5 Biases In Decision Making That Every Manager Should Know

There is an old saying that ‘opinions are like noses, everyone has one.’ While opinions are subjective and may differ from person to person, biases are some of the most common factors that affect decision-making. These biases have been studied extensively, and managers can use them to their advantage in decision-making. In this blog, we will talk about biases in decision-making and how you can overcome them as a manager.

What are the common biases in decision making?

Biases can lead to faulty decisions that can have long-term consequences. First, however, good managers must be aware of their preferences and work to counter them. Common biases in decision making include recency bias, proximity bias, and halo and horn effects.

Managers should be willing to revisit past decisions and reconsider their assumptions as new information comes in. The more aware you are of your biases in the workplace and how they can influence your decisions, the better prepared you will be to make intelligent choices and avoid common errors in judgment.

How do biases affect decision making?

The impact of biases on decision making can be significant and far-reaching. Some of the most common effects of biases on decision making include the following:

• Inaccurate decisions: Biases can cause individuals to ignore vital information and make decisions based on incomplete or false information, leading to poor and incorrect choices.
• Unfair treatment: Biases can cause individuals to make decisions that are not based on merit or objective criteria, leading to unfair treatment and discrimination.
• Decreased productivity: Biases can cause individuals to overlook important information and make decisions based on incomplete or inaccurate information, leading to reduced productivity and inefficiency.
• Missed opportunities: Biases can cause individuals to overlook important information, ignore new ideas, and fail to recognize potential opportunities, leading to missed opportunities and decreased innovation.
• Damage to reputation: Biases can cause individuals to make decisions that are not in the best interests of the team, leading to adverse outcomes and damage to reputation.
• Decreased trust: Biases can cause individuals to make decisions that are not transparent or based on objective criteria, leading to reduced trust in leaders and the decision-making process.

Overall, biases in decision making create a significant impact by causing individuals to make decisions based on incomplete or inaccurate information, leading to poor, unfair, and inefficient decisions, and decreasing trust and confidence in leaders and decision-making.

How can managers overcome the impact of biases in decision making?

Overcoming the halo and horn effect

The halo and horn effect is a bias that affects the perception of a manager towards their team members based on the first impression. In case the view is negative, it is termed as horn effect. Conversely, a positive perception toward a team member is called a halo effect.

• Use clear and objective criteria: Clearly define the criteria for evaluating performance and ensure that it is based on accurate and relevant measures.
• Provide regular and comprehensive training: Provide regular training to managers on evaluating performance objectively and free from personal biases.
• Encourage self-reflection: Managers should reflect on their preferences and consider alternative perspectives when assessing performance.
• Use multiple raters: Consider using multiple raters, such as peers or subordinates, to evaluate performance and reduce the influence of any one individual’s biases.
• Regularly assess and adjust the evaluation process: Regularly evaluate the performance evaluation process to ensure it is free from halo and horn effects and adjust as necessary.

Overcoming the proximity bias

The proximity bias is the tendency for people to prefer things that are nearby or within reach. This bias can significantly impact our decision-making processes, particularly when it comes to making choices about what information to believe and how to act on that information. In addition, it can seriously cause hybrid teams that cannot maintain equal communication between in-person and remote employees.

• Consider a broader geographical and temporal scope: Encourage team members to consider a more comprehensive range of information from different geographic locations and periods.
• Use objective data: Use objective data and be less susceptible to biases in decision making, such as performance metrics or financial data.
• Encourage diverse perspectives: Encourage team members to seek out diverse views and opinions, which can help to broaden the range of information considered.
• Build resilient communication processes: Build resilient communication processes that can help you overcome proximity bias. Otherwise, in-person team members’ communication can overpower remote team members’ ideas.

Overcoming the recency bias

The recency bias is the tendency to overweight recent events or experiences in making decisions. It can lead people to make rash or hasty decisions based on what they have seen recently rather than basing their decisions on longer-term evidence. The recency bias can be a problem when making decisions about personal or professional matters, as it can lead people to make decisions based on limited information or viewpoints.

• Use objective data: Use objective data less susceptible to bias, such as performance metrics or financial data.
• Encourage diverse perspectives: Encourage team members to seek out diverse views and opinions, which can help to broaden the range of information considered.
• Use forecasting tools: Consider using forecasting tools or simulations to help predict future outcomes based on historical data and other relevant information.
• Regularly reassess: Encourage team members to periodically reassess their decisions and consider new information or events that may have an impact.
• Give time to decisions: To overcome the recency bias, take time before making decisions with your team so that you can think through them instead of hurrying.

Overcoming the central tendency bias

The central tendency bias happens when managers tend to give ratings toward the center of the scale. It prevents effective performance reviews as most candidates are rated towards the middle – leaving extremely well-performers and low-performers unaddressed. The biases in decision making can have negative consequences, such as leading people to make decisions based on inaccurate information or making assumptions about other people’s behavior.

• Consider a range of data: Encourage team members to provide multiple points of view and consider a range of data.
• Use more robust data: Consider less sensitive data to outliers or extreme values, such as the median or interquartile range.
• Encourage creativity and divergent thinking: Encourage team members to consider different and non-traditional approaches to problem-solving.
• Use outside sources: Consider obtaining information from external sources to broaden the range of data considered.
• Regularly question assumptions: Encourage team members to challenge assumptions and biases periodically and to consider alternative perspectives.

Overcoming the idiosyncratic rater bias

The idiosyncratic rater bias is the tendency of people to give higher ratings to items they have personally experienced or own than they would to items they have not experienced or do not own. This bias can impact how people perceive and rate products, services, and other experiences – which are critical inputs for any manager’s decisions for their teams.

• Use clear and objective criteria: Clearly define the criteria for evaluating performance and ensure that it is based on accurate and relevant measures. Setting expectations is the key.
• Provide regular and comprehensive training: Provide regular training to managers on evaluating performance objectively and free from personal biases.
• Encourage self-reflection: Managers should reflect on their preferences and consider alternative perspectives when evaluating performance.
• Use multiple raters: Consider using multiple raters, such as peers or subordinates, to evaluate performance and reduce the influence of any one individual’s biases.
• Regularly assess and adjust the evaluation process: Regularly evaluate the performance evaluation process to ensure it is free from idiosyncratic rater bias and adjust as necessary.

Conclusion

Every decision maker faces biases. Despite that, biases in decision making can be understood and managed. The first step is to recognize biases in decision making for better decision-making. Managers can work around them by using structured decision making processes if they can understand biases. However, the next step is to train decision-makers and leaders to manage biases in decision making better. If you want to learn more about bias-based decision making, here’s a blog that you can read.