Making Effective Decisions: Overcome Cognitive Bias
Project success relies on effective decisions.
Decisions made based on emotions and distorted by cognitive biases are likely to send projects off in wrong directions and result in mediocre if not down-right poor outcomes.
Program complexity, according to Navigating Complexity: A Practice Guide (PMI, 2014), is driven by human behavior, system behavior and uncertainty. The more complex a program is the more necessary it is to consider individual and group behavior, with an emphasis on cognitive biases and their causes and effects. This article will define and explore cognitive bias, its impact on decision making and how to manage it.
Collaborative and Authoritarian Approaches
Let’s take two examples. In one organization, the CEO believes that centralization is the best way to organize a complex conglomerate. It saves money, increases controls, promotes higher quality and leverages the best resources. In another organization, the CEO believes that decentralization, with autonomy and services at individual business units is best because it promotes accountability and enables customized services at the business unit level. Both CEOs are interpreting the situation and determining an approach based on assumptions founded on their own experiences, and beliefs. Each points to information from studies that confirm their beliefs.
They initiate programs to implement their visions. Both recognize the danger of moving ahead based on limited knowledge and biases. One makes it clear that program leadership must propose a plan based on a collaborative process to explore alternatives with objective analysis of biases, risks and potential benefits. The other takes a more authoritarian approach, appoints program leadership whose thinking aligns with the CEO’s thinking, and orders program leadership to move ahead without exploring alternatives and their comparative risks and benefits.
There is no one correct way. There are good reasons for both collaborative and authoritarian approaches. The major difference between them is speed to action. The authoritarian approach will result in quicker action as it will not be delayed by the analysis of alternatives and risks. It is particularly effective when the senior stakeholder/decision maker is highly intelligent, analytical, objective and has the capacity to quickly and accurately assess the situation from multiple perspectives. He must be good at making effective strategic decisions. The first of these decisions is the decision to take an authoritarian or a collaborative approach.
The collaborative process is effective when the players are competent and able to put aside politics, self-interest and personal beliefs to rely on an analytical process and engage in candid conflict resolution and decision making. The team must avoid analysis paralysis. In the end, there is a need for an authority to make final decisions based on the results of the collaborative process.
The quality of decisions can be just as good, or bad, with either a collaborative or an authoritarian approach. Objectivity and flexibility, the ability to adapt and change course when appropriate based on prevailing conditions during the program, add to the probability of success with either approach. Objectivity requires awareness of biases and the ability to effectively manage emotions as positions and beliefs are confronted.
In any program or project, some analysis is needed before a plan is made and put into action. A critical part of that analysis is the exploration of cognitive biases and their relationship to risks and benefits. The effective authority figure must be aware of his or her own biases and the biases of the people involved in the management of the program. Members of a collaborative decision-making team must also be aware of and guard against the influence of cognitive biases and be able to manage them.
A cognitive bias is a systematic (repeated and predictable) error in thinking that effects decisions and judgments. It leads to a deviation from rational logic because of misconceptions due to inaccurate or incomplete memories, unfounded beliefs and assumptions, limitations in attention, mental shortcuts (heuristics), and incorrectly attributing effects to causes. There are many cognitive biases. Some of the most common ones that impact projects are:
- Planning fallacy: The tendency to underestimate or overestimate the time, skill and cost it takes to perform a task
- Optimism: Believing that one will attain success and less likely encounter risk events
- Confirmation Bias: Focusing on information that supports one’s preconceived ideas or plans and ignoring contrary information
- Overconfidence: Making quick decisions based on intuition when more deliberate decisions are needed
- Lack of confidence: Not trusting intuition and one’s own assessment
- Wishful thinking: Believing something is true because one wants it to be true
- Halo Effect: Letting a quick impression – often based on physical appearance, age or ethnicity – of a person sway one’s decision of his or her character or the quality of his or her ideas or decisions
- Strategic misrepresentation: Distortion or misstatement of facts, often planned, to get approval or support
- Group-think: Inadequate decision making because members of a group filter out information that contradicts group beliefs or values.
When working in groups, cognitive bias is multiplied by the combination of individual biases and by phenomena like the Abilene Paradox in which individuals withhold information they think will disturb others in the group. When a bias is held by a person in authority or by an influential part of the group, the strong desire to move in a particular direction can inhibit risk analysis or distort it by under valuing the probability and impact of risks.
What Can Be Done?
With awareness comes the ability to communicate and collaborate effectively. Since it is far easier to see other people’s biases than one’s own, the ability to candidly confront and question is critical. Then there can be a discussion and analysis of an issue or decision to convince stakeholders about the biases that are operating and their potential effects.
Often courage is required to speak truth to authority and to question and validate one’s own beliefs and positions. To reduce the need for courage make sure people are aware of bias as an issue and institute a formal process that includes questioning about the basis for positions such as the choice of a strategic approach, the size of an estimate or the scoring of a risk.