What Role Does Cognitive Bias Play in Decision-making?

Whom to hire or promote, what to invest in or purchase, how to advertise, which projects to take on, where to make budget cuts.

Whatever your job, there’s a good chance it frequently involves making decisions. And while you may strive to make these decisions objectively based on the facts at hand, the reality is that you are likely being subconsciously swayed by cognitive biases.

In this blog post, we’ll explore some of the most common forms of cognitive bias and how they may be influencing you, because the first step to removing bias from your decision-making process is understanding what it is and how it works.

A pervasive threat

Cognitive bias is the tendency to reach an irrational conclusion as a result of filtering external input through your existing views, preferences and experience. This isn’t necessarily a bad thing – for example, sometimes basing a decision on past experiences can help you avoid repeating earlier mistakes. However, in other situations a cognitive bias may lead you to overlook opportunities or risks because you are not viewing the facts of the situation objectively.

There are dozens of types of cognitive bias, each of which can influence your thinking and decision-making in a different way. For an overview of 20 common examples, Business Insider has a handy reference guide that can help you quickly identify where your thinking may be going off target.

Here are four examples that are prevalent in workplaces around the world:

1. Anchoring bias. This is the idea that your perception of a situation is influenced by the first piece of information that you receive. For example, if a supplier provides you with an estimate of $5,000 and the final invoice ends up being $8,000, you will likely be unhappy. However, if the supplier starts with an estimate of $9,000 for the exact same product or service, you will likely be happy with a final invoice of $8,000.
2. Bandwagon effect. This is the idea that you will tend to align your behaviour in a given situation with how others around you are behaving. For example, if your competitors all suddenly start focusing on the adoption of a new technology, you may feel compelled to do the same for your company – even if logically it doesn’t make much business sense.
3. Confirmation bias. This is the idea that when making a decision, you will tend to embrace data or evidence that supports your pre-existing views or preferences while ignoring anything that contradicts them. For example, if you have made a decision to expand your company’s business into Indonesia, you might seek out encouraging statistics that reinforce why this is a good idea while ignoring data that casts doubt on the market potential for your company in that country.
4. Recency bias. This is the idea that you will tend to place greater emphasis on the most recent data that you receive while paying less attention to older data. For example, when evaluating your team members, you might focus more on their good performance in the past few weeks while overlooking the months of poor performance before this (or vice versa, focusing on recent poor performance and forgetting their excellent work earlier).

If you’re keen to learn more about cognitive bias and would like to see a more detailed breakdown of its different forms, this infographic is a useful resource.

Avoiding bias starts with awareness

In general, we are all hardwired to be influenced by cognitive biases – they pose a challenge precisely because they are subconscious and pervasive. However, by learning more about them and taking the time to critically assess how they may be influencing your decision-making processes, you can minimize the likelihood that they will lead you towards bad decisions.