Decision-making: perceptual biases and emotional impulses
Nothing in life is more torturous, and therefore more prized, than to be able to decide. Business schools and management textbooks have always vouched for the rational model of decision-making. Notwithstanding the exaltation with which the rational model of decision-making is treated in the world of business and management, it is not how people, in practice, make their decisions! Human beings are generally emotional creatures subject to perceptual distortions even as they endeavour to be rational.
Human beings, despite their reputation for rational thinking, seldom hesitate in sanctioning the entry of perceptual biases and emotional impulses to crawl into their judgement. Time constraints, pressure to perform, lack of adequate resources, incomplete information, personal interests and the desire to take short-cuts in the decision process—all play their part in dutifully chipping away at the edges of rational decision-making!
There is nothing to suggest here that the rational method of decision-making is irrelevant or futile. It is to highlight the role of perception and emotion in incapacitating the viability of making rational decisions. The rational model of decision-making has its merits, but it often chooses to disregard the role of perceptual biases as well as emotional impulses in aborting the effectiveness of decision-making.
Making decisions with unquestioning belief in rationality is bound to plunge the sense of judgement into the deepest gloom. One of the major reasons why ‘management of change’ in organisations succumbs to resistance is because managers invest so much time in rationalising their decision, and so little time in observing the perceptual biases and emotional impulses of their people.
Not every decision is made under conditions of certainty. Managerial decisions often involve risks where costs and benefits have to be assessed, and involve extreme conditions of uncertainty in which the outcome could be a matter of survival. Limitations of human perception mean that it would be a dangerous luxury to ensconce oneself in the fortress of rationalism whilst subscribing to the infallibility of human perception. Below are some of the biases that affect our perception.
Overconfidence bias: There is no bigger catastrophe in decision-making than making a judgement drenched in over-confidence. An interesting organisational finding reveals the fact that individuals with the weakest intellectual and inter-personal abilities are the most liable to overestimate their performance and ability. As one becomes more knowledgeable, it is only natural to salt one’s judgement with the seasoning of moderation.
Example: Investors who are overconfident in their ability to read the stock market invest their fortune disregarding market trends.
Anchoring bias: The human mind has an inherent weakness in enthusiastically tugging at the first piece of information it receives whilst failing to temper subsequent information with similar enthusiasm. The power of attraction at the first contact with information tends to colour what follows thereafter. Becoming fixated on a single trait or piece of information excludes one from prying into other important factors crucial to making an effective decision.
Example: When buying a house, the particular focus on how the kitchen should be may prevent looking into other important aspects such as flooring, age of the property or the standard of utilities.
Confirmation bias: We draw information selectively, not objectively, to draw our mental map that re-affirms our past experiences and previous choices we have made. We tend to trample upon any information that happens to contradict our values, beliefs and assumptions. In short, we have an ingrained preference to see what we want to see and hear what we want to hear.
Example: A person who believes that a particular political party is nasty may pay attention to only information or news that is consistent with the belief that the political party is nasty.
Availability bias: Events that evoke strong emotions and incidents that have occurred more recently tether our reasoning to overestimating the probability of those events because of their ready availability in our memory. We are prone to granting more weight to recent happenings than to occurrences in the long past.
Example: Even though statistics reveal that getting killed in a car accident is more probable than in a plane accident, the reaction to flying is more adverse than in driving a car. It is because the likelihood of the ‘plane accident’ is more available or memorable.
Escalation of commitment: Even after a series of failures has laid siege to a plan, some individuals escalate their commitment to the decision that they have made. This is the classic example of ‘throwing good money after bad’ to prove that the original decision was right.
Example: Management investing more money in a project and committing to throw more resources to prove that the original decision to invest was right even if it was a lost cause from the beginning.
Hindsight bias: To become wise after the occurrence of an event is quite common among the human race. It is, in fact, the case of claiming, albeit falsely, to have correctly predicted the outcome of an event before it actually happened. What becomes obvious in hindsight is ambiguous in foresight!
Example: Almost every ‘expert’ claimed that the 9/11 terrorist attack could have been prevented; not before but after the event had taken place!
Besides perceptual biases, emotional impulses determine the quality of our decision.
The current environment in which we live is overfilled with a deluge of information. There is, naturally, less time to decide on the best course of action through rational analysis. The pressure of time invariably summons the role of emotions to take charge. Where reason falters, emotion marches. It is when emotions run haywire that we tend to make the wrong decision, commit errors in judgement, distort understanding and react prematurely.
Contrary to general belief that human beings are rational creatures, evidence in neuroscience exposes the play of emotion in decision-making. Studies in neuroscience bring to light the influence of amygdala, an emotion-generating structure in the brain, which has a reciprocal relationship with the pre-frontal cortex, the area of conscious thinking that is responsible for planning, analysing and moderating.
Studies in neuroscience corroborate the fact that we make decisions by factoring in the role of emotions despite our conviction that our decisions are firmly planted in logic and reason. When people identify themselves with standards of fairness or unfairness, they would possibly do anything that they can to stand by their values; some even go to the extent of killing themselves or others despite full knowledge that their actions do not solve the problem!
Human beings do not live only in the moment; their past is co-mingled with their present existence. The past is never fully divorced from the present. The past and the present have a symbiotic relationship. Our past experiences bear an emotional mandate that is converted into some meaning and registered in memories. When we encounter a situation similar enough to past experiences, we readily command emotions connected with those experiences which markedly determine our prospective choices. We then assess the ‘good’ choices against the ‘bad’ ones. Emotions are not fully divorced from our cognitive analysis.
There are times when logic and reason are firmly pushed into the backstage while emotions call the decisional shots. In the corporate world though, a great amount of emphasis is placed upon the objectivity of decision-making framed around the dictates of logic and reasoning with much less consideration of the emotional side of things, especially when the decision involves high stakes. The centrality of emotions in decision-making also reflects the reason why many change efforts directed at organisations flounder and generate resistance from employees.
Logic and reason are useful in justifying the costs and benefits that a decision may bring about. That will hardly be adequate to effect change. Change occurs only when there is an emotional commitment, not rational acceptance, to the decision enacted.
For years, managers have racked their brains and scratched their heads wondering why ‘sound’ decisions despite their soundness have failed to achieve the kind of results they had always wanted! The revelation of how emotions play a crucial role in determining human behaviour is good news in that managers while articulating the rational tone of their decision can also peep into the emotional vein of decision-making.
The effectiveness of the rational model of decision-making will always be determined when biases in perception and impulses of emotion are taken into consideration. Combining rational and emotional elements of decision-making will help in making better decisions, creating a better workplace, and ensuring better employee involvement in the work.