Getting to Better Funding Decisions: Eliminating Noise and Bias in Decision Making: “Noise: a flaw in human judgment” by Daniel Kahneman

We need a better system of making funding decisions. Right now if you are degree educated and able to write well in a manner which works for a grant application form you are more likely to be successful than those without those attributes.

So whilst we need to address the structure of application making, not enough thought is being given to HOW decisions are made.

Some of the answers can be found in the latest book from Daniel Kahneman who you may know for his seminal work “Thinking Fast & Slow.”

His latest book explores how noise affects decision making and raises a whole set of questions about how well our funders make decision on the applications they receive.

In a nutshell Kahneman says there are 2 elements which affect decision making: Bias and Noise.

Bias, a phenomenon widely discussed, involves systematic errors in judgment due to preconceived notions or discriminatory tendencies. It's a hurdle that decision makers are becoming increasingly aware of and working to address. However, noise, its counterpart, often lingers unnoticed.

Noise refers to the variability and inconsistency in decision-making that arises when different individuals assess the same situation differently. It's the discord in judgment that can lead to puzzling disparities in funding decisions.

It’s tough deciding who gets what and so funding decisions rely on good judgment and this is where the problems begin. Judgment, as a measurement tool, relies on the human mind as its instrument. This instrument is inherently prone to biases and susceptible to the influence of noise. When organisations make life-altering funding decisions, it's imperative to scrutinise the quality of judgment at play.

Kahneman suggests that to combat both bias and noise, organisations must establish a robust “decision hygiene strategy”. This approach encompasses several key components that can enhance the quality of funding decisions:

-??????Diverse Perspectives: Embrace the power of collective intelligence by involving multiple individuals in decision-making processes. Diverse perspectives can offset individual biases and offer a more balanced assessment of applications.

-??????Deconstruction and Assessment: Break down the components of applications to be assessed. This allows for a more focused evaluation and reduces the likelihood of noise distorting the final decision.

-??????Independent Assessment: Encourage independent assessment by decision makers. This means each individual forms their judgment without being influenced by group discussions or external factors.

-??????Intuition and Delayed Application: While intuition can offer valuable insights, it's prudent to delay its application. Allowing decision makers to initially assess applications based on objective criteria can help mitigate subjective biases.

-??????Relative Judgment Scales: Develop judgment scales that are grounded in familiar instances understandable to all decision makers. This relative approach fosters consistency and reduces the impact of noise.

The integration of AI in decision-making processes is inevitable. Research indicates that machines often exhibit superior judgment compared to humans, sorry, the robots really are coming! Thinking positively though as AI progresses, organisations might find that embracing these technological tools could significantly enhance their funding decisions.

Kahneman suggests that organizations seeking to refine their funding decisions should think about the following:

-??????Bias and Noise Audit:

Begin any revamp with a comprehensive audit of existing processes to identify potential sources of bias and noise. This step is crucial for building a strong foundation for change.

-??????Decision-Making Teams:

Formulate new decision-making teams led by a designated Decision Observer. This individual is tasked with recognizing biases in real time, ensuring a fairer assessment.

-??????Objective Criteria Review:

Review and revise decision-making criteria to make them more objective and efficiently assessable. This helps to minimize the influence of individual biases.

-?????Decision Hygiene Strategy:

Design a decision hygiene strategy that aligns with the specific needs and challenges of your organization. This customized approach can yield more impactful outcomes.

In a time of increasingly restricted resources we need better ways of making sure the money goes where it can have the greatest impact.

This requires our funders to have a better understanding of how noise and bias, shape their judgments and create processes which are fairer and easier to understand.

“Noise: a flaw in human judgment” by Daniel Kahneman might help.