Why did I do that? Unexpected reasons for taking decisions – and what to do about them

While decision-making is a fundamental part of an executive's life, research by IESE professors shows that we don't always take decisions for the reasons we think.

 

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Some studies estimate that we take 200 decisions a day … just related to food. That’s so many decisions that we can’t possibly put reasoned thought into every one of them, meaning that we make many choices without full awareness or room for reflection. Why is this relevant to the workplace? Because decision-making is a fundamental part of an executive’s life, and the impact of those decisions goes far beyond wondering why we had a second serving of potatoes at dinner.

Recent research by IESE professors has looked at a number of these sometimes unexpected reasons behind the decisions we take. Here, some of those findings – along with what you can do to make sure your decisions are sound:

We take more risk with percentages: Our attitude toward risk is different when options are presented as percentages or fractions, then when they’re presented as numerical figures. In other words, we react differently if potential loss is described as 10% or as €2,000 – even if objectively they’re the same.

  • What to do: Try framing options as both a percentage and a number before you make decisions to ensure that you’re not reflecting this bias. Also, be aware that you may be more convincing to risk-averse clients if you present options as percentages.

We magnify extremes: While Hillary Clinton supporters normally think that people who voted for Donald Trump were drawn to his radical views on immigration, Trump supporters themselves indicate they actually were looking more at his economic policies. Research shows that we have a tendency to give too much weight to extreme positions to arrive at quick judgments, prompting us to dismiss other factors which could have influenced these decisions.

  • What to do: Ask yourself what business positions or people you have dismissed for their apparent “extremity.” Then ask yourself whether you may have made erroneous inferences about them, and whether other, more nuanced factors, may have been at play.

We have too much information: You may think that the more tools for complex analysis the better, but frequently more information simply means greater risk. Studies suggest that, contrary to conventional wisdom that more information is always better, too much information can skew your risk perception and create alarmism and waste.

  • What to do: Choose your information, along with the tools you’ll use to process and evaluate it, wisely. Less can be more.

We’re unpredictable under pressure. You may consider yourself to be a cool-headed executive, but research has shown there’s a “cold-hot” empathy gap that prevents us from knowing how we’ll react to a high-pressure situation before we’re in it.

  • What to do: Take a more considered approach when going into situations you know may escalate. For example, if you’re involved in competitive bidding, you should not only prepare for the auction — e.g., set a price limit for how much you’ll spend — but also acknowledge how escalating pressure could change your frame of mind as the bidding unfolds.

We like complete sets: We are intrinsically drawn to completion and perceive a whole as greater than its parts. It has been shown that grouping tasks (even if it’s arbitrary) makes people want to complete the set and can nudge a decision. This phenomenon is also valid for purchases. Think about it: When’s the last time you bought five of something that’s normally sold as a six pack?

  • What to do: Set framing can be a powerful tool to inspire and motivate workers to get things done. Approach and assign tasks not as a single item, but as a whole.

Executives who want to take better decisions should be aware of these different processes in order to act rationally and to avoid mental biases. Limiting the number of errors committed unconsciously is fundamental to improving your results. And, to complete the set, some final recommendations:

  • Take a look back: Self-criticism is key. It’s important to analyze your decisions to detect errors, weaknesses and possible cognitive biases that may have impacted your analysis. An excess of confidence can have serious consequences.
  • Listen to the voice of experience: It’s important to seek the advice of people who have faced similar situations, as well as to analyze the outcome of similar situations in the past.
  • Never stop learning: Education is crucial to establishing the criteria for decision-making. Better decision-making is a cornerstone of many of our programs, whether it’s general management programs such as the Advanced Management Program, the Program for Management Development, or Driving Leadership Potential, or shorter-term programs such as Getting Things Done or Developing Leadership Competencies.

Want to read more? Here’s some of the research:

Mindless Eating: The 200 Daily Food Decisions We Overlook

Probability or Price? Form Matters When it Comes to Risk

Are We Perceiving More Polarization than There Actually Is? 

How Not to Lose Your Head in a Bidding War

Blowing the Budget: Analytics, Risk and the Race to Overspend

That Missing Piece: Playing to Our Need to Complete Sets

This post is also available in: Spanish

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