Outsmart your own prejudices

by lottoinisrael

Suppose you have to evaluate a candidate to lead a new subsidiary in another country. On paper, this is by far the best person you saw. Your answers to the interview questions are impeccable. She has impeccable social skills. But something does not feel right. You can not point the finger at what is only logical. Decide to rent?
You may cancel your intuition that you led in the past to rely on, and send it on its way. This is what most executives say they would do when we examined this scenario in our classrooms to make management decisions. The problem is that, unless you sometimes go

expand your perspective

It may be dangerous to very judgments 1 can leave an automatic system of thought of the associations stored in memory of what experts call instead of working logically through the information that is available. Undoubtedly, the system 1 is essential for survival. It’s what makes you turn to avoid a car accident. But as psychologist Daniel Kahneman has shown, it is also a common source of bias that can lead to bad decisions because our intuitions often lead us astray. Other sources of bias with defective System 2 thinking essentially the conscious reasoning went wrong. Limitations or cognitive

We are all susceptible to this prejudice, especially if we get tired, stressed out or multitasking. Just think of a CEO, negotiating a merger while under pressure by the lawyers to decide to manage the redundancies closure of the factory and to colleagues. In such situations, we are far from ready to spend ourselves mentally, emotionally and physically. We work with even more confidence largely intuitive System 1 studies and less confronted on careful reasoning. The decision will be easier and faster, but the quality suffers often.

Most of us tend to even be in our estimates. It is important to allow for the uncertainty.

One solution is to delegate the organization and combat prejudice, to change the architecture of the environment option, be taken in the decisions. (See “Leaders like architects, decision” in this issue). Most of the time but the delegation is not appropriate, and it’s all about you, the manager, to decide. If this is the case, you can outsmart their own prejudices. over-reliance on intuition, lack of motivation, or both: you start by understanding where they come from. In this article, we describe some of the most persistent prejudices out: tunnel vision on future scenarios, objectives and options. But conscience alone is not enough, as Kahneman, reflect on their own experiences, he said. So we offer strategies to overcome prejudices, collected the latest research on the psychology of judgment and decision making.

But first, back to that as a candidate. Maybe your questions are not really, but the major issues have not yet been articulated. What if the economic environment in the new region is not as promising as expected? What if employees have problems across borders or coordination with the headquarters? The answers to these questions are to reduce the decisions, or manage, the growth continued to be determined, depending on how the future unfolds. So you should think about emergency now, when deciding who to hire.

But ask those questions, larger hard drive is not something natural. We are cognitive misers they do not like our insecurities spend entertain mental energy. It is easier to find closure for us to do. These seams in our thinking which leads us over a possible future focus before (in this case, an office that goes as planned), a (hiring someone who manages under these circumstances) target and isolation option (the candidate us). If this tight thinking weaves a compelling story, kicking System 1: Intuition tells us, soon we are ready to help you decide, and ventured forward with great confidence unfounded. For “Debias” our decisions, it is important to broaden our perspective on all three fronts.

Thinking Ahead

Almost everyone thinks too tight on the possible outcomes. Some people make a better estimate and to stop it (“If we build this plant, we will sell 100,000 cars per year”). At least try Furthermore, their paris cover (“There is a probability of 80% sell 90000-110000 more cars”).

Unfortunately, more coverage is clearly insufficient. When researchers asked to create hundreds of CFOs from a variety of industries, annual return for the S & P 500 over a period of nine years, which range from only 80% were only one-third of the time. That’s an awfully low accuracy rate for a group of presumably comprehensive knowledge of the US economy frameworks. The projections are still of place where people evaluate their own plans, in part because of his desire to succeed biased interpretation of data. (In the words of a former Goldman Sachs CFO David Viniar, “The lesson is always learned that his definition of extreme is not extreme enough.”)

Like most of us tend to be very confident in our estimates, it is important to “push” for us leave, risks and uncertainties. The following methods are particularly suitable.
Get three estimates.

What is the price of crude oil in January 2017? How many new homes will be built in the United States next year? How much memory chips will order your clients next month? These forecasts form of decisions as to whether a new market, the number of people to rent, and the number of units produced. In order to improve the accuracy to work until at least three estimates of the low, medium and high instead of just one setting. People give more areas, when they think of their separate low and high estimates, and give three numbers that ask you to do this.

