𝗪𝗵𝗮𝘁 𝗬𝗼𝘂 𝗗𝗼𝗻'𝘁 𝗞𝗻𝗼𝘄 𝗠𝗮𝘆 𝗛𝘂𝗿𝘁
Updated: Dec 31, 2022
Various cognitive preconceptions may influence our leadership without us knowing.
While it’s impossible to know all the history, people, and factors influencing our decisions, it’s useful to know how certain cognitive biases impact our decisions. In addition to education, we must rely on self-awareness and our challenge networks to keep us honest.
We will look at some powerful biases to give you some understanding of them and to acknowledge their potential influence on our decisions:
Negativity bias occurs when you measure two pieces of equal information and the bad one far outweighs the good one. For instance, we linger on one bad comment in an otherwise fantastic review. Negativity bias makes us risk-averse, and dwelling on potential flaws can make us slow to act.
Evolutionarily, negativity bias makes sense. Early humans who worried constantly were much more likely to survive living among tigers, poisonous foods, and other dangers. Negativity bias also plays out in the news, which emphasizes negative events using hard-hitting headlines to grab attention and, thus, advertising dollars.
Studies show that it takes at least five good encounters to offset the feeling from a bad one.** If you find yourself revisiting negative feedback or comments more than once, consider addressing them instead of just ruminating on them.
What’s the best way to respond to negativity bias?
Business growth. Seek positive input from advisors, the team, and experts. Record your triumphs.
Team growth. Recognize and announce recent feats. Writing them down and saying them aloud will reinforce the accomplishments.
Personal growth. Force yourself to say no aloud (or loudly in your head) if the negative comments linger in your mind.
Key Takeaway: Negativity bias can have an outsized effect on productivity and should be actively countered.
Confirmation bias is the inclination to interpret new information or data we find as support for (or confirmation of) our own beliefs or ideas. It makes us less willing to accept others’ ideas and rules out creative, potentially game-changing recommendations.
An example would be the belief that people in your industry are smarter than in other industries because, as a founder, you meet a ton of bright people at industry events and panels. It’s likely the distribution in your industry is the same as it is in many others.
What’s the best way to respond to confirmation bias?
Business growth. Encourage and test ideas. If you don’t, and all ideas except yours are ignored, the message to the team is that only you are right, which will cause you to miss potentially innovative recommendations or advice.
Team growth. Don’t create vanity metrics to support your beliefs; instead, rely on industry metrics. To encourage innovation, allow everyone to submit and review ideas.
Personal growth. To grow, ask employees and peers directly and privately, “What could I have done differently to make this better?” This line will help you push past their instinct to agree with you. In meetings, ask, “What are we not doing?” to reach the market, improve productivity, and recognize employees