In their book, Decisive, the Heath brothers write that there are four major villains of decision making.
Narrow framing – we miss alternatives and options because we frame the possibilities narrowly. We don’t see the big picture.
Confirmation bias – we collect and attend to self-serving information that reinforces what we already believe. Conversely, we tend to ignore (or never see) information that contradicts our preconceived notions.
Short-term emotion – we get wrapped up in the dynamics of the moment and make premature commitments.
Overconfidence – we think we have more control over the future than we really do.
A recent article in the McKinsey Quarterly notes that many “bad choices” in business result not just from bad luck but also from “cognitive and behavioral biases”. The authors argue that executives fall prey to their own biases and may not recognize when “debiasing” techniques need to be applied. In other words, executives (just like the rest of us) make faulty assumptions without realizing it.
Though the McKinsey researchers don’t reference the Heath brothers’ book, they focus on two of the four villains: the confirmation bias and overconfidence. They estimate that these two villains are involved in roughly 75 percent of corporate decisions.
The authors quickly summarize a few of the debiasing techniques – premortems, devil’s advocates, scenario planning, war games etc. – and suggest that these are quite appropriate for the big decisions of the corporate world. But what about everyday, bread-and-butter decisions? For these, the authors suggest a quick checklist approach is more appropriate.
The authors provide two checklists, one for each bias. The checklist for confirmation bias asks questions like (slightly modified here):
Have the decision-makers assembled a diverse team?
Have they discussed their proposal with someone who would certainly disagree with it?
Have they considered at least one plausible alternative?
The checklist for overconfidence includes questions like these:
What are the decision’s two most important side effects that might negatively affect its outcome? (This question is asked at three levels of abstraction: 1) inside the company; 2) inside the company’s industry; 3) in the macro-environment).
Answering these questions leads to a matrix that suggests the appropriate course of action. There are four possible outcomes:
Decide – “the process that led to [the] decision appears to have included safeguards against both confirmation bias and overconfidence.”
Reach out – the process has been tested for downside risk but may still be based on overly narrow assumptions. To use the Heath brothers’ terminology, the decision makers should widen their options with techniques like the vanishing option test.
Stress test – the decision process probably overcomes the confirmation bias but may depend on overconfident assumptions. Decision makers need to challenge these assumptions using techniques like premortems and devil’s advocates.
Reconsider – the decision process is open to both the conformation bias and overconfidence. Time to re-boot the process.
The McKinsey article covers much of the same territory covered by the Heath brothers. Still, it provides a handy checklist for recognizing biases and assumptions that often go unnoticed. It helps us bring subconscious biases to conscious attention. In Daniel Kahneman’s terminology, it moves the decision from System 1 to System 2. Now let’s ask the McKinsey researchers to do the same for the two remaining villains: narrow framing and short-term emotion.