Their low and high approximations have in the realm of possibility unlikely, but still. For example, at the bottom, you might say, “There is a probability of 10% that we have less than 10,000 memory chips next month to sell.” And at the top it is possible to obtain a 10% probability that sales exceed 50,000. With this approach it is less likely to be surprised by the events at the ends, and you plan for it. (How to increase production if demand is much larger than expected? If less, how will you deal with excess inventory and maintain cash flow?) Chances are you closer to your average estimate that one of the two number range would.
Think twice.

A related exercise is to make two predictions and the average. For example, the study participants has been invented their best estimates of the data in the history as the year of the Cotton Gin. Then ask them to take your first answer was wrong, you can guess again. Also an assumption was usually closer to each other, to enjoy people’s “wisdom of crowds inside” their average assumptions; this strategy was more accurate than relying on estimates of itself. Research also shows that when people think more than once about a problem, they often come to him with a different perspective, and added valuable information So, play their own internal public and make it possible to check time. Design a result , a pause (sleep on it if you can), and then to come back and take another. They point to its previous non-estimate you to anchor yourself and your ability to achieve new knowledge limit. If you can not avoid thinking about his earlier estimate, while assumed that he was wrong and examine the reasons for another hypothesis.

Use premortems.

At autopsy, the task is usually the cause of the last failure to understand. In a pre-mortem, raises a future failure, and then explain why. This technique, which also helps as the potential decline not in the sense you potential problems, the normal forecast relate identify. If you are a manager in an international store, you can say, “Let’s say it’s 2025 and our Chinese businesses have money every year since 2015. Why did it happen lost?”

Thinking this way has several advantages. First, the optimistic mood, promoting realistic risk assessment. Second, it helps you prepare backup plans and exit strategies. Third, you can use the factors that highlight the success or failure of which can their ability to control results increase influence.

Perhaps Home Depot would have benefited from a pre-mortem before deciding to China. According to some reports, the company was forced to close shop there because he learned too late that China is not a do-it-yourself market. Apparently, given the way the labor is cheap, middle-class Chinese consumers prefer to outsource their repair. Imagine the weak demand in advance could have resulted in additional market research (Chinese consumers wonder how they their problems at home repair to solve) and a change in the do-it-yourself products, services.
Take a look on the outside.

Now let’s say you are responsible for a new product development team. They have a plan carefully for about six months, which develops very confident for the first draft, consumer testing and prototyping. And they worked carefully, you need to make optimal use of the equipment and to be successful why wait. This is what Dan Lovallo and Daniel Kahneman have the project “inner vision”, which usually leads to a lot of optimism. It is necessary to complement this with a perspective that the outside what is happening with similar companies and what advice would you give someone when you do not share holding in the effort. The analysis could show, for example, that only 30% of new products in your industry turned a profit within five years. Would a colleague or friend advised to assume the risk of default of 70%? If not, do not proceed if you can prove that your chances of success are much better than have any.

An exterior view also prevents the “planning fallacy” narrative -spinning and overall management for the success-oriented as well as default risks are very high. If you is a cold, hard look at the costs and time required to develop new products in your market, you can see that far to change its optimistic forecasts, which could cause or to remove exceed the plan.
Think goals

It is important to expand a mindset to have their goals, too. This will help you to concentrate when it’s time to select the most appropriate options. Most people unconsciously limited to allow a portion of the laudable objectives to guide them, just because they are aware of the variety of ways.

This is a trap Team Seagate Technology Executive is trying to avoid the early 1990s when the company the world’s largest manufacturer of disc drives. After acquiring a number of companies, Seagate decision analyst Ralph Keeney help went two ways they find to integrate into a single organization into a single organization. Keeney held individual interviews with 12 executives from Seagate, including the CEO, to the company’s objectives. In a summary of their responses, eight goals he identified (such as creating the best organization of the software and provide value for customers) and 39 specific (eg the development of better standards of products and reduce costs Client). Significantly, appointed every officer, on average only one third of the specific objectives, and a person cited for more than half. But with all the goals, leaders need a broader vision and a common framework for deciding which opportunities to pursue. If they do not systematically in their goals, some of these prospects may go unnoticed.

