Examples of decision making scenarios in the workplace

Researchers have identified a series of flaws in the way we think when making decisions. They are hardwired into our thinking process, so we often fail to recognize them. 

While we cannot entirely rid ourselves of them, we can learn to understand the traps and compensate for them.

You have an edge if you can establish a personal connection with those you are negotiating with.  Connect emotionally and intellectually so the other person will like and trust you. 

Reciprocation (http://lawofreciprocity.com/)

Do something positive for someone and that person will want to reciprocate some time, some how.

Reciprocation flows from Divine Law that can neither be ignored or put aside. Perhaps, the most important of these laws is the 'law of love.'   Put simply, "Love is Law, Law is Love. God is Love, Love is God." This amounts to the same thing as "the gift of giving" without the "hope of reward or pay," or serving others. This 'law of love' is identified in many different ways--for example, in Wayne Baker's bestseller,"Achieving Success Through Social Capital"(Jossey-Bass), this law of love in the workplace is described as the "law of reciprocity."

The law of reciprocity is not what can best be described as "transactional reciprocity."  Baker says that, "Many people conceive of their business dealings as spot market exchanges--value given for value received, period. Nothing more, nothing less. This tit-for-tat mode of operation can produce success, but it doesn't invoke the power of reciprocity and so fails to yield extraordinary success."

Baker explains, "The lesson is that we cannot pursue the power of reciprocity. When we try to invoke reciprocity directly, we lose sight of the reason for it: helping others. Paradoxically, it is in helping others without expecting reciprocity in return that we invoke the power of reciprocity. The path to reciprocity is indirect: reciprocity ensues from the social capital built by making contributions to others.

The deliberate pursuit of reciprocity fails, just like the pursuit of happiness. Acts of contribution, big and small, build your fund of social capital, creating a vast network of reciprocity. And so those who help you may not be those you help. The help you receive may come from distant corners of your network."

"One of the most potent of the weapons of influence around us is the rule for reciprocation. The rule says that we should try to repay, in kind, what another person has provided us."   Robert B. Cialdini, author of "The Psychology of Persuasion" (William Morrow, 1993)

Example: A request for a charitable donation that is accompanied by a gift.

Anchoring

From sexuality to religion, we seek balance between the unchosen realities that anchor us (race, geography, history) and choices that liberate us.

Making important choices is never simple, but it can be a lot easier and more fulfilling when we pay attention to where the choice is coming from.  From business to personal choices, we don't have to make choices from circumstances---like the selection process of choosing from a smorgasbord.  Our life choices are best when they come from a deep understanding of who we are and what our life's work is.

Becoming aware of how we perceive others and our unique identity (our intangibles of assumptions/beliefs, values, vision and guiding principles along with our signature talents) help us to make conscious choices.

When considering a decision, the mind gives disproportionate weight to the first information it receives. Initial impressions, estimates or data anchor subsequent thoughts and judgments.

In business, a common anchor is a past event or trend.  While relying on such may lead to a reasonably accurate estimate of future numbers, it also tends to give too much weight to past events and not enough to other factors.

“People estimate the values of unknown or uncertain objects or events by starting from an initial anchor value and adjusting from there.  These anchors are typically based upon whatever information, relevant or irrelevant, is handy or strategic.  Frequently, an anchor will inhibit individuals from negotiating rationally.”  Barzerman & Neale

The Antidote

Anchors affect how virtually all professionals make decisions. No one can avoid their influence. But becoming aware of their dangers can reduce their impact:

• Always view a problem from different perspectives. Try using alternative starting points and approaches rather than sticking with your first line of thought.
• Think about the problem on your own before consulting others.
• Be open-minded. Seek opinions from a variety of people to widen your frame of reference.
• Avoid anchoring your advisers, consultants and others from whom you solicit information. Tell them as little as possible about your ideas and estimates. If you reveal too much, your preconceptions may simply come back to you.

Status-Quo

We are predisposed to perpetuating the status quo.  Deep within our psyches, we are self-protective and risk-aversive. 

The Antidote

Don’t maintain the status quo just because it’s comfortable. Do so only when it turns out to be the best choice.

• Remind yourself of your objectives.  Examine how they would be served by the status quo.
• Never think of the status quo as your only alternative.  Identify other options.
• Ask yourself: Would I choose the status quo if it weren’t so?

Sunk-Cost  

  We tend to make choices in ways that justify past decisions, even when the latter no longer seems valid.  We know rationally that sunk costs are irrelevant to present decisions, but they nevertheless lead to inappropriate choices. This frequently occurs when we’re unwilling, consciously or not, to admit a mistake.

