Unlocking Your Brain: A Guide for Managers to Avoid Common Mistakes
Common Mistakes
Imagine if there were a manual for your brain—something that explained how you think and make decisions. Well, you’re in luck! Nobel Prize winner Daniel Kahneman has created a fascinating framework that helps us understand our minds better. His ideas can help managers navigate everyday challenges and avoid costly mistakes. The suggestion for this article came from Fernando Lopez.
We have Two Systems of thinking: System 1 (Thinking Fast) and System 2 (Thinking Slow).
System 1 is the intuitive, “gut reaction” way of thinking and making decisions. System 2 is the analytical, “critical thinking” way of making decisions. System 1 forms “first impressions” and often makes us jump to conclusions. System 2 does reflection, problem-solving, and analysis.
Most of us identify with System 2 thinking. We consider ourselves rational, analytical human beings. Thus, we think we spend most of our time engaged in System 2 thinking.
Actually, we spend almost all of our daily lives engaged in System 1 (Thinking Fast). We engage System 2 (Thinking Slow) only if we encounter something unexpected or make a conscious effort. Kahneman wrote:
“Systems 1 and 2 are both active whenever we are awake. System 1 runs automatically and System 2 is normally in comfortable low-effort mode, in which only a fraction of its capacity is engaged. System 1 continuously generates suggestions for System 2: impressions, intuitions, intentions, and feelings. If endorsed by System 2, impressions and intuitions turn into beliefs, and impulses turn into voluntary actions. When all goes smoothly, which is most of the time, System 2 adopts the suggestions of System 1 with little or no modification. You generally believe your impressions and act on your desires, and that is fine?—?usually.
When System 1 runs into difficulty, it calls on System 2 to support more detailed and specific processing that may solve the problem of the moment. System 2 is mobilized when a question arises for which System 1 does not offer an answer… System 2 is activated when an event is detected that violates the model of the world that System 1 maintains.”
?So, System 1 is continuously creating impressions, intuitions, and judgments based on everything we are sensing. In most cases, we just go with the impression or intuition that System 1 generates. System 2 only gets involved when we encounter something unexpected that System 1 can’t automatically process.
While System 1 is generally very accurate, there are situations where it can make errors of bias. System 1 sometimes answers easier questions than it was asked, and it has little knowledge of logic and statistics.
One of the biggest problems with System 1 is that it seeks to quickly create a coherent, plausible story?—?an explanation for what is happening?—?by relying on associations and memories, pattern-matching, and assumptions. And System 1 will default to that plausible, convenient story?—?even if that story is based on incorrect information.
“The measure of success for System 1 is the coherence of the story it manages to create. The amount and quality of the data on which the story is based are largely irrelevant. When information is scarce, which is a common occurrence, System 1 operates as a machine for jumping to conclusions.”
WYSIATI: What you see is all there is.
Kahneman writes extensively about the phenomenon of how people jump to conclusions based on limited information. He has an abbreviation for this phenomenon — WYSIATI — “what you see is all there is.” WYSIATI causes us to “focus on existing evidence and ignore absent evidence.” As a result of WYSIATI, System 1 often quickly creates a coherent and believable story based on limited evidence. These impressions and intuitions can then be endorsed by System 2 and turn into deep-rooted values and beliefs. WYSIATI can cause System 1 to “infer and invent causes and intentions,” whether or not those causes or intentions are true.
“System 1 is highly adept in one form of thinking — it automatically and effortlessly identifies causal connections between events, sometimes even when the connection is spurious.”
This is the reason why people jump to conclusions, assume bad intentions, give in to prejudices or biases, and buy into conspiracy theories. They focus on limited available evidence and do not consider absent evidence. They invent a coherent story, causal relationships, or underlying intentions. And then System 1 quickly forms a judgment or impression, which in turn gets quickly endorsed by System 2.
As a result of WYSIATI and System 1 thinking, people may make wrong judgments and decisions due to biases and heuristics. This happens daily on a personal level but it is equally true of how companies are run and how management makes errors.