Early on, want to create a lot of goals in the process of decision-making to. Later, you can, the most important control. Seagate makes, for example, a high priority on the improvement of products, since they lead to more sales and more satisfied customers and ultimately increased profits. Of course there are other ways to higher profits, such as the development of a thinner workforce more efficiently. Joint document, and the organization its goals will help you to see these roads clear so that you choose the one that makes more sense in terms of the likely outcome.

Follow these steps to make sure you are getting high and long enough with their goals.
Advice.

Complete search for your prospect, others for ideas. In one study, researchers asked MBA students to list all its targets for an internship. Most mentioned seven or eight things as “to improve my ability to gain full-time employment” and “my leadership skills to develop.” Then they showed a master list of all goals and asked what they personally relevant than. Your own lists doubled accordingly and if the participants rated their goals later, the other facts as high as those who came up with themselves.

Scheme targets on your own before looking for advice so that you do not get “anchored” by what others say. And not his advisers in importance to what we believe that already at anchor (“I think our new CFO has experience with acquisitions that you think you have?”). If you make a decision, with others, people list their goals independently and combine the lists, just like Seagate Keeney.
Cycle through your goals.

Based on their experience consulting and laboratory Keeney just found the goals a help at a time instead of all at once people come up with more alternatives. Looking for a solution that is each field on site too difficult, paralyzing decision-making.

Therefore, if one of your goals, say, a refuge off-site, one at a time. If you want the people who are teaching the past year, the development of certain leadership qualities to share and deepen their understanding of the strategic priorities, separately considering these goals can help you to achieve more effective. One can imagine a number of meetings and events experts have moderators to visit Lead brainstorming sessions, a seminar on leadership in a business school. Then proceed to combinations of targets. Develop leadership skills and accompanying family members entertain the experience seeing might as Outward Bound. Even if you do not initially like an idea, you write additional ideas to generate the other goals.
Think Options

While a critical mass of options to make informed decisions is necessary, it is also necessary, at least two serious contenders, but to find the ideal case, three to five. Of course it is easy to pull system 1 reflection give in and create a false choice to its intuitive favorite option (to rationalize like asking parents, a spirited child: “Do you have a nap or two want now?”). But then, quite simply wrong. The decision can not be beat, is the best option to study. Also System 2 thinking often too narrow. Analyze the advantages and disadvantages of the various options will not make you good if you managed to best identify.

Unfortunately people often considered more than one made at a time. Managers tend decisions, yes or no questions of the place of production to work out alternatives. You might ask, for example, “Are we to our business in the retail sale of furniture in Brazil?” Without question whether the expansion is always a good idea, and if Brazil is the best place to go.

Yes-no framing is just one way we keep our options. Others include the emphasis on one type of solution to a problem (what psychologists call functional fixation) and is about our assumptions, what works and what not limited. These are all signs of cognitive rigidity, which is amplified when we feel the pressure of time, threatened negative emotions, exhaustion, stress and other factors. We spent the mental energy, a way to avoid a loss, found instead to explore the development of new opportunities.
Use JAP.

The problem of evaluating options in isolation is that you can not guarantee the best results. Take this scenario a known study: A company is looking for software developers to write programs in a new programming language. There are two candidates in the estimated same graduates. 70 program was written in the new language and have a grade point average of 3.0 (5.0). The other wrote 10 programs and has an average of 4.9. Who gets the highest bid?

The answer depends on whether you are likely to look at the side of the two candidates each other or. The pay In the study, most people, both programmers simultaneously in the joint assessment of wanted to test, to recruit more money prolific, despite its low GPA. However, if other groups of people asked on a single programmer were each proposed salaries, higher for those with the highest average. It is unclear whether the 70 programs is a lot or a little, if not a comparison. Mode independent assessment, respect human as to what they can easily be assessed in this case, academic achievement and ignore what they can not. You make a decision without taking into account all relevant facts.

A proven way to take care of, such as the joint evaluation shall examine what is missing when you make a selection. This forces you to look for other options. In a study by Yale University, 75% of respondents said yes to the question “Do you want a copy of an entertaining movie for $ 14.99 to buy?” But only 55% said yes, he said explicitly that it could either buy the movie or keep the money for other purchases. This simple change Joint Assessment underscores what economists the opportunity cost, what will happen if you pursue something else.

