Common Biases in Decision Making

In the business organisations and day-to-day business operations, the decision making aspect of the organisational managers has been a key factor which influences the sustainable development and growth of the organisation. At the time of decision making, there are several factors which come in between at the persona as well as the professional level of the individuals which develops biasness in the decisions taken by the managers. At the time of taking business related decisions or performance related decisions, there takes place biasness in giving rewards, feedbacks to the employees, while making investment related decisions as well as at the time of evaluating the performances of the employees. But in present scenario, it is highly essential to make ethical decisions for having a reliable and trustworthy market position (Betsch and Haberstroh, 2014). Ethicality in the decision making process shows the authenticity and integrity of the organisational managers. The higher the ethicality in the decisions is, the greater is the trust of the employees and the customers on the organisation and the business operations. The paper will provide in-depth information regarding the various kinds of biases in the behaviour of the managers at the time of decision making. It will also help in understanding the importance of ethical decisions making, the common types of biases and their outcomes for the organisation and on the employees. The report will also showcase various key recommendations which can help in overcoming the issue of managerial biasness in the organisational decision making so that the organisations can work on ethical principles with utmost level of integrity and equality on the decisions of the managers.

In the business organisations, it is the key responsibility and duty of the managers to make the decisions. The managers are the key persons who are accountable for the success or the failure of the business operations and the organisation. The managers are the key drivers of organisational growth and development as one of the key managerial functions is making decisions in order to achieve the organisational goals (Weber and Johnson, 2009). This managerial function is the backbone of the organisation. There are several characteristics of the managers because of which they are sound to be capable of making decisions at all the phase of business life cycle. The managers are the responsible and accountable authorities that can either improve the organisation with efficient decisions or can deteriorate the enterprise with inefficient and incompetent decisions. A manger is required to remain extremely conscious at the time of decision making so that the organisation or the employees do not suffer with negative consequences (Croskerry, Singhal and Mamede, 2013).

Importance of Ethical Decision Making

The organisational managers are highly prone to decision making biases and this biasness in the decisions has a direct impact on the organisational ad employee performances. Numerous authors and researchers have presented this topic in their articles and researches. It is one of the key subject areas for the authors who have their respective researches on the subjects like inequity at workplace, managerial biasness or biases in decision making. There are several behavioural aspects which force an individual or an organisational manager to make decisions on the basis of some psychological factors rather than based upon equity or set rules and frameworks (Gigerenzer and Gaissmaier, 2011). There are number of times, when the managers are required to make sudden decisions based upon the organisational situation. The managers do not have access to complete and detailed information at that point of time and take decisions as per their experience and consciousness. This also gives chances of arising biases in the results. The primary bias which takes place in the managerial decision making is the time of analyzing and evaluating the performances of the employees. Because of various factors, the managers take biased decisions which pose a number of negative implications on the performance and productivity of the organisational employees (Fenton?O’Creevy, et al., 2011).

There are various kinds of common bases in the decision making process. Manager sat the time to making organisational decisions go through various thought processes. There are mainly five key biases which are at the preset at the time of decision making and its impact the performances of the employees as well as the organisation. There are five common psychological biases which usually appear at the time of managerial decision making. The first and the foremost bias is confirmation bias (Hartley and Phelps, 2012). This kind of bias takes place when managers look for information which can support their already existing viewpoints and beliefs and reject that information which is against to their viewpoints. And this results in bias decision making as while making decision entire information has not been used. The results of such biasness are that the decisions are always that which have the confirmation and support of the manager. The people or the employees who have a different view point are deprived of managerial support (Heilman, et al., 2010).

The next common bias in the decision making is overconfidence bias. It takes place when there is extraordinary faith in oneself opinions and knowledge. When a manager thinks that his contribution in any decision is of more value in than it truly is, than such overconfidence biasness takes place in the decisions. It is one of the most researched subjects in the field of managerial biasness as in this kind of biasness; the managers have a tendency to overestimate their accuracy of their opinions. When at the time of decision making, if there is overconfidence bias then it means that the managers does not give significance to the information or the actual data rather the decisions are entirely based upon an individual’s opinions and knowledge. The third common bias in the decision making is Gambler’s Fallacy (Hofmann and Frese, 2011). In this kind of bias, there are chances that the past events will impact the present as well as the future events. It is similar to a toss coin where if a person gets seven times a similar side at the time of tossing then it is assumed that in the eighth time also it will be the similar side only. The managers who make decisions with the Gambler’s Fallacy then it can be highly dangerous fir the business organisations as well as for the employees as the decisions are the result of past experiences as well as it can be said that it is merely a gambling game where the results can either in your favour or against you but there is no surety that the results will be in favour only (Johnson and Fowler, 2011).

Impact on Organization and Employees

The next i.e. the fourth common bias is anchoring. In such bias, there is a tendency among the managers that they use to jump directly to the conclusions. Without having complete information or just with a few amounts of data, the decisions are taken. This is extremely hazardous for the organisation as well as for the other stakeholders as there can take place numerous consequences of decision based on partial information without making any kind of analysis. It is also called as first impression bias (Jones, 2010). When the managers develop a view point fir any person or kind of thing than it carry on with his views and results in the decisions making of the managers. Another common bias is fundamental attribution error. In this kind of bias, the managers have a tendency to blame and charge others if in case the results are wrong and against the desired outcomes. The managers do not work on looking for the actual fault or loop hole because of which the results diverted whereas they just blame other people for the same. The external events or people are charged for the negative out comes. Such biasness is harmful for the employees as they are directly or indirectly blame for the decisions of the managers (Johnson, et al., 2013).

