Stamp Out Bias in Your Decision Making

In this month’s Harvard Business Review, Princeton University psychology scholar and Nobel laureate Daniel Kahneman joins colleagues from University of Sydney and McKinsey & Company-Paris in describing techniques for reducing bias in management decision making.
     Becoming aware of your biases isn’t enough. When making crucial business decisions under conditions of uncertainty, assertively stamp out your biases by asking challenging questions. Do this even if answering the questions requires extraordinary effort and objectively considering the answers is embarrassing.
     Here’s my adaptation of those questions to the retailer’s world:

• What information that you don’t have would you like to have in order to help you make a more accurate decision without losing what could be a valuable opportunity? Even if there isn’t enough time now to gather that information, get high-quality substitute data which are available within the time you do have.
• To what degree are you basing the decision on the outcome of a similar decision you’ve made yourself or was made by others whose judgment you trust? Check that the degree to which you’re doing this is not more than the degree of similarity of the current situation facing you to the situation occurring with the basis decision.
• Are there more reasons to take the action or more reasons not to take it? Put somewhat more time into evaluating the side with the smaller count of reasons than the side with the larger count.
• What is the evidence that the numbers and stories you’re using to make your decision are overall averages that mask a wide range or are extremes that mask typical situations?

     Although that fourth one may seem out of sequence, I put it there to make a point. The Princeton/Sydney/McKinsey allowed themselves to fall into a trap: They advocate for you fighting biases with the statement, “…when organizations worked at reducing the effect of bias in their decision-making processes, they achieved returns up to seven percentage points higher.”
     “Up to seven percentage points” is an extreme that does not inform us of typical situations or the true range of effectiveness.
     And here’s one research-based bonus tip from my own business consulting experience:

• Always know that “information” is not the same as raw data. Information has implications for action. It directs you toward what to do or not do. Be careful that you don’t take false comfort by bathing in lots of warm data that aren’t information.

Click below for more:
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