Try test “evacuation possibilities.”

Once people have a good choice, as a rule, they want to move on, then stop to explore alternatives, which may be higher. To solve this problem, experts are Chip Heath and Dan Heath recommend a mental trick: Let’s say you do not vote, you can choose one of the options that you weighing just and ask this question one: “What could I do? ” , Exploring alternatives to firing can use it to open your thinking about the development of furniture industry in Brazil: “What if we do not invest in South America I could What to do with our resources to do” You may ask to the investment in improve another region in force to their current location or the online shop for a major upgrade. If more than one idea seemed promising, it is possible, the difference divided For example, to build the water in Brazil for counters and not try and use the surplus for the renovation.
Fight Bias Motivated

They say that all these cognitive biases road forward thinking, “motivated” to be on the objectives and options, if driven by an intense psychological need, as an attachment or strong emotional investment. Motivated prejudices are particularly difficult to overcome. You know, if you have already paid countless hours and resources in the development of an idea, only to discover months later that someone hit him. You should calmly, but his desire to avoid a loss is so great that their perception of the benefits and risks distorted. And if you believe that there is an urgent need to move forward and to show that your idea is a little bigger or better.

Our belief in our own misjudgment made matters worse. We are confident for two reasons: We have information, too much weight (see box “Prevent Misweighting”) And because we do not know what we can not see, hard to imagine other possibilities, we must. frame the problem and working on a solution.

But we can expect some motivated, as the tendency to stubbornly pursue a plan of action that we want to take necessarily, through the use of a “tripwire” to redirect us toward a logical way through. That makes many leaders in the implementation of the Expedition Everest customers: Log notice. If the group does not reach the top, by then you have to return and, weather permitting storage, you may need to enter in their entirety, the issue. From a rational point of the months of training and preparation the level of sunk costs and should be taken into account. If removed from the situation, almost everyone would agree that without the response time could be the life at stake and put too risky. However, loss aversion a powerful psychological force. No tripwire, many climbers do not grow in advance prepared to give up their dream of the mountain to conquer. His tendency to act on emotions, is even stronger because the system 2 thinking is incapable by low levels of oxygen at high altitude. As you climb higher, they are less ready for decision and in greater need of a trip wire.

In business, Fallen son they may be less prone to the “present bias” -the tendency to focus on the objectives and the immediate preferences and to make to ignore the long-term consequences. For example, if you say publicly, but to go looking for training that your boss wants you (and you drop, even though you know that it is good for you), you’ll be better able to continue to be. Make your stay more accurate wire (date name) so that you will be fighting not to be considered later, and share with the people who control it.

Cognitive rigidity is enhanced by time pressure, negative emotions, exhaustion, stress and other factors.

Another important use of traps is son-bidding situations where time and effort already a negotiation can feel like a waste if a deal was not reached invested. Managers often try to avoid that loss to overpay by escalating their commitment, for millions or even billions of dollars. The thing is that the preferences often change during a negotiation (eg new information becomes available, can justify paying a higher price). So in this situation, you should install a decision on a type of thread travel, which is less restrictive because it causes reflection rather than action. When the issue price escalated to pause on its trigger value, and to rethink their goals and options. Decision points offer greater flexibility than “hard” trip wire, but because they operate in different ways, but also the risk of taking short-term decisions to increase on emotions.

Although the narrow thinking can to torment us any time, we are particularly sensitive to this area decisions at a time, and we can not learn from experience. So tactics that are expanding our perspective on possible future targets and options particularly useful in these situations. Some tools, such as checklists and algorithms can improve decision making by reducing the burden of memory or attention; others, like son traps, make sure our attention to a critical event when it happens.

In general, it is good to provide three possible futures, provide three main objectives, and create three viable options for each scenario production. We can always do more, of course, but the general approach is we can be overwhelmed by endless possibilities almost as debilitating as seen very few to avoid.

Even the smartest people are biased in their judgments and decisions. It is foolish to believe that we overcome by sheer will. But we can anticipate and thwart pushes us in the right direction when it’s time to make a call.