Unconscious Biases In Business: How To Recognize Them And What To Do About Them

Unconscious biases - the biases we exhibit that we are not cognizant of - are everywhere in business. To give you a quick example: have you ever worked on a project that required a lot of data collection to prove your point? You work across the organization, gather what you need, and use it to inform your conclusions and recommendations. Brimming with confidence, you present the findings to your boss or someone in the C-suite.

What does that person do? They end up making a decision based on their ‘gut’ or ‘experience’. If this sounds familiar, the decision maker had an unconscious bias that was in play. There could have been a few in fact. Regardless of how many there were, the end result is sub-optimal decisions being made.

It is hard to train yourself to avoid these biases - they are unconscious, which means they are done without thinking - but simply knowing what they are and being aware of them can help businesses make better, more informed decisions. We’ll go over a few here and talk about some ways you might be able to fight them. Let’s kick it off with a pretty common one:

Egocentric Bias

What it is: This bias means you believe people are more like you than they actually are. That they enjoy the same things as you, value the same things as you, are inclined to purchase the same things as you. It may come as a surprise, but people are VERY different in their tastes, opinions and things they purchase. This can leave you in a precarious place, particularly if you bring a product to market that you think is a great idea, but the market does not. Unless you plan to purchase a lot of that product, it is going to flounder.

How to avoid it: Data collection is critical here. Instead of assuming because you think something is great that the market will respond, prove out that theory. Think deeply about the type of customer that will use this product. Once you identify a market, gather data about that market (primary or secondary) that supports the fact that there is a need for this product or service. Think about doing some A/B testing - for instance, testing different messaging or advertisements to see what resonates best with customers.

Remember - just because you think something is a good idea, does not mean that the market shares that opinion. Gather data to prove or disprove your theories, and be open to what the data is telling you.

Hindsight Bias

What it is: You have probably heard the saying “hindsight is 20/20” at some point. What that means is with the benefit of time and space between a decision and an outcome, we can pinpoint things we could have done differently to make the outcome better. Football provides a great example of this: a quarterback, who threw an interception on Sunday, watches the film on Monday and says “I really should have seen that safety cheating down to undercut the throw”.

It’s when people look back on their past decisions to inform future ones that hindsight bias comes into play. When we look back on past decisions, we have a tendency to over-inflate our ability to correctly predict them. In fact, it has been reported that once people know an outcome, they tend to inflate their original prediction between 15-20%. If you make a business decision based solely on the past success of another one, you can be setting yourself up to fail.

How to avoid it: Just because this bias exists does not mean that past decisions, and their outcomes, cannot be used to inform future ones. When doing it however, ask yourself these questions:

  • How related is the decision you are making now to the successful one you are referencing?

  • What process did you go through to make the successful decision, and did you use the same process in the run up to this decision?

  • What could have been done differently in the past to make the outcome better?

  • What have you learned from the outcome that can inform future decision making?

  • How many different voices have you brought into the room to weigh in?

If you are considering launching a product, the same process can be applied. Just replace “decision” with “product”.

Bandwagon Effect

What is it: This refers to when a large number of people hold a certain belief, the chances that other people will jump on and also hold that same belief becomes greater. Also referred to as group think, people with differing opinions than the majority sometimes do not speak up because they go against what others believe. In essence, they go along to get along, particularly in large group meetings. This can be a problem because a really good idea could get buried, or worse, the idea that the majority hold could be really bad.

How to avoid it: Al Davis, the late owner of the Oakland (now Las Vegas) Raiders used to have a saying: if everyone is thinking the same thing, nobody is thinking. As a leader, create an atmosphere where diverse opinions are not only welcomed, they are required. Encourage people to bring them forward if they have the data points to back them up.

Since people can feel uncomfortable bringing up an idea in a big meeting that goes against what everyone else is saying, consider asking team members to submit them offline, in private, to take some of the pressure off. If you go that route however, not only do you need to be open to the idea(s) that come forth, but you need to be willing to present them if you believe in them - even if they go against the majority opinion. Nothing is more deflating to a teammate than telling them you listen to them, only for them to find out you were paying them lip service.

Survivorship Bias

What it is: This refers to the fact that people look only at examples that worked, or survived, instead of taking a look at all examples, namely the ones that failed. Doing that can cause people to improperly evaluate a situation, as they have not considered the negative outcomes. For example, everyone looks at the success of Apple’s iPhone and iPad and thinks the company can do no wrong. Few remember that the Newton, Apple’s original PDA, flopped when introduced, and became a running joke in pop culture.

How to avoid it: Push yourself to seek as many examples as possible! Do not just stop once you find something that shows a good outcome. Actually seek out things that do not align with what you believe. Only once you have the full range of outcomes can you really feel confident you have made a good decision.

Recency Bias

What it is: When we see a string of good results, we sometimes assume things are going to stay that way for a long time. We use what we see in the recent past to lull ourselves into a sense of comfort. That’s recency bias. Instead of using past data to better inform our decisions, we weigh the recent past too heavily. We think that, because things have been good lately, they are going to stay good. Investing in the stock market is the classic example of this - people see the market string together a few good days in a row and think it will always look this good. Then they dive in head first and lose money on the next downturn.

How to avoid it: Instead of looking for recent trends, try to look at historical ones. Using the retail industry as an example, someone engaging in recency bias may completely overlook the effect of seasonality on sales - but someone looking for historical trends will absolutely spot it.

Outcome Bias

What it is: This refers to when people judge a decision based solely on the outcome, rather than examining the process it took to make the decision. This leaves businesses vulnerable to basing decisions off of past instances where they “got lucky”. Luck has a habit of evening out in the long run, so basing future decisions based on good prior results can be risky for businesses - particularly in connection with survivorship bias.

How to avoid it: Have a process in place to make decisions and use it, and not outcomes, to steer future decision making. Constantly evaluating and tweaking the process, particularly if it leads to sub-optimal results on a consistent basis (there can always be a one-off). Making decisions in this manner does not lead one to over-inflate the results of past decisions in future decision making.

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