Featured Product
This Week in Quality Digest Live
Risk Management Features
Yoav Kutner
Let salespeople spend more time on customer service, market research, and competitor analysis
Jose Luis Alvarez
CEOs should sharpen their most important strategy execution tool
Gleb Tsipursky
Here are some strategies on how to rescue them
Aarti Gumaledar
Looking at how firms responded to the pandemic reveals a new, more effective supply chain frontier
Ashley Y. Metcalf
How lean and JIT organizations can withstand supply chain disruptions

More Features

Risk Management News
Design, develop, implement, continually improve risk management in systems and software engineering
ISO/IEC/IEEE 16085 has just been updated
Galileo’s Telescope describes how to measure success at the top of the organization, translate down to every level of supervision
NSF-funded project is developing a model to help manufacturers pivot and produce personal protective equipment
How to develop an effective strategic plan and make the best major decisions in the context of uncertainty and ambiguity
What continual improvement, change, and innovation are, and how they apply to performance improvement
Good quality is adding an average of 11 percent to organizations’ revenue growth
Further enhances change management capabilities
How the nation’s leading multistate cannabis company ensures quality and safety standards

More News

Gleb Tsipursky

Risk Management

Are You Anchoring Yourself to Poor Quality Data?

Staying the course in the face of new information isn’t always smart

Published: Wednesday, December 16, 2020 - 12:03

Have you changed your views about Covid-19 months into this pandemic? Or are you anchoring to the same views you held last spring?

For example, many people still believe the false claim spread by many prominent leaders in March 2020 that Covid is no worse than the common flu. They protest against public health measures such as wearing masks, despite high-quality peer-reviewed studies showing that masks save lives.

They also ignore new developments, such as the recent urgent requests by governors to stay at home and if possible telecommute to tamp down the explosive third wave of Covid. Likewise, they fail to pay attention to just-published research showing that restaurants, gyms, hotels, and other crowded indoor spaces that foster prolonged exposure—including workplaces that fit such criteria—significantly increase Covid risk.

We tend to continue treading the same path based on information we initially received. That’s regardless of strong new evidence that our path leads off a cliff. The name cognitive neuroscientists and behavioral economists give to this dangerous judgment error of sticking to initial data despite it’s poor quality is “anchoring.”

Anchoring is one of the many cognitive biases that lead us to make poor decisions. Recognizing its danger and impact helps us make much better decisions to manage risks wisely and survive and thrive during this pandemic.

Anchoring in manufacturing: A case study

Let’s consider the case of a 130-person manufacturing company based in Texas that had a lot of difficulty with remote work at the start of the pandemic.

The company’s leadership team didn’t think they needed to prepare for a disruption of more than a week or two. This was because they followed early guidelines from the CDC to prepare for nothing more than a brief interruption due to a short-term outbreak.

As a result, the leadership team asked all of its workforce to come back to the office and factory as states reopened, despite news reports of an increase in cases in Texas. A significant number of the company’s employees were scared and resistant to come back to the office, leading to conflicts and tensions.

Eventually, the majority of employees did return. Yet because of the company leadership’s perception that Covid-19 wasn’t a big deal, neither the leaders nor employees took appropriate precautions. That’s because of a mental blindspot called “emotional contagion,” where followers take on the emotions, beliefs, and perceptions of their leaders.

In fact, most of the executives and employees did not follow guidelines on social distancing or mask wearing, especially since Texas state officials did not mandate wearing masks. Staff who tried to wear masks and maintain social distancing were ridiculed by their colleagues, with the tacit approval of the leadership.

You can probably guess what happened next.

Unfortunately, there was an outbreak of Covid-19 from an all-hands meeting. More than two dozen employees caught Covid-19, including three C-suite leaders. Several employees, including the COO, ended up in the hospital, and two older employees died. This led to a plunge in productivity, attrition, and low morale within the company.

The company’s chief risk officer decided to contact me for a consultation in late May after reading my article on preventing failure in shifting to working from home to adapt to the pandemic. By the time Miriam called me, internal fighting had already spread throughout the organization, leading to resignations of some key employees. This led to a heavier workload for everyone else, causing even greater tension between staff and management.

Even those who initially steered clear of the chaos said they were starting to look for other job opportunities so they could jump ship. It was obvious that the company needed help—and fast.

The heavy burden of anchoring

When I met with the CRO as well as the company’s CEO, COO, and HR head over Zoom, I told them upfront that they had to start acknowledging the disruptions brought about by Covid-19. Continuing as they did would endanger their company’s bottom line and even survival during this pandemic.

