5 Cognitive Biases

5 Cognitive Biases that can Fail You as a Leader

Last updated: 13 Sep 2016
Did you know that we make hundreds or even thousands of decisions every day?
From which shoes to wear to massive business decisions that could impact the lives of thousands of employees.
So how do we really make these decisions?
What are some cognitive biases to beware of and how can we maximise the chance of making the right decision?

Decisions, decisions, decisions

Cognitive psychologists believe human beings make decisions in two different ways. One is through our intuitive system, which is typically fast, automatic and effortless. It relies on simplifying strategies, or cognitive heuristics, when facing choices and these help us make decisions faster in this complex world. The busier we are, the more we have on our minds, the more likely we will be to rely on “gut feeling.”

The second method is logical, conscious, explicit and requires high effort to make rational, rule-based decisions. It is a slow, deliberate and analytical method, which is specific to humans, according to Nobel-prize winning psychologist Daniel Kahneman. This process kicks in when you have to do your tax returns or parallel park into a tight spot.

Prof Daniel Kahneman’s System 2 Thinking in Action

So what are cognitive biases?

To hasten the decision-making process, the brain relies on cognitive heuristics. These mental shortcuts are simple, efficient rules, hard-coded by evolutionary processes or learned. We rely heavily on cognitive heuristics and, in most cases, it works well (like sensing/avoiding danger, deciding which road to take, etc) but they can also lead to systematic errors or what are called “cognitive biases.”

Cognitive biases are tendencies to think in a certain way that can lead to errors in judgment. The human brain is remarkable and able to process an enormous amount of information, but it is not without limitations. When we start interpreting a large volume of information at great speed, we often subconsciously attempt to simplify. And then, sure enough, we end up making poor decisions and bad judgments.

If you’re a leader of a business or a team, you’re bound to be strapped for time. Your business decisions have massive implications for your colleagues and the firm. Have you ever wondered: have my cognitive biases affected my team or the business? What are they and what can I do to avoid them?

Here are five common cognitive biases that may affect you and those you lead.

1. Dunning-Kruger effect: Too smart or too stupid

Many of us have, at least once, overestimated our abilities. Call it ego or arrogance, we have all been guilty of the inability to recognise our own lack of skill/knowledge or incompetence.

Cornell University psychologists Justin Kruger and David Dunning carried out a series of experiments through which they discovered that “those with limited knowledge in a domain suffer a dual burden: Not only do they reach mistaken conclusions […], but their incompetence robs them of the ability to realise it. On the other hand, they say, extremely competent individuals suffer a burden as they fail to realise that their proficiency is not necessarily shared by their peers. This cognitive bias is called the Dunning-Kruger effect.

Yes, you’re special…just like everybody else.

The inability to recognise that you, as a leader, lack in certain areas can be extremely detrimental in business. No one is a master of all, no one can do everything. The important thing to recognise as a leader is to uncover areas of weakness in yourself and in others, and recruit team members who complement each other.

But, as Dunning and Kruger pointed out, it is equally important to recognise that not everyone can be as skilled or experienced as you. There is a reason why you were asked to lead a team and so don’t expect everyone to be a clone of yourself.

2. Confirmation bias – The information cherry-picker

Your workday is busy as ever. You’re pressured to produce results by your bosses, the board and your shareholders. You need to make a decision, fast, and so you’ve already made up your mind. What you really need is grounds to support your decision, so you seek, interpret and focus on information that validates your decision. This is called confirmation bias.

Sound familiar? We have all been down this road and, at more occasions than one, regretted doing so. Sometimes you luck out and the decision was the right one. But when it wasn’t, all those arms that you twisted to support your cause will extend fingers that point straight toward you when asked, “Whose decision was this??”

The take home lesson here is that set your hypothesis and deliberately look for instances to prove that you are wrong, advises behavioural economist Shahram Heshmat of the University of Illinois. This is perhaps a true definition of self-confidence: the ability to look at the world without the need to look for instances that pleases your ego. For group decision-making, it is crucial to obtain information from each member in a way that they are independent, he says.

Of course not all decisions can be democratic but, remember, your colleagues are there to work with you, not for you. Keep an open-mind and respect the decision-making process, you’ll likely yield better results.

3. Curse of knowledge – Importance of delivery

Many businesses have seen exciting new strategies fail as managers made one fatal mistake: they assumed that their staff understood the strategies as well as they did. The details of the strategies that you as a manager are privy to may not be even comprehensible, let alone actionable, to your team. This may infuriate you but your knowledge has now become a “curse” and you can’t fathom what it would be like to be in their shoes.

To avoid imbalances in information getting in the way of actioning your strategies, share knowledge and information in a concrete and relatable manner. This may mean that you need to streamline the information and pitch your ideas in a suitable language and format so that they “stick.”

In the best-selling book Made to Stick,” brothers Dan and Chip Heath wrote about six principles that help make ideas stick: a Simple Unexpected Concrete Credentialed Emotional Story (for easy reference, SUCCESs).

