Michelle Gibbings
Financial advisors and planners make decisions every day – for themselves, and their clients. Having highly attuned and skilled decision making skills is critical.
However, most people are unaware of the bias that surrounds decision making. This bias is pervasive, and often unconscious.
This is because we don’t make decisions on facts alone. We make decisions on hunches, feelings and gut reactions, all of which are based on our past experiences.
Your pre-frontal cortex, which is the part of the brain that’s involved in thinking, analysing and reasoning, gets tired easily.
Consequently, your brain, very cleverly, has found a way of conserving energy. It takes short-cuts. A mental short-cut is known as a heuristic. Your brain uses heuristics to make big things and complex issues easier to manage, and ultimately remember.
As your brain takes in new information it tries to make sense of it, so that it knows what it needs to do. To ease the cognitive load this processing takes, it compresses information and sorts it into patterns. It looks for things that it’s seen or experienced before and goes – “I now know what to do”.
Of course, the brain’s short cutting process isn’t always reliable, and it gives rise to bias in decision making. For example, your brain may expect to see something in a certain way, and so it will seek out information to validate that view. It filters out information that doesn’t fit with its view of the way things should be.
Consequently, you can close your mind to new information that may be relevant.
Daniel Kahneman in his brilliant book “Thinking Fast and Slow” shared his years of research into this field. He explains how the automatic and instinctual part of brain can lead to cognitive bias, and that people can place too much confidence in their own judgement.
This leads to traps such as: sunk cost (where due to loss aversion people don’t walk away from something, even when the facts show they should), anchoring (where decisions are influenced by the earliest piece of information received), and others.
A number of researchers have put anchoring to the test. Using examples such as the age at which Ghandi died, the height of the Brandenburg Gates in Germany, and the population of Turkey, they’ve found that the figure first given to people influences the answer to subsequent questions.
For example, two researchers, Strack and Mussweilier (1997), asked two groups a different question:
- Group 1 – Did Ghandi die before or after the age of 9?
- Group 2 – Did Ghandi die before or after the age of 140?
When the groups were then asked to guess the age at which he died, the initial anchor of the 9 and 140 influenced the response. The first group suggested his age was 50, while the second group suggested 67.
This happens because the brain relies on first impressions or details when decisions are made. Once this ‘anchor’ has been set, you will make decisions based around that anchor, often without taking other information or views into consideration.
Savvy negotiators know this and use it to their advantage when they negotiate.
So how do you overcome these barriers and help ensure that your decision making has the right level of robustness? It’s about having the right level of awareness, analysis and aptitude.
Awareness – it’s important to understand the level of consciousness you have about the decision you are making. Are you aware that a decision is being made? Are you alert to influencing factors and how you are processing information? Are you conscious of limitations or bias that may be constraining how you think?
Analysis – be clear on how you analyse and secure a range of information sources, and ensure you are not selectively filtering out information. How much information are you looking at? Are you seeking views from a range of diverse sources? How are you prioritising the information and using a clear process to sort, rank and select the possible outcomes?
Aptitude – be willing to challenge assumptions, pre conceived ideas and to take on different ideas and opinions. During your thinking processes are you being curious and opened minded, or is your opinion fixed? Are you ensuring that the decision has been analysed from multiple perspectives? Are you willing to change your mind? Are you listening to the silent minority and looking for outliers?
Alfred Sloan, the former CEO of General Motors is quoted as saying: “Gentlemen, I take it we are all in complete agreement on the decision here…Then I propose we postpone further discussion on this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about”.
Perhaps it’s time to take your decision making to a new level.
Change happens. Make it work for you.
Michelle Gibbings is a leadership and change expert, who is known for making the complex, simple. She helps people to think more deliberately, act with greater purpose and inspire more value by understanding the art and science of change.