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Business executives can outsource functional works related to finance, marketing and administration to capable staff. But they can't outsource the process of making important decisions. It's not necessary that they make decisions that turn out right all the time. But it is important to see what thought process and what mental balancing between what's known and what's unknown leads them to make decisions that affect people, resources and results in the long run.
I picked up this hobby several years ago, after failing more often than I dare to admit in my own various decision-making processes, and after having kept a log of my mistakes and that of others' from which I continue to learn. One lesson that comes up time and again is the elementary psychological biases that executives fail to be conscious of when they make decisions.
Confirmation bias: This bias leads executives to use new information to further believe what they already believe, usually by ignoring evidence that stand contrary to the existing beliefs.
Let's say that you believe that Shyam is unpopular with his colleagues. One afternoon, you see him eating lunch alone. You interpret this observation to further believe that Shyam is really the most hated person in the office. After all, you ask, why else would he be eating lunch alone?
But unless you talk to Shyam directly and find out more about his work and lunch-eating habits, you are merely reinforcing beliefs about his unpopularity based on one set of observations. This is not going capture what's really true about Shyam. Who knows, Shyam may be a hard worker who's disliked by his colleagues simply because he makes them feel like slackers.
One antidote is to ask: "Could it be that what I believe and what the verifiable truth is are actually two different things?"
Framing bias: Executives often frame issues in such narrow terms that they miss making decisions that get to the heart of their business problems.
I once startled colleagues by arguing that my company is not really in the media business, but in the attention business. That is, we have to constantly do innovative things that legitimately attract subscribers' and advertisers' attention. In a world full of choices, we are in the business of competing for our customers' attention.
One way to guard against using narrow frames when making decisions is to first define issues in broadest possible terms, and then zero in on the core business problem.
Fundamental attribution error: You see a good-looking person. He speaks flawless English, talks easily about the state of the world, and you find out that he had attended all the right schools. Impressed by what you see, you assume that he must be excellent at his business.
But being an excellent businessman has nothing to do with being good-looking, speaking foreign languages or being a graduate of elite schools. What you, as an observer, have done is attribute what you see in one context to success in another, even when these contexts are completely different. In this case, the only way to judge the businessman's worth is through his measurable work-related performance, and not so much by how he charming he is in public.
Executives do not make decisions in a vacuum. As flesh-and-blood human beings, they make decisions by using their head, heart and guts, all of which are influenced by non-logical factors that can lead the decision-making process astray.
But being aware of these three biases is a good step toward sharpening one's decision-making skills in business in these uncertain times.