A CEO might have thirty years of daily immersion in the logic and conventions of business, the Heath brothers say. Reversing the process is as impossible as un-ringing a bell and you can’t unlearn what you already know, they say. There are, in fact, only two ways to beat the curse of knowledge reliably. The first is not to learn anything and the second is to take your ideas and transform them, they add.

Take a simple example. You’re trying to explain the equation of 1+1=2 to your four-year old child. It is so simple and it drives you insane that she doesn’t just get it immediately. She looks back at you blankly and you have a feeling you’re going to lose your temper because you think she’s: a) not even trying to understand b) it’s so simple you don’t even know how to explain the concept because it’s that simple and c) you wonder if she’s not a “math” person.

The fact of the matter is you’ve forgotten that, at the age of four, 1+1=2 is not a simple concept to understand. And that the responsibility is on you, who understands the concept, to explain it properly because it is you who wants her to learn this now. So you take a deep breath and draw two rabbits. “I have one rabbit and then another one hops along and sits beside it. How many are there now?” And, lo and behold, she gets it immediately. “TWO!” And that, in a nutshell, is how you overcome the curse of knowledge bias. SUCCESs!

Something simple is not always easy

4. Stereotypical bias – “Women are too emotional”

Stereotypes are ubiquitous. They cover race (“Asians are good at math”), politics (“Republicans are rich”), genders (“Women are bad at math”), demographic groups (“Florida residents are elderly”), and activities (“flying is dangerous”), says Bordalo,Coffman, Gennaioli and Shleifer in a Harvard University working paper published in 2015.  As these and other examples illustrate, some stereotypes are roughly accurate (“the Dutch are tall”), while others much less so (“Irish are red-headed”; actually only 10% are), they say.

Stereotypes can lead to misunderstandings and unnecessary complications in the workplace. “She’s of child-bearing age, she may just work for a few years and quit” or “Hire the Indian guy, Indians are known for their IT skills.” A moment’s lapse in judgement may have a long-lasting impact on your business. Unfortunately, this bias is inevitable to a certain extent, but think twice to check yourself before you make business decisions based on stereotypes.

5. Social comparison bias – Don’t be a king of the lesser

Social comparison is something we learn to do from a very young age. We do it naturally in our daily lives all the time.“He’s got a better degree,” “She has a bigger house,” “He gets paid more… “ The list goes on.

In 1954, American social psychologist Leon Festinger hypothesized that people compare themselves to others in order to fulfill a basic human desire: the need for self-evaluation. He called this process social comparison theory, say psychologists Stephen Garcia and Arnor Halldorsson of the University of Michigan. At the core of his theory is the idea that people come to know about themselves—their own abilities, successes, and personality—by comparing themselves with others, they say.

Comparing can be a very positive thing. It can drive you forward and upward, serving as a motivational booster to be the best version of yourself. An example of positive comparison on a business level is how English Premier League football managers observe and compare their performance against other teams, to come up with strategies to beat their opponents.

But in a business environment, social comparison can also have negative implications.

Do we sometimes fight against our long-term interests for short-term instincts?

For example, you’re a business leader. You’re at the helm and hold all the cards but you need to hire a second-in-charge to help manage and grow the business. As you sift through the pile of CVs on your desk, which one catches your eye? The one that has as good (or better credentials) experience and qualifications as you? Or do you go for someone who is good enough but you’re sure he/she won’t show you up or make your bosses think you’re replaceable?

In a research paper titled “Tainted Recommendations,” psychologists Garcia, Song, & Tesser say research suggests people will actively champion the candidate who does not threaten their standing on a relevant dimension in an organisation. In other words, self-evaluation maintenance forces are so powerful that people will essentially advocate for a candidate whom they feel is inferior, they say.

It takes a big person to think beyond self-preservation and consider the business, first. But hiring the wrong people who may be just capable enough to take some of the burden off your shoulders is rather self-serving. Think succession-planning, think long-term. You want to go up higher on the corporate ladder, you need to have someone to fill your shoes.

Bottom line: Communication, communication, communication

It may be lonely at the top for a CEO or a team leader, especially if you’ve been in that position for a while. You might wonder about the sincerity of people around you or be in constant fear about losing the power you worked so hard to attain.

Cognitive biases may exacerbate your isolation from colleagues and compound that loneliness you feel. So be kind to yourself – vocalise your thoughts, communicate with your colleagues. Be upfront and try to not let your brain trick you into mental shortcuts that lead you down the wrong path.

And who knows? You might find yourself feeling lifted up by those who support you, instead of staring down at a sea of blank faces.

Author: Catherine Cheong

Catherine is a regular contributor to the EngageRocket blog, and has written for news organisations such as the Washington Post and Reuters. She is a corporate communications expert, having headed the PR and branding efforts of international asset management firms.

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