Saturday, October 10, 2020

Variety of “Bias” in Decision-Making

Due to "VUCA" digital new normal, decision-making is in less mathematical or fancy methodological consideration but as a sociological problem. 

The digital era upon us is about increased velocity, complexity, unpredictability, and fierce competition. There is a need for a faster response to changes in businesses based on effective and efficient decision making. 

However, in reality, poor decision making is, unfortunately pervasive and caused by quite a few factors and the variety of bias. It’s important to identify them, deal with them intelligently, leverage both logic and intuition, in order to make sound judgment and effective decisions

Cognitive Bias: Oftentimes, individuals have cognitive differences. Silo mentality, various non-critical thinking patterns, lack of insight or contextual intelligence, etc, lead to poor or inaccurate judgment, unconscious bias, illogical interpretations, and then, further cause a series of issues cascaded into big problems and fatal business failures. At the group level, the homogeneous team setting spurs groupthink, causes cognitive bias, creates blind spots for making effective decisions. A heterogeneous team perspective is crucial for novel decisions because no individual has all the necessary expertise, but collectively, they can incorporate their unique viewpoint to overcome cognitive bias.

To dig through, bias or cognitive gaps come in many forms and are difficult to recognize if you are the decision maker. It is so important to seek out different voices, appreciate diverse viewpoints, and continue learning and updating knowledge. Willingness to acquire additional information begins with an acceptance you do not know enough to achieve your purpose. It’s important to look for diverse feedback, embrace cognitive difference, and provide a better perspective that helps to close decision gaps, create cognitive unease, among decision makers at the executive level, and optimize important decision-making processes to improve decision effectiveness.

Optimism/Pessimism Bias: Optimism and pessimism are outlooks or states of mind/heart and they may affect the approach people take to make decisions or accomplish a task. Optimism bias is the tendency to believe, expect or hope that things will turn out well. It’s a sort of systematic tendency to be overly optimistic about the outcome of actions. Calm down, and dispassionately analyze the circumstances objectively. Even with the best systems and processes, there are no guarantees that you will always get the expected outcome. The fact that something requires a decision will mean that there will be a bunch of associated risks to manage for solving complex problems effectively.

Similarly, Pessimism Bias is the tendency to believe that most things are likely to go wrong, some of which may be down to the individual who has learned to be helpless, and develops a ‘Can't-Do’ attitude with a sense of being out of control, overly pessimistic about the outcome of actions. Both optimism/pessimism biases cause decision ineffectiveness. At the strategic level, the decision is not about good vs. bad decisions, more precisely, it is about making a decision that has 'less bad' outcomes and improves the success rate of problem solving.

Focalism Bias: It’s a sort of systematic tendency describing the common human tendency relying too heavily on the first piece of information provided when making decisions; becoming inwardly focused and losing situational awareness and appreciation of wider context during times of stress. The lack of updated information, or more accurately, lack of deep insight, is the cause to the failure of, or consequences of a bad decision. It is critical to be able to step outside of the system, explore the full cognition spectrum, gain an in-depth understanding to shape an objective view for making effective decisions.

The digital dynamic is complex, making effective decisions requires deep thinking, multidisciplinary knowledge to gain contextual understanding. To overcome the focalism bias, it’s critical to apply viable information and systematic understanding, see interdependency and different systems interconnected with each other. Always attempt to identify areas in which measurable improvements can be realized via practicing, providing measurable results and demonstrable progress is essential for improving decision maturity.

Due to "VUCA" digital new normal, decision-making is in less mathematical or fancy methodological consideration but as a sociological problem. Try to be "objective" is to try to let go of one's bias, systems understanding of truth is one gateway to overcome the variety of biases to improve decision effectiveness and coherence.


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