The September issue explored how the human brain relies on two primary systems for making decisions. System 1 is fast, automatic and intuitive, seeking immediate pay-off, whereas system 2 is slower, more deliberate, focusing more on longer-term consequences. When the energy needed by System 2 becomes depleted, we inevitably and unconsciously take the faster route via System 1. Although the faster route can feel like we are getting somewhere, it can lead to errors in judgement, which can prove to be costly. This article will explore some of the ways in which this can play out in the workplace.
Unconscious Bias - System 1 thinking is fast, because it uses mental shortcuts, but these are often based more on our assumptions and beliefs, than objective evidence. These shortcuts introduce bias that impairs our ability to evaluate information and form sound judgements.
Complexity and Bias - Although managers like to think that their decision-making is consistent, unconscious bias introduces subjectivity and therefore variability. Consider this in the context of major decisions around expenditure, restructuring, executive appointments and introducing major change. Also, as complexity and time pressure increase, executive stress increases. This means that leaders have less cognitive resources for making important decisions. Poor quality decisions can leave others confused and disengaged.
Nobel Laureate, Daniel Kahneman, considered the father of behavioural economics, has pioneered work in this area. His view is that “figuring out how to make the act of decision-making commensurate with the complexity and importance of the stakes is a huge problem, to which the business world does not devote enough thought”.
Outsmarting biases - By their very nature, cognitive biases cannot be eliminated. However, the effects can be mitigated by encouraging more System 2 thinking. This can be done through:
Raising awareness of unconscious bias and systematic errors in decision-making;
Using joint evaluations in major decisions to encourage diversity in thinking. For example, one person might be assigned the role of “devil’s advocate” to ask the tough questions and look for flaws in a planned course of action;
Using “premortems” where you imagine a future failure and then explain the cause;
Identifying objectives on your own before seeking advice, to prevent being anchored by others’ beliefs. Similarly, don’t anchor your advisors by telling them what you believe; and
Encouraging diversity - research has demonstrated that teams with the most cognitive diversity (skills, background, experience) perform faster and generate more successful solutions than those with lower diversity.
Leaders as Decision Architects - Biases reinforce cognitive rigidity which, in turn, reduces capacity for effective decision-making. Leaders can encourage good problem solving by creating work environments that encourage greater diversity in thinking. This places more emphasis on a leader’s capacity to reduce group-think, by encouraging dialogue and constructive debate, versus coming up with the answers. Encouraging diversity builds capacity for finding answers to new and complex business problems.