Monday, December 26, 2016

Three Effects, Three Decision-Making Pitfalls

Decision-making is both art and science.

The majority of leaders and professional spend a significant amount of time on making large or small decisions in the work and life. At today’s digital new normal with “VUCA” characteristics -Uncertainty, Complexity, Velocity, and Ambiguity, the capability to make effective decisions becomes a crucial leadership competency and professional capability. There is fuzziness in the decision because there is fuzziness in conflicting criteria, and there are hidden barriers on the way. Here are three effects which lead three potential pitfalls in decision-making.

Bandwagon effect: The bandwagon effect is characterized by the probability of individual adoption increasing with respect to the proportion who have already done so. The tendency to follow the actions or beliefs of others can occur because individuals directly prefer to conform, or because individuals derive information from others. According to this concept, the increasing popularity of a product or phenomenon encourages more people psychologically to "get on the bandwagon" too. The bandwagon effect explains why there are fashion trends or brand effect. From a decision-making perspective, it means the majority of people follow the conventional wisdom in making judgment or decisions. In other words, as more people come to believe in something, others also "hop on the bandwagon" regardless of the underlying evidence. The potential decision-making pitfalls is caused by bandwagon effect because there is a lack of independent thinking or the structural process in making sound decisions cohesively.

Group Thinking or Abilene Paradox: Group Thinking or peer pressure is a term refers to a psychological phenomenon in which people strive for consensus within a group. In many cases, people will set aside their own personal beliefs or adopt the opinion of the rest of the group. From the variety of industry studies, group thinking is often caused by the homogeneous team setting; group polarization means that a group of people can make a more extreme decision than an individual. You'd think that a group would tend to democratize the diversified viewpoint and to moderate individual points of view. In fact, the opposite often occurs. The homogeneous team setting will make team members more vulnerable to peer pressure, risk avoidance, making biased decisions and sticking to the comfort zone. In an Abilene paradox, a group of people collectively decide on a course of action that is counter to the preferences of many or all of the individuals in the group.

The Ostrich Effect: The Ostrich Effect is the tendency to ignore a dangerous or risky situation, just like an ostrich will bury its head when faced with danger presumably: “If I can't see it, it doesn't exist.”
Either for decision-making or problem-solving, sometimes, people will demonstrate this kind of behavior by blotting out a problem from the mind instead of tackling the situation which threatens them. For example, people make decisions only based on gut-feelings, and lack of sufficient information; or people only make the decisions for fixing symptoms, even though they know it might cause more issues for the long run. There are many variables in complex decision making, there are tradeoffs you have to leverage, you need to be courageous to face the problems and understand the situation objectively in order to make effective decisions.

The reason decision making is often a difficult task because it is contextual and situational, it takes a unique individual to understand a situation and relate it to the present, and there is no magic formula to follow. An effective decision can be defined as an action you take that is logically consistent with the alternative you perceive, the information you get and the preference you have. Learning from your own experience or others' failure lessons; overcome bias and avoid those potential pitfalls, in order to achieve decision-making maturity.


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