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Naveen Khajanchi

Innovation

How Biases Can Ruin Our Decisions

The art of making a good judgment call

Published: Tuesday, April 26, 2016 - 13:58

Adam Grant, a professor of psychology at Wharton, admitted how wrong he was to pass up on the opportunity to invest in an online startup selling glasses. Because the company didn’t have a functioning website the day before its launch, and because other competitors were already operating in the space, he didn’t invest. He thought the startup’s procrastination showed a lack of commitment. But the company, Warby Parker, went on to be recognized as one of the world’s most innovative companies and was subsequently valued at over a billion dollars.

In his later research into original thinkers, Grant found that procrastinators are more creative than planners, and “improvers” (those who enter an existing industry with an improved idea) have a lower failure rate than “first-movers.” The founders of Warby Parker weren’t dragging their feet; they were spending their time thinking about bigger issues, such as how to make people feel comfortable buying glasses online, not how to get online as quickly as possible. It didn’t fit the mold of what Grant thought an enterprising startup should be, but it worked.

Judgment calls are an art more than a science. A judgment call is a decision or direction taken at a particular point in time, in a particular situation, which means it’s always highly contextual. There are no perfect models for making good calls.

Yet our lives are a product of past experiences, decisions, directions, and previous judgments. Our cognitive lens is laden with biases, and we tend to deeply associate with them. All of these aspects can play a part in our decisions, which are more crucial today than ever before. Leaders face multiple feedback channels, and their decisions will be remembered. What people most remember is the outcome of those decisions, and if they’re wrong, it’s going to stick.

Experience can help, but in a complex workplace constantly at the mercy of digital transformation and ever-increasing diversity, experiences based on fixed models of operating can become biases and therefore, liabilities. While we can’t build a model for making decisions, we can remove obstacles that will prevent us from making good ones.

Speed is not effectiveness

One of the things that most frightens the leaders I coach is the fear that they might be caught without a quick answer and lose their clothes in front of everyone. The “imposter syndrome” haunts many managers, who worry they’ll be exposed as the perfectly normal individuals they are and not the superstar savior everyone expects. However, there’s no law that says decisions must be made on the spot.

A manager can always ask for more information before making a decision, or better yet, pass some of the ownership for parts of the decision to someone else. Evidence suggests that distributed leadership makes for better organizations and enables the leader to spend more time thinking of the bigger picture than the nitty-gritty of everyday decision making.

In my executive search capacity, I was recently asked to fill the CEO position for an automotive company. We examined CEOs from consumer electronics, global MNCs, and FMCG giants who all had successful operational backgrounds. When it came to the final choice, though, I went against the company’s decision to fill the spot quickly with one of the final candidates because that person had never launched new categories or sold products in a declining market. I recommended that we should go back to the drawing board, despite my initial recommendations. It was difficult for me and the company to accept, but necessary for the long-term good of the company.

By spending more time on the search, we not only found a better candidate, but also realized some additional qualities we hadn’t originally deemed necessary, such as turnaround experience and the ability to disrupt existing operating models.

Overcome biases

On the whole, biases help us make decisions with little effort, but they can also blind us to new information or options. Let’s return to Grant, who exhibited signs of the “availability bias,” a tendency to make a decision based on the information that comes to mind most quickly, rather than on other evidence.

Overcoming biases is much easier said than done. Studies show that training, education, or even feedback on managers’ biases are not effective. Biases operate on an unconscious level, and education doesn’t change that. David Rock and Heidi Grant Halvorson of the Neuroleadership Institute define five types of bias:
1. Similarity: “People like me are better than others”
2. Expedience: “If it feels familiar and easy, it must be true”
3. Experience: “My perceptions are accurate”
4. Distance: “Closer is better than distant”
5. Safety: “Bad is stronger than good”

To overcome such biases, they recommend a mixture of methods for each bias. If we zero in on experience, the Achilles heel of many managers, Rock and Halvorson recommend getting multiple independent opinions, then revisiting ideas (after a break) to see them freshly before proceeding. When was the last time you suspended a decision to seek alternative options or just took a break from deliberating?

Background, background, background

If you’re making a hiring decision or having difficulty motivating an employee, it might be best to delve into the subject’s recent past to get a sense of his path and how he ended up in front of you. This can dispel many assumptions and even challenge your biases. What someone tells you she does in her spare time is usually what she thinks is expected or accepted, but what about personal experiences? What about mistakes she’s made? There can be more to a person than meets the eye; spending time to dig deeper can reveal a wealth of insights.

As Professor Sumantra Ghoshal says, creating effective organizations starts with leaders creating the right context—and that starts with creating the right context within yourself. Creating processes in your own mind to consider all information can help you overcome Rock and Grant Halverson’s “expedience,” or the tendency to follow what feels familiar.

Biases are an inherent part of our mental state; we need to be aware of them.

Acceptance of others and being content with what exists helps not only to calm the mind’s waters, but also to reflect on the best course of action. As Peter Drucker said, “Follow effective action with quiet reflection. From the quiet reflection will come even more effective action.”

This article is republished courtesy of INSEAD. © INSEAD 2016.

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About The Author

Naveen Khajanchi’s picture

Naveen Khajanchi

Naveen Khajanchi is a practicing executive coach supporting CXO/CEO-level leaders to transform and adapt to the current business environment. He has worked with organizations from start-ups to high-end real estate consulting. Today, he leads a search firm that helps top Indian corporations in their leadership hiring. Khajanchi has more than two decades of experience in talent acquisition. He has an executive master’s degree in clinical approaches to management programs from INSEAD. Khajanchi is the author of Evolutionary Leadership: A Holistic Perspective (EastWest, 2011).