There are several potential errors in judgment that people may make when they over-rely on System 1 thinking: This is your brain's autopilot. It’s quick, automatic, and often based on gut feelings. For example, if a manager quickly decides to approve a budget based on a familiar pattern, they’re using System 1.
Common Mistake: Managers often rely on fast thinking to make decisions without sufficient information, leading to poor choices. Example: A manager might approve a marketing campaign that worked previously without considering current market conditions.
Slow Thinking (System 2): This part of your brain is like a calculator. It takes time to analyze and reason through complicated problems. When a manager conducts a thorough analysis of a new project or evaluates team performance, they’re using System 2.
Common Mistake: Many managers fail to engage System 2, leading to decisions based on incomplete analysis. ?A manager might rush to hire someone based on a good interview without checking references or conducting proper assessments.
Common Mistake: Managers may stick to routines and established practices, even when they’re no longer effective. ?Continuing a monthly meeting format without evaluating its effectiveness can waste time and hinder productivity.
Understanding Heuristics and Biases
Kahneman’s work helps explain why managers sometimes think the way they do. Here are a few biases that can affect decision-making:
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·??????? Confirmation Bias: Within WYSIATI, people will be quick to seize on limited evidence that confirms their existing perspective. And they will ignore or fail to seek evidence that runs contrary to the coherent story they have already created in their mind.
·??????? Managers tend to seek information that supports their existing beliefs. A manager convinced that a certain product is the best may ignore negative feedback or market data suggesting otherwise. Another example may be: Ignoring customer complaints about a product because they believe it’s superior can lead to lost sales.
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·??????? Availability Heuristic:?This bias occurs when people rely too heavily on readily available information, such as recent or memorable events when making judgments or decisions while ignoring other relevant information that may not be as readily available. Availability bias can manifest in various aspects of the workplace, including performance management and employee recognition. ?Managers might judge how common or likely something is based on how easily they can recall similar situations.
·??????? A manager might think that a specific marketing strategy will always succeed because they remember one successful campaign, ignoring the broader context.?Another example may be if a manager recently heard about a competitor’s success with social media ads, they might quickly adopt a similar strategy without proper research.
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·??????? Anchoring: The anchoring bias is a cognitive bias that causes us to rely heavily on the first piece of information we are given about a topic. When we are setting plans or making estimates about something, we interpret newer information from the reference point of our anchor instead of seeing it objectively. This can skew our judgment and prevent us from updating our plans or predictions as much as we should.
·??????? A manager might base salary negotiations on the first figure mentioned, which can result in unfair compensation, or if a manager initially hears that market salaries are around $70,000, they may anchor their offers to that figure, even if it’s not aligned with industry standards.
?·??????? There are many other biases that we use in everyday life and that also appear in management styles:
?·??????? Overconfidence: Due to the illusion of understanding and WYSIATI, people may become overconfident in their predictions, judgments, and intuitions. “We are confident when the story we tell ourselves comes easily to mind, with no contradiction and no competing scenario… A mind that follows WYSIATI will achieve high confidence much too easily by ignoring what it does not know.?
·??????? Over-optimism: People tend to create plans and forecasts that are “unrealistically close to best-case scenarios.” When forecasting the outcomes of risky projects, people tend to make decisions “based on delusional optimism rather than on a rational weighting of gains, losses, and probabilities. They overestimate benefits and underestimate costs. They spin scenarios of success while overlooking the potential for mistakes and miscalculations… In this view, people often (but not always) take on risky projects because they are overly optimistic about the odds.”
·??????? Managers may underestimate how emotions and biases affect their teams’ decisions. ?A manager might push a strategy because it feels right, ignoring data that suggests it’s flawed.?
·??????? Rationalizing Decisions: Even when managers switch to slow thinking, they often justify and rationalize their impulsive choices.
·??????? A common mistake occurs when managers ignore the reasons behind poor performance and instead rationalize their decisions to reprimand or fire whoever they believe is responsible. Or, if a project fails, a manager might blame external factors rather than acknowledging their own misjudgment.
