Let’s face it; we live in a world saturated with information! We’re constantly trying to filter out the noise to discover the bits of data that are significant. It’s not surprising, therefore, that our brains tend to take shortcuts in this evaluation process. These mental shortcuts – called cognitive biases or heuristics by psychologists – help us handle the sheer number of decisions we must make each day by allowing us to make decisions quickly. For our ancestors, that ability was often a matter of life and death.
Cognitive biases distort our thinking, however. While we like to see ourselves as objective and rational, that’s true a lot less often than we might imagine. Our mental shortcuts often cause us to dismiss facts that we need to form accurate judgments. They can also lead us to place undue importance on other information. When we have a lot of different demands on our attention, we tend to lean more heavily into biased thinking.
There are dozens, if not hundreds, of different types of cognitive biases. So let’s take a look at 5 common biases that can derail our productivity and good decision-making.
Building consensus is great, but a lot of people can still be wrong. This is the reality at the heart of the Bandwagon Effect. Someone experiencing this bias judges the credibility and value of an idea based on the number of people who support it. Hopping on the bandwagon can be positive for a business. The Bandwagon Effect underlies the value of product/service reviews by consumers, for example.
But this cognitive bias can have a chilling effect on diversity of thought. People who look at things differently or who question the status quo are often the sources of innovation. Shutting them down can hamper our business’s ability to remain competitive. Creating an echo chamber of like-minded individuals also magnifies the impact of other cognitive biases because no one is willing to challenge the groupthink. Finally, over-reliance on common opinion can cost a business talented people. Few of us enjoy being the odd one out – especially if there are tangible consequences for being the outsider, such as stalled career advancement.
If you can’t say something nice, don’t say anything at all. This statement sums up the Courtesy Bias. An individual with a strong courtesy bias is reluctant to share their dissatisfaction with a situation. They don’t want to offend anyone or be seen as a troublemaker.
The Courtesy Bias has similar effects to the Bandwagon Effect. It stifles diversity of thought, but in this case, the person is self-censoring. While no one wants to be seen as a Negative Nellie, decision-makers need accurate information to make good choices. Being able to give honest feedback also allows employees and customers to vent frustrations that might otherwise build to the point where severing the relationship seems the only option.
Another cognitive bias that can thwart the ability of businesses to gather accurate feedback on performance is the Dunning-Kruger Effect. People with this bias believe they are smarter or more skilled than they actually are. Many of us experience a mild version of this effect as part of our normal learning curve. We gain a basic competence, but don’t realize how much there is still to learn in order to achieve true mastery. For people experiencing the Dunning-Kruger Effect, however, this misperception persists over time. Think of it as self-confidence on steroids.
Understandably, this bias can make judging the relative value of team members more difficult. This is especially true for businesses that don’t track objective measures of performance. The problem is often compounded by a curious flip side of the Dunning-Kruger Effect. In this instance, highly capable people judge their performance harshly, often refusing to accept that they are really as skilled as others say (Imposter Syndrome) or believing that everyone else is performing to their level (the False Consensus Effect). Dunning-Kruger can lead overconfident team members to tackle tasks or make decisions that they aren’t truly equipped to handle.
This term describes the tendency to assess the worth of something we own with little regard for its objective market value. The Endowment Effect can take hold when we lack information about the value of comparable assets. Additionally, we know the effort and resources we devoted to creating a product or building a business. Our valuation reflects that investment.
The Endowment Effect often leads us to charge too much for the goods and services we provide, slowing the growth of our businesses. It can also cause problems when owners attempt to raise capital to fund growth or become involved in the mergers and acquisitions process. Lastly, this effect can prevent us from adopting new technologies or revamping business processes because we overvalue the systems we already own.
The Optimism Bias leads us to believe that we are less likely to suffer setbacks and more likely to succeed than others. Many entrepreneurs have a strong optimism bias. It’s one of the traits that help them persevere. But like so many of the traits we’ve discussed today, optimism needs to be tempered.
Unchecked optimism can cause us to overlook or minimize risks that can potentially derail our businesses. It also can interfere with day-to-day functions such as project management. Individuals with an Optimism Bias frequently underestimate the time and costs required to meet goals because they rely on the best-case scenario. Worst of all, when bad things do happen, individuals and organizations with this bias often overreact. They feel a sense of personal betrayal that the rosy outcome they were “promised” doesn’t materialize.
Overcoming Cognitive Biases
Because they operate below the conscious level, overcoming cognitive biases can be extremely challenging. The first step is to identify the biases we have, both as individuals and as organizations. Learning more about how cognitive bias works can help us see these traits in ourselves. It’s also a good idea to ask others if we exhibit these behaviors. The ideal person to ask is someone who knows us well enough to evaluate our behavior over time, but who doesn’t have a “stake” in the answer. Courtesy Bias aside, close friends and family may be too emotionally involved to give an impartial answer. Seek a variety of opinions. There are also a number of assessment tools available to help us analyze our behavior.
For organizations, collecting objective data about performance and outcomes can help. Be careful, though! Cognitive biases can also influence our decisions about what to measure. For example, a company with a strong Optimism Bias might unconsciously choose to measure things they know or believe they do well. When this happens, our “hard data” only reinforces our biased expectations. Talk with industry peers or management consultants to see what comparable businesses measure in their performance improvement programs. Finally, practice mindfulness and strive to maintain a healthy work-life balance. When we are tired and stressed, when we take on too much and don’t give ourselves time to make considered decisions, cognitive bias is more likely to steer our behavior. That can take us to a place we don’t want to go.