The Antidote

• Seek feedback from those who were uninvolved in the earlier decision.
• Examine why admitting a past mistake distresses you.  Even the best and most experienced managers are not immune to errors in judgment.
• Be on the lookout for the influence of sunk-cost biases in subordinates’ decisions and recommendations.
• Don’t cultivate a failure-fearing culture that leads employees to perpetuate and cover up mistakes.

Confirming Evidence

  Leaders sometimes seek out information that supports their existing instinct or point of view, while avoiding information that contradicts it.  This trap affects where we go to collect evidence, as well as how we interpret it.

The Antidote

Don’t necessarily disregard the choice to which you’re subconsciously drawn, but make sure it’s the smart one.

• Check whether you’re examining all evidence with equal rigor.
• Ask someone you respect to play devil’s advocate.
• Be honest with yourself about your motives.  Are you really gathering information to help you make a smart choice—or are you looking for evidence that confirms what you already think and want to do?
• When seeking others’ advice, don’t ask leading questions that invite confirming evidence.

Framing

  The first step in making a decision is to frame the question.  It’s also one of the most dangerous; how you frame a problem can profoundly influence your choices.

Individuals tend to be risk averse to positively framed choices and risk seeking to negatively framed choices.  Example: Framing a choice between two plants as “plants saved” vs. “plants lost.”

The Antidote

Limit adverse effects by employing the following:

• Don’t automatically accept the initial frame, whether it was formulated by you or someone else.  Always try to reframe the problem in various ways.
• Try posing problems in neutral ways that combine gains and losses or embrace different reference points.
• When others recommend decisions, examine the way they framed the problem. Challenge them with different frames.

Three Forecasting Traps

  Meteorologists and bookies have opportunities and incentives to maintain records of their forecasting abilities.  The rest of us seldom have enough carefully tracked data to adequately calibrate our minds to make reasonable estimates in the face of uncertainty.  This sets us up for three estimating and forecasting traps.

We have a natural tendency to look for instances that confirm our story and our vision of the world--these instances are always easy to find.  You take past instances that corroborate your theories and you treat them as evidence. 

Those who believe in the unconditional benefits of past experience should consider this pearl of wisdom allegedly voiced by a famous ship's captain:

"But in my experience, I have never been in any accident...of any sort worth speaking about.  I have seen but one vessel in distress in all my years at sea.  I never saw a wreck and never have been wrecked nor was I ever in any predicament that threatened to end in disaster of any sort."  E. J. Smith, 1907, Captain, RMS Titanic

Captain Smith's ship sank in 1912 in what became the most talked about shipwreck in history. 

1. The Overconfidence Trap

Most of us are overconfident about our judgment abilities and prediction accuracy, as we remember our successes and quickly forget our errors. Our hubris tricks us into considering only a narrow range of possibilities.

Major initiatives and investments often hinge on estimate ranges.  Managers who underestimate the high end (or overestimate the low end) of a crucial variable may miss attractive opportunities or expose themselves to far greater risk than ever imagined.

Example: Estimating a narrow range between the seller’s and buyer’s reservation price in a real estate negotiation.

1. The Prudence Trap

When faced with high stakes, we tend to adjust our estimates or forecasts with prudence, “just to be on the safe side.”  Too much prudence can be as dangerous as too little.

1. The “Recall Ability” Trap

Memories of dramatic events leave strong impressions on our minds and can skew future decision-making efforts.

The Antidote

Take a disciplined approach to forecasting.

• Start by considering the extremes: the low and high ends of possible value ranges. Then, challenge your estimates, as well as those of your subordinates and advisers.
• Always state your estimates honestly, and explain to anyone who will be using them that they have not been adjusted.  Emphasize the need for frank input to anyone who will be supplying you with estimates. Test estimates over a reasonable range to assess their impact.
• Carefully examine all of your assumptions to ensure they’re not unduly influenced by your memory.  Get actual statistics whenever possible, and avoid being guided by impressions. 

Recommended Reading on Behavioral Decision Making

“Judgment in Managerial Decision Making”  by Max Bazerman

“Decision Traps”  by J. Edward Russo and Paul J. H. Schoemaker

“Negotiating Rationally”  by Max Bazerman and Margaret A. Neale

“Influence: The Psychology of Persuasion”  by Robert B. Cialdini

“Achieving Success Through Social Capital"  by Wayne Baker

“The Black Swan: The Impact of Highly Improbable” by Nassim Nicholas Taleb 

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