Leadership – Decision Making Traps

“Informed decision-making comes from a long tradition of guessing and then blaming others for inadequate results.” – Scott Adams

Decision-making is a difficult business and when the success of your organization hinges upon your ability to make sound decisions, it is worth your while to educate yourself on this subject. Many leaders keenly perform their due diligence when it comes to decision-making: collecting the right information, conducting cost/benefit analyses, defining alternatives and weighing out their options carefully. Unfortunately, with even the best intentions, leaders often fail to make good decisions. This is because they fall victim to faulty thinking and succumb to decision-making traps. These traps exist because of the normal way the human brain functions. The brain looks for shortcuts to process large amounts of complex information. Decision-making with all its many possibilities and risks can be a lengthy and energy-consuming process. The human brain uses unconscious shortcuts known as ‘heuristics’, that operate mostly outside of our consciousness. These heuristics can sometimes negatively influence decision-making. This article aims to elucidate three common decision-making traps that people unconsciously fall into.

The Anchoring trap

Did you know that your mind tends to give more weight to the first information it receives? For example, if a colleague or leader presents their analysis or opinions first, a group’s thinking may be unduly influenced by that information, simply because it was presented first. Similarly, your first impressions, estimates of future impressions, past events and trends will ‘anchor’ subsequent thoughts. If too much weight is given to the past without taking into consideration other factors, historical anchors can lead to poor forecasts and misguided choices.

To combat this tendency, try to think about the problem on your own before soliciting advice. Then, seek information and multiple opinions to expand your frame of reference.  Be careful to avoid latching onto the first points of information you receive, balance the weight of all the information you have, to make a good decision. Try to view the problem from multiple perspectives to avoid only going by your first line of thought.

The Status-Quo Trap

I have always found it interesting how some students in my undergraduate classes choose their seats on the first day of the semester and thereafter sit in them for the entire semester. They are unconsciously observing the ‘status quo heuristic’ or ‘sticking to what you know’.

The human brain is also wired to perpetuate the status quo because it is naturally risk-averse and protective. This phenomenon plays out in decision-making when we carry biases that influence the choices we make as we have a preference to maintain the existing situation. Learn to question the status quo and identify other options to counterbalance the status quo. Settling for what already is can blind the decision maker to superior alternatives.

The Sunken-Cost Trap

Have you ever held onto an underperforming investment simply because of the money that you had already spent or watched a boring movie to the end? Sunk-cost fallacy refers to a tendency for people to irrationally follow through on an activity that is not meeting their expectations. This is because of the time and/or money they have already invested.

Past decisions can also carry a lot of weight when it comes to decision-making because of our tendency to make choices that align or justify with these past decisions. Leaders can sometimes be unwilling to admit their mistakes to avoid public criticism and scrutiny. Unfortunately, they are more likely to justify past decisions and continue to ‘throw good money after bad’ instead of cutting their losses.

Leaders need to be particularly wary of this trap and realize that nobody is immune to making mistakes. Humility is a desirable trait in leadership and boldly owning up to one’s mistakes can also earn respect and admiration. This quality can also set the tone for the entire organization to have a culture that does not perpetuate mistakes because of fear. Become attuned to the influence of sunk-cost biases and educate your followers on the perils of falling into this trap.

There are many other decision-making traps and other pitfalls that can derail good decision-making. Awareness and education are the antidotes to these traps. Invest in training for yourself and your followers to create an organization that is armed with the skills to make good, sound decisions that will bring lasting success. In the words of the celebrated author, Malcolm Gladwell, “Truly successful decision-making relies on a balance between deliberate and instinctive thinking.”

Article by Shailja Sharma, SBS Faculty Member and Leadership and Career Coach