One of the most important things that leaders do is make decisions. The effectiveness of a leader can be gauged by the quality of her decisions. Did they work out fine in the short-term? In the long-term? Did the decision achieve the intended outcome? How did it impact the people involved? Getting a decision right, is a key skill that a leader must master. Part of getting better at that skill, is being aware of some of the decision traps we can fall into. When we are aware of these traps, we know when we are heading towards one and go around it. Let’s use a German word to help us remember — Achtung — which means danger. We’ll cover three points this time, and the remaining four in our next post.
A or B
There’s a very important book that I hope all of you will make it a point to read. It’s called Decisive, written by the brothers Chip and Dan Heath. Chip is a professor at the Graduate School of Business at Stanford University and Dan is a senior Fellow at Duke University’s Centre for the Advancement of Social Entrepreneurship. One of the biggest decision dangers they write about, is the trap of A vs B. We often find ourselves caught between two choices. Should I go for the Samsung or the iPhone? Should I specialise in HR or marketing? Should I opt for employer A or employer B? We often trap ourselves between false choices and as a result we end up making a poor choice. What the Heath brothers recommend, is that we widen our frame. We should recognise that we are not trapped between A and B. There could be a choice C, a choice D. When we widen our frame, these choices then become visible and we have a broader menu to choose from.
Amazon would have stayed a seller of books if it had taken an A vs B approach. Instead it chose to look at its strengths, its capabilities and then could see the whole range of choices available. Uber is doing the same by diversifying into Uber Eats. In the business workplace tomorrow, we will find the A vs B problem when a product has to be rolled out, when a new office location has to be finalised. In the outsourcing space — onshore vs offshore was the defining frame. Some clients wanted the benefits of outsourcing, especially in terms of lower costs, than their onsite operations, but were unwilling to take the risk of their data and transactions moving thousands of miles away. Option C became nearshoring which provided such clients a way out of the A vs B dilemma and allowed them to take the first step on the outsourcing journey.
This is when we seek out or believe people or information who confirm what we actually want to do. Let’s say I have fallen in love with all those stories of entrepreneurs who ditched their studies, to pursue their entrepreneurial dreams and made it big. So, I think of following in their footsteps. Now I unconsciously start looking for and almost seeing evidence everywhere, that this is what I have been called to do. I take part in a business idea pitch competition and win the first prize. My professor says he can see the entrepreneurial talent in me. Each time I see confirmation that I should quit my studies and start my business. What happens is that we get emotionally attached to one or more outcomes and this can cloud our decision making.
One way to counter the confirmation bias is to deliberately look for evidence to the contrary. In the example above, I start to look at what are the risks associated with ditching my studies and starting a business. I look at cases where students failed doing that and regretted jumping in too early. I might realistically assess my skills vs more accomplished entrepreneurs. This helps us detach ourselves emotionally from the outcome and then assess the evidence.
In the business world, the confirmation bias has infected many a merger and acquisition decision. When the CEO suddenly gets the bright idea to do one, everybody then piles on with confirming evidence that the merger or acquisition is the way to go. Only when the decision has completely bombed, do people sift through the facts and see that the confirmation bias was at play. Strong boards, the process of having a devil’s advocate and doing pre-mortems are good ways to try and guard against the confirmation bias.
The halo effect
This is when we take one single characteristic or quality with either a positive or negative impression, and then extend that to the whole. This was first outlined by psychologist Edward lee Thorndike, over a 100 years ago. Halo is the circle of light that we see around a divine or a saintly person. Let’s understand the halo effect trap. Let’s take an example. I read a great book by an author. When I pick up his next title, I automatically assume it’s going to be good. I’ve enjoyed using the product of a company and when they land up for placement, I automatically assume that they will be a fantastic employer. The negative also holds true. I meet someone whose shirt is a little dirty and I assume he is an uncultured, rude and unintelligent person. I don’t like the look of the professor who walks into the classroom and automatically take a dislike to the subject she is to teach.
Advertisers are always using this effect in celebrity advertising. We see a favourite actor or sports person talk about a product or service and we think that we will like the product and that the product or service will be good. That’s how the halo effect works. How do we counter it? One by not jumping to conclusions, second by digging deeper and doing a little more homework before we judge anything or anyone.
At the workplace tomorrow this will become extremely important when we are hiring. The halo effect can positively or negatively skew our perception of a candidate and hamper us in making the right decision. When we assess the performance of a teammate, a recent disaster may cause us to negatively rate him when actually he has done a good job overall. This is also sometimes called the recency effect when recent events cast a cloud on our judgement.
Decision traps have been the bane of many a leader. When we make a habit of checking for them, it will help us navigate the traps and provide the team a wiser decision. Next time we’ll look at another four decision traps to be aware of.