Decision-making in humans is a complex process involving diverse factors such as knowledge, emotions, gaps, etc. Even with the information overload of today’s times, consumers regularly make bad decisions resulting in the purchase of products which are either less beneficial or downright harmful to them.
In the case of organizational decision-making, despite the big data and the supporting analytics, executives often struggle to convert data-based insights to tangible, achievable solutions. Instead, they resort to what Jim March and coauthors explain as “garbage can” decision making - a framework in which, actors, problems, and alternate solutions circulate in a hypothetical garbage can and people end up approving on whichever option visible on the top.
The recent studies have shown several new insights which prove that our assumptions about decision-making are flawed. Here are a few myths that we believe about decision-making are false.
1> Correct information equates to better decisions.
There is a general assumption that better information leads to better decisions. Decisions arising as a result of bad data can be costly for organizations.
In many situations, people do not use the available information that can help them in making correct decisions. For example, purchasing wrong health insurance or unhealthy foods and medicines.
This research explains that the primary reasons people do not use the available information can be classified into two broad categories – Frictions and Mental Gaps. The Friction explains the framework of “rational inattention” where a decision-maker deliberately avoids utilizing the available information because of the presumed time and cost associated involved in the information processing.
The Mental Gap theory explores the scenarios where the supporting information is easily available, however, due to the gap between what people think and that should be rationally thought for making a right decision – the loopholes appear in the final decision.
2>Decision-making is proportional to the collective influence.
Be it brainstorming sessions, meetings, or conferences, the emphasis on collective problem solving and learning is highly prized in most institutions. Nonetheless, as per this study, excessive collective influencing results in less than perfect decision making. Instead of more emphasis on transparency, the organizational processes should be restructured to accommodate occasional isolation for optimum collective intelligence.
3> Errors in decision making are a result of inherent cognitive biases.
Role of cognitive biases in decision-making is a widely studied topic since recent years. By biases, we mean the inherent and subconscious assumptions which are difficult to get rid of. Apparently, the biases that result in faulty decision making are not only subliminal, as per this study.
Researchers discover a concept of “Motivated Errors” resulting from self-serving motives. With this factor, the decision-makers tweak or ignore the available information to make irrational decisions. Such biases are difficult to spot as they can handle debiasing reforms convincingly. The motivated errors seem like a result of cognitive biases but are indeed motivational in nature.
To sum up, the problem with bad decisions isn’t the lack of data or skills, it is quite the opposite. Knowing and understanding about decision-making can effectively help in prioritization as well as in discovering reasons behind imperfect decisions.