Avoiding psychological traps
Even in circumstances where analysis is complete and the path forward seems relatively clear, decision-making can be a challenge.
Sometimes the fault for sub-optimal decisions comes not from the decision-making process, the intel gathered or the analysis completed, but rather, the mind of the decision maker. Psychological traps are easy to fall for when it comes to making business (or any) decisions, says Nicole Widmar, associate professor of agricultural economics at Purdue University.
“Decision traps are built-in flaws in our thinking,” she says. “Understanding what these traps are and how they affect decision making is critical to understand how people arrive at their conclusions.”
In their 2006 Harvard Business Review Article, “The Hidden Traps in Decision Making,” John S. Hammond, Ralph L. Keeney and Howard Raiffa offer a series of common psychological traps that affect the way people make decisions. Here are a few examples:
The anchoring trap is an easy one to fall for. The original question surrounding the decision you are trying to make has already created an anchor. In the words of Hammond, Keeney and Raiffa, “The anchoring trap leads us to give a disproportionate weight to the first information we receive.”
According to Widmar, anchors come in all forms. They could come from old data or even from stereotypes. The keys to avoiding them are open-mindedness and critical thinking.
“Carefully seek others’ input to compare and contrast with your own,” she says.
Status Quo Trap
The status quo trap is one in which the decision maker is biased toward options that are similar to the current situation. Settling for what already is can blind the decision maker to superior alternatives.
Widmar says the key is to ask yourself, “If I weren’t currently choosing this option, would I choose it from my alternatives?”
Confirming Evidence Trap
The confirming evidence trap refers to seeking out biased advice or information that supports a particular option, and discounting any opposing information.
Avoiding this trap is about seeking out a variety of information from trusted sources and weighing it equally.
“Don’t seek out one-sided information and advice you know will tilt the decision-making process,” Widmar says. “When you seek input, avoid sharing your ideas first so the person giving the advice doesn’t fall into the anchoring trap.”
The framing trap happens when options are presented in ways that can change perspective.
“Never look at a problem from only its original frame,” Widmar says. “Always consider various ways to evaluate a situation.”
These are just a few examples of psychological traps that decision makers fall into in the business world. Others include the sunk-cost trap, which can cause perpetuation of past mistakes; the overconfidence trap, in which the decision-maker overestimates the accuracy of forecasts; the recallability trap, which can cause decision makers to give too much weight to recent events; and the prudence trap, which can lead decision makers to be overly cautious in making estimates.
Being aware that these traps exist and considering them throughout the decision process can ultimately help decision makers choose to pursue the most sound of the options for their businesses.
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