As Featured on Forbes
The 3 Cognitive Biases That Undermine Executive Decision Making
When you think of executives, vulnerability is not a word that comes to mind. Executives are driven, capable, decisive. Along with these powerful traits, successful leaders also often share certain patterns of thinking—or cognitive biases—that are typically reinforced by business culture.
For example, those with a bias toward action tend to rise through the ranks faster than those who just reflect quietly; no one wants an indecisive leader. But the same cognitive biases that are essential to creating growth during a company’s early stages can, if left unchecked, eventually get in the way of good decision making.
Before we dive in, let’s just get this out of the way. We’re not recommending that executives discount their intuition. We’re also not asking you to implement the insights below for every action or decision.
But when it comes to those mission-critical strategy sessions, you can’t afford to ignore the hidden influence of executive biases.
Next Step works with hundreds of executives across a variety of industries, bringing the theories of behavioral science out of academia and into the real world. We created the Science of Design™ (SoD), a predictive framework that pinpoints a causal relationship between what your company does and how your users respond.
Along the way we’ve discovered a consistent pattern of cognitive biases among executives. This article will shed light on which cognitive biases are most likely to undermine executives and teach you tips on creating a process that removes undue influence.
The Trifecta of Cognitive Bias: Ignore This Combination at Your Own Risk
Recent success, corporate culture, and a positive feedback loop create this combination of biases:
- Overconfidence bias when you’re highly convinced in the accuracy of your judgements, even without subjective proof.
- Confirmation bias when you interpret neutral information in a way that supports your existing beliefs.
- Herding when your team gravitates toward consensus, often reflecting back the opinions of the highest status members.
See These Hidden Cognitive Biases in Action
The following two examples are from established companies within the education sector.
- Client A was seeking new users.
- Client B needed to convince existing users to increase adoption.
When it came to selecting a strategy, executives at both companies were sure they instinctively knew the right course. The hidden influence of executive bias meant each wanted their messaging and marketing campaigns to focus on a single area.
- Client A wanted to focus on their accountability system. Because confirmation bias was strongly in play, the discussions focused primarily on information that reinforced their conviction. Other possibilities were not deemed compelling.
- Client B wanted to focus on their ability to create a better world. Overconfidence bias exerted itself, drawing on the past success of using aspirational language to generate excitement among funders, politicians, and team members.
We’ve oversimplified the above: each scenario actually had all three executive biases in play, each reinforcing the other. The confirmation bias fed the overconfidence bias which also fed the group think created by herding.
The SoD Approach: Robust Testing for Unbiased Results
We know that clean data trumps gut feelings. The SoD process includes running a series of controlled interventions and determining which strategies result in measurable change.
Quantitative testing revealed fact-based insights:
Client A: Quantitative research revealed that users actually held a negative sentiment towards the accountability system.
Client B: Testing revealed that while people might like the aspirational message, it wasn't actually effective at driving behavior. Research showed that another bias called the "endowment effect" was much stronger at getting existing users to increase adoption.
If not for SoD testing, this trifecta of biases would have led us down the wrong path, full of confidence until it was too late.
What else can you do to counter executive bias?
Other safeguards you can implement into your decision-making processes:
To counter confirmation bias: Knowing that this is one of the most natural and powerful biases, actively seek evidence that you’re wrong, not right:
- Challenge teams to come up with alternative hypothesis to explain the same set of facts.
- Unearth the pattern recognition that’s been triggered.
- Recognize and discuss how individual experiences influence narratives.
- Try on new assumptions and role play these new perspectives.
To counter overconfidence bias: One of the most effective ways to offset overconfidence and to safely bring up potential problems is to hold a pre-mortem.
- Ask your teams to imagine that they’ve already done the project or strategy you’re about to embark on and it’s failed.
- Have them individually write down reasons it went wrong.
- Open up the discussion and capture some of their reasons on a white board.
- Discuss how to address and mitigate the issues brought up.
To counter herding: Instead of subconsciously encouraging teams to adopt high status ideas, the above create an environment that acknowledges uncertainty and genuinely welcomes candor.
During critical strategy sessions, take conscious steps to counter executive biases. A good process won’t let anything get in the way of good decision making.