·??????? Experts and Fast Thinking: Experts develop reliable shortcuts, but they can still misjudge new situations.
·??????? Managers may over-rely on their expertise in familiar areas and overlook changes in the environment. Example: An experienced manager might ignore emerging trends in their industry because they’re comfortable with old practices.?
Cognitive Biases Are Inevitable: Since we often think quickly, managers are all prone to unconscious biases. When applying the following strategies to management decision-making, they can help leaders make more objective, well-rounded choices by reducing cognitive bias. Cognitive biases can lead to suboptimal decisions in management, affecting everything from hiring to resource allocation. Let's see how each approach applies to management decision-making, and I’ll add two additional methods to further reduce bias:
1. Become Self-Aware
For managers, self-awareness is crucial when making decisions. Understanding how personal biases might cloud judgment helps to avoid knee-jerk reactions that are based on prior experiences rather than current data. For example, a manager might favor a particular candidate for a promotion based on past positive interactions, even though objective performance data may suggest another employee is more deserving. By being aware of these tendencies, the manager can step back and review all available data before making a final decision.
2. Challenge Your Thinking
In management, challenging your own thought process can lead to better strategic decisions. For instance, a leader might be inclined to invest more in a project because they have previously succeeded with similar initiatives. However, by questioning whether the current situation is truly comparable, they can avoid confirmation bias and evaluate the project on its actual merits. Managers should ask themselves: Am I looking at this situation through a biased lens? What external factors might I be overlooking?
3. Be Comfortable Being Uncomfortable
Management involves handling uncertainty and making tough decisions. Leaders often prefer decisions that align with their comfort zones or the status quo. However, addressing cognitive biases requires stepping into discomfort. For example, recognizing bias in employee evaluations may mean having difficult conversations or changing long-standing practices. However, embracing this discomfort can lead to fairer, more equitable outcomes, promoting organizational growth and a more inclusive environment.
4. Establish Debiasing Techniques
Managers can introduce formal debiasing techniques to organizational decision-making processes. Encouraging open dialogues during meetings, inviting diverse perspectives from different departments, and incorporating structured decision-making tools like checklists are practical ways to reduce bias. Additionally, slowing down decision-making processes—especially for high-stakes choices—can prevent rash decisions based on incomplete information.
5. Seek Multiple Perspectives
Diverse teams can help managers spot blind spots. When making major decisions, it's useful for leaders to consult with others, especially those who may think differently due to their unique backgrounds, expertise, or experiences. This reduces groupthink and helps challenge ingrained biases, offering a broader view of the potential impacts of any given decision.
6. Encourage Data-Driven Decision Making
Another way to reduce cognitive bias in management is by fostering a culture that prioritizes data-driven decision-making. Managers should rely on objective data and analysis instead of gut feelings or personal preferences. By doing so, they reduce the influence of biases like anchoring (relying too heavily on the first piece of information received) or overconfidence bias. Establishing metrics, KPIs, and data analytics tools can help managers make more informed decisions that are less prone to subjective errors.
7. Implement Pre-Mortem Analysis
A pre-mortem analysis is a technique where the team imagines a future failure of the decision at hand and then works backward to determine the causes. This approach can reduce the optimism bias and other cognitive distortions by encouraging decision-makers to think critically about the potential pitfalls of a plan. In management, this process allows leaders to stress-test their strategies and identify risks they might otherwise overlook, leading to more comprehensive planning and better decision outcomes.
By integrating these strategies, managers can reduce cognitive bias and make decisions that are more objective, well-rounded, and aligned with organizational goals. Each of these methods encourages critical thinking, diverse perspectives, and reflection, which are essential in navigating complex business environments.
Conclusion
By understanding how your brain works—thanks to Kahneman—you can make smarter choices and recognize the biases that affect decision-making every day. This knowledge empowers managers to lead more effectively, avoid common pitfalls, and create a more productive work environment. With these insights, you can transform how you approach decisions and drive your team toward success!