All these above mentioned common biases in the managerial decision making have a direct and huge impact on the organisation as well as on the employees. There are numerous negative consequences of such behavioural biases of the managers. Starting from the confirmation bias, it can be understand that this bias forces the employees to have their acceptance in the decisions and if they do not have their approval or acceptance then there are probable chances that they will not be able to get any managerial support (Vermeulen  and Curseuurseu, 2010). Such kind of behavioural aspects in the decisions results in employee demonization as they are not able to express their viewpoints and opinions which restrict their personal development and also they have to work under a pressure. The consequences of overconfidence bias is that there is a major negative impact on the organization as the managers take decisions on the basis of his opinion and knowledge (Klein, 2011). All the other relevant and external information is side-lines and this hampers the success of the business operations as well as there are extreme chances of risks and business failures as no in-depth analysis have taken place. The negative outcomes or consequences of Gambler’s Fallacy biasness in the managerial decisions is that because of taking decisions on the basis of past events restricts the implementation of pioneering approaches and innovativeness in the business operations. It is not essential that every time a similar decision will work. Numerous authors have opposed this biasness as it is necessary for the managers to take decision on the basis of the present situation and the circumstances so that more improved and appropriate results can be achieved (Pettigrew, 2014). There are numerous negative consequences of anchoring bias on both the employees as well as on the organisation. In case of employees, the morale and the motivation of the employees gets decreased as if the employees are not able to met the targets or have not delivered the desired performance, then action are taken against them because of anchoring biasness on the decision making. But there can be certain factors which might be responsible for such results and performances (Lerner, Valdesolo and Kassam, 2015). Therefore, it creates negative viewpoints in the minds of employees which directly results in high attrition. Lastly the negative outcomes and consequences of fundamental attribution error related bias is that the employees cannot trust the managers as the managers can blame the employee for the negative or undesired results. Thus, being performed well, the employees can be blamed. It hampers the will of the employees to take initiatives and work hard as they can be questioned for their performances at any point of time. Thus, instead of getting blame, the employees intend to leave the organisation so that they can get a better working place. The organisation also get negatively impacted as such biasness also deteriorates the association with the external parties as they can also be blamed but the managers at the time of occurrence of sort of any negative results. Therefore, from the overall perspectives and analysis, it can be said that biases in the decisions made by the managers have numerous negative consequences for the organisations as well sat for the employees. Thus, it is essential that the decision must be bias-proof or free of biasness (Manktelow, 2012).

Key Recommendations

In the present time, it is essentials that the decisions must be free from biases so that there can be improved decision making process in the organisations. There are various ways to overcome these biases from the decisions. To avoid or overcome the issues of confirmation bias, the managers must take use of the six thinking hat as this will help them to consider and analyse any situation from various perspectives, so that the best perspective can be used in making decisions (Stone and Moskowitz, 2011).To avoid or overcome the issues of overconfidence bias, the managers must tend to analyse the sources of information as well as check that the decisions are fact based or not. It is also essential that more people should be involved in information gathering so that various viewpoints can also be considered at the time of decision making. To avoid or overcome the issues of gambler’s fallacy bias, there must be used PEST analysis and situational appreciation tool so that the decisions can be based upon the current situation (Rogerson, et al., 2011). To avoid or overcome the issues of anchoring bias, the managers must take time for gathering and analysing a complete set of information. The past results must also be analysed which were the results of instant judgements. The pros and cons must be analysed. Lastly to avoid or overcome the issues of fundamental attribution error related bias, the managers must develop empathy in themselves so that before blaming other they can understand the consequences of such decisions (Morewedge and Kahneman, 2010).

Ethical decision making is highly significant in management and the business organisations. The ethical issues takes place when the organisational managers mare decisions by having biasness in the behavioural aspects which either benefits themselves or a group of stakeholders at the cost of other group of individuals. The ethical decisions are the one which are accepted by the society, organisations, and employees as whole (Weber and Johnson, 2009). To maintain ethicality in the decisions is necessary and essential so that there can be increased employee motivation and employee engagement. When the decisions are based on equality and ethicality, then there develops a sense of reliability which improves the relationship among manages and the employees. The brand image of the organisation also empowers and strengthened as the ethicality approaches of the managers are reflected on the sustainability report of the business organisations. The people use to connect themselves primarily to those organisations that are ethically sound whether in the form of customers, investors or employees (Milkman, Chugh and Bazerman, 2009).

Conclusion

From this report it can be concluded that the managers usually take decisions which are impacted by the behavioural biases. Every organisational manager can have a different biasness at the time of making decisions. But this biasness has various negative consequences which restricts the organisational growth and success. It also results in increase attrition rate, decreased employee participation, declined motivation of the employees and increased chances of business risks. It is essential to take appropriate measures to overcome the negative consequences if biasness as well as to avoid them taking place in the coming future. It is essential that the managers must have an ethical approach in making organisational decisions so that there can be attained extreme support of the employees, public, stakeholders and the industry. The higher is the ethicality in the decisions is, the more successful and sound the managers are. The level of honesty and integrity in the decisions taken by the managers show the future of the business operations and the organisation. Thus, it is necessary to avoid biases and implement an ethical approach in the decisions.

References

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