The refusal to recognize the gravity of the pandemic and even the act of downplaying it stem from a combination of three factors:
• The nature of the virus itself
• The preexisting beliefs and plans of the business leaders
• The dangerous judgment errors we all tend to make that cognitive neuroscientists and behavioral economists call cognitive biases, most notably anchoring

Anchoring refers to our tendency to be too strongly anchored by the initial information we have and fail to update our beliefs sufficiently based on new evidence. That’s even if new evidence is, objectively speaking, much more persuasive. This dangerous judgment error harmed us in two profound ways with Covid-19.

First, business and political leaders and ordinary people anchored on past pandemics within living memory, which, while serious, didn’t cause widespread disruption.

SARS, the first pandemic of the 21st century, led to about 750 deaths in 26 countries. The H1N1 virus, also known as the swine flu, killed many more, as many as half a million. Yet it didn’t impact the United States too much, with about 12,500 deaths, and even fewer in the United Kingdom, at about 500, which was at the high end of deaths in Europe.

Ebola and Zika barely reached the United States. As a result, a large majority of Americans initially ignored Covid-19, thinking it would pass them by as did these other illnesses.

The second profound harm came from the comparisons of Covid-19 to the flu, with many prominent people stating it was no more deadly than the flu. However, while about 0.1 percent of those who get the flu die, the estimated fatality rate from Covid-19, about 0.5 to 1 percent with quality treatment, is much higher. Sure, it’s lower than the 50-percent average for Ebola and the 15 percent for SARS. Yet the infection rate is much higher, in part because about half of all who get infected don’t show any symptoms. Even those who eventually show symptoms are often infectious before they do.

As a result, without strict controls, every infected person can infect two or three others, and any outbreak doubles in three to six days. Furthermore, about 10 to 20 percent of those infected have a serious illness, mainly older adults, and about half of those with a serious illness need to go to the hospital. Of those who go to the hospital, about 10 to 20 percent die.

Given the fact that hospitals have low capacity for a surge of patients, a major outbreak would overwhelm healthcare systems, as we’re seeing around the United States during this third wave. Many more die in cases where healthcare systems are overwhelmed.

Thus, sticking to the initial anchors on the pandemic is very dangerous.

Adapting to the new abnormal

At the start of the pandemic, most companies activated their business continuity plans and then just followed along as the months rolled by. However, it’s a bad idea to stick to these emergency measures throughout the potentially two years of the pandemic.

Companies must go beyond emergency measures if they want to survive and thrive during the next few years. They must adapt to the pandemic and accept the current reality of ongoing waves of restrictions as the new abnormal.

This essentially means transforming internal and external business models if organizations want to chart a productive and rewarding course during these troubled years.

Doing so will include taking a long, hard look at the elements that drive your business. It will also entail revising or, in some cases, even totally revamping daily operations and the business continuity plan.

Moving forward from anchoring

When I last spoke with the CRO a few months ago, she told me that after serious deliberation, the CEO called for a leadership meeting to reexamine the facts of Covid-19. Fortunately, after being presented with overwhelming evidence that Covid-19 was a serious matter and that they needed to take immediate steps, the executives eventually acknowledged the gravity of the situation.

The leadership team then decided to take the following steps:
1. The CEO held a companywide virtual town hall to debunk the erroneous information about Covid-19 on which the majority of the company had anchored.
2. The leadership team rolled out a comprehensive remote work program, where back-end office employees got tech and equipment support to work from home. They could also report to the office, but it was strictly optional. The leadership team made sure that the office had all the necessary visual and physical cues to encourage social distancing. Reminders on wearing masks were placed strategically.
3. Strict social distancing and multiple shifts were implemented for those who worked on the factory floor.
4. The marketing team updated its external and internal collateral to include what the company was doing to make its virtual and physical spaces safe for its employees.
5. The COO and CRO worked with the HR head on numerous retention efforts to prevent more employees from jumping ship.

As a result of these efforts, the company was able to correct its course and finally get back to a productive path.

The strict policies on working onsite also minimized health risk, thereby lessening the company’s risk of accountability in case of an outbreak in the office or the factory floor. This was a heavy load off the C-suite’s back. The CRO informed me how relieved she was that they made the changes once the numbers of Covid-19 cases began to increase in Texas, prompting a pause of the reopening process that eventually led to a cycle of reopening and restrictions.

Discuss

About The Author

Gleb Tsipursky’s picture

Gleb Tsipursky

Gleb Tsipursky is on a mission to protect quality leaders from dangerous judgment errors known as cognitive biases by developing the most effective decision-making strategies. A best-selling author, he wrote Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters (2019). His expertise comes from 20+ years of consulting, coaching, and speaking and training as the CEO of Disaster Avoidance Experts, and over 15 years in academia as a behavioral economist and cognitive neuroscientist. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, Twitter@gleb_tsipursky, Instagram@dr_gleb_tsipursky, LinkedIn, and register for his Wise Decision Maker Course.