unit made plan because of circumstances and good work in a given year or quarter does not guarantee that to happen in succession. The surprise-by-surprises trap crops up from a failure to give reality its due. Surviving success is most important.
These traps that lead to poor choices and bad decision making are the anathema of breakthrough performance and a successful life. An important element in quality management circles and Six Sigma is “Fact Based Decision Making”. There is also a saying among SS practitioners “In God I trust all others bring me data.” Whenever possible it is wise to base your decisions on facts. The best protection against all traps is awareness, obtaining reliable information or data input, weighing options, watching for spin doctors, and consciousness about the consequences of bad choices.
Work Cited
Hammond, et al. Smart Choices: A Practical Guide to Making Better Decisions. Boston: Harvard Business School Press, 1999.
No comments:
Post a Comment