The decisions made by leaders and entrepreneurs often shape the future of their businesses. Whether in finance management, hiring new talents or choosing a long -term strategy, each choice counts. However, behind each decision hide psychological processes which strongly influence our judgments, often without our knowledge. These processes are called cognitive biases. Cognitive biases are distortions in the way we perceive and process information, and they can have a considerable impact on the quality of our decisions. For an entrepreneur or a manager, being aware of these biases and knowing how to manage them is essential to avoid expensive errors.
Cognitive biases: what is it?
Cognitive biases are systematic errors of thought that influence our decisions and judgments. They come from the way in which our brain processes information and can be seen as a mental shortcut which, although it is generally useful for making rapid decisions in situations of stress or uncertainty, often leads to errors of judgment. These biases are sometimes harmless in daily life, but in a business context, they can have serious consequences.
Cognitive biases influence all the facets of decision -making, from human resources management to commercial strategy, including financial choices. Fortunately, once identified, these biases can be managed.
Current cognitive biases that affect our decisions
Here are some frequent cognitive biases that influence the decisions of business leaders:
Confirmation bias
This bias consists in looking for, interpreting and promoting the information that confirms our preexisting beliefs while ignoring or minimizing the information that contradicts them. In business, this can manifest itself, for example, when a leader decides to continue a strategy despite the signs indicating that it does not work. Confirmation means can also influence recruitment, bringing a manager to hire a person who shares his own opinions and values, rather than looking for a profile more suitable for the position.
How to avoid it:
Encourage an environment where divergent opinions are not only accepted, but also sought after. During meetings, set up exercises aimed at challenging preconceived ideas and inviting opposite views.
Anchoring
The anchoring is the bias that pushes a person to be excessively based on the first information they receive, called “anchor”, even if it is insufficient or not relevant. For example, if a manager sees that a product costs € 500 in another store, he may have to judge a product at € 700 as too expensive, even if it represents better value for money.
How to avoid it:
During decision-making, especially when it comes to financial or commercial analyzes, be sure to examine all the options available before making an assessment. Do not only trust the first data or proposals.
Optimism bias
This bias manifests itself when a leader underestimates the risks and overestimates the potential benefits of a decision or a project. This can lead to too large investments in risky initiatives, without a realistic evaluation of potential obstacles. Optimistic entrepreneurs are often so convinced of the success of an idea that they neglect to take into account external factors or critical variables.
How to avoid it:
Encourage a more realistic approach by actively looking for information that questions your assumptions. It is essential to create a corporate culture which values not only successes but also failures and learning from errors.
Availability
This bias refers to the tendency to give more weight to recent or more easily accessible information, whether relevant or not. For example, a leader who intends to speak of a series of successes from a competing company could be inclined to follow the same strategies without taking into account the specificities of his own market.
How to avoid it:
Take the time to collect various information from different sources before making a decision. Consider consulting experts or conducting in -depth research before acting, even if a recent example seems relevant.
Overrinting bias
One of the most frequent errors among the leaders. This is the tendency to overestimate your own capacities or knowledge. A leader may, for example, be convinced that he can manage a crisis without the help of external experts or ignore external advice due to excessive confidence in his skills.
How to avoid it:
Always be open to receiving feedback and criticism. Ask your employees to challenge you regularly and value external advice, especially those of mentors or advisers. The ability to recognize its limits is a key skill for a leader.
How to manage these biases?
Decision making is a complex process, but several strategies make it possible to minimize the impact of cognitive biases and to promote a more objective and reasoned approach.
Use data and analyzes
One of the first methods to reduce the influence of biases is to rely on objective data and analyzes. A decision -making process based on figures and facts makes it possible to avoid subjective judgments and mental shortcuts. For example, when a leader makes an investment decision, he must rely on detailed market studies, financial forecasts and risk analyzes, rather than trusting intuitions or personal prints.
Encourage collaborative decision -making
One of the best ways to avoid cognitive biases is to encourage collaborative decisions. By involving several people in the decision -making process, we diversify the points of view and we reduce the risks of errors due to subjectivity or group thought. Each member of the team will be able to provide their expertise and their observations, and thus help identify dead angles or potential risks.
Set up post-decision reviews
Once the decision has been made, it is useful to set up a review process to assess the results and identify the biases that may have influenced the initial decision. This allows you to learn from each experience and better understand how biases have been able to affect the choices made. By analyzing what worked or not, the company can refine its decision -making processes.
Take time
Stress, pressure and emergency are factors that promote cognitive biases. When a leader must make a quick decision under pressure, he is more likely to fall into cognitive traps. Therefore, as soon as possible, it is essential to take time to reflect, analyze and, if necessary, consult other people before deciding.
