The Brain Science of Bad Decisions
ach day, intelligent leaders make mistakes, with devastating consequences. Our daily decisions are generally small and innocuous. Others are incredibly important, affecting people’s lives and their well being.
Authors Sydney Finkelstein, Jo Whitehead and Andrew Campbell have studied how smart leaders make catastrophic decisions. In Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You (Harvard Business School Press, 2008), these experts show how the brain’s thinking processes can distort judgment.
Flaws of Decision Making
In studies of more than 83 flawed business and political decisions, the authors identify two major factors at play:
- An individual or a group has made an error of judgment.
- A decision process fails to correct the error.
Normally, when an influential person makes an error of judgment, the decision process will bring the error to light. Other people with different views will challenge the flawed thinking. The facts will be exposed and erroneous views corrected.
Complex decisions always involve personal interpretations and judgment. That’s what makes them difficult to get right. You need debate and consensus—but even with both, two important questions arise:
- How do you know when you or those debating your premise are coming from a biased position?
- How do you know when your consensus is nothing more than groupthink?
Old-School Decision Processes
Traditional decision-making processes are supposed to follow several logical steps:
- Lay out the problem.
- Define the objectives.
- Generate options.
- Evaluate each option against the objectives and other relevant criteria.
- Choose the option with the best outcome.
- Monitor progress and change course, if necessary.
Many people work under the illusion that if these steps are followed, little can go wrong. But these steps do not take into account what goes on in people’s brains when they weigh options and make judgments.
The Brain Science of Decision Making
The brain uses two processes that enable us to cope with complexities:
- Pattern recognition
- Emotional tagging
Both help us make excellent decisions most of the time. But in certain conditions, these processes can mislead us, resulting in poor judgments and bad decisions.
Pattern-Recognition Flaws
Most of the time, pattern recognition works remarkably well. But when something looks familiar—yet truly is not—we can be fooled into thinking we understand it.
This problem is called a “misleading experience,” and it’s a major contributor to faulty reasoning. Our brains house memories of past experiences that connect with inputs we are receiving. But when the past experiences are not a good match with the current situation, we form wrong conclusions.
Another problem arises when our thinking has been primed before we receive the inputs. For example, we may have made previous judgments or decisions that connect to the current situation, but they may, in fact, be inappropriate. This causes us to misjudge the information we are receiving—faulty thinking known as a “misleading prejudgment.”
Emotional Tagging
Emotions are essential in decision making. While most of us pride ourselves on our ability to be analytical and rational, our brains simply do not work this way. We depend on emotional input to focus our thinking and make choices.
Emotions primarily work on our bodies in unconscious ways, and we cannot eliminate their effect, as hard as we may try. Most of the time, emotions are helpful, but they can sometimes lead to disaster. We need some way of anticipating when our emotions may cause a problem.
Here are four sources of emotional tags that can interfere with sound decision making:
- Intense emotional experiences: We may have powerful memories of successes, failures, fears or pleasures that we’ve experienced in the past. These emotions usually help us, but strong memories can also mislead us.
- Previously made judgments and decisions: We can tag previous judgments and decisions with strong emotions. When these judgments are sound, our emotions help us focus. But if the judgments are misleading, our emotions can cause us to cling to them.
- Personal interests: We often have personal interests at stake in the decisions we make. If these decisions affect only ourselves, our emotional tags will help us reach the right answer. But when our personal interests conflict with our responsibilities to others, our judgment can be unbalanced.
- Attachments: As social animals, we are designed to become attached to other people. We can also become attached to a group or tribe, places and even possessions. If the decision we’re about to make is likely to affect one of our attachments, the emotions generated can impair our thinking.
Safeguards
When no red flags exist, the decision-making process can be fast and simple. When we spot red flags, we can design appropriate, effective safeguards that are less likely to de-motivate everyone involved in the decision process:
- Experience, Data and Analysis: In business, there are many ways data can be collected and experience broadened. Discussion with key customers can provide valuable feedback. Consultants can be hired to offer objectivity and outside perspectives.
- Group Debate and Challenge: The process of debate can help expose assumptions and beliefs. It’s vital to choose the right participants, as the group must identify appropriate challenges that meet organizational goals.
- Governance: It may be necessary to set up a separate governance team if one doesn’t exist apart from the decision-making team. The new team should be designed as a vital backstop to stand in the way of any flawed judgments that make it past the decision team.
- Monitoring: The monitoring process tracks the progress of the decision. Awareness of monitoring encourages decisions makers to think carefully before making their recommendations. If decision makers know the outcome will be recorded and publicized, they will be motivated to think—and rethink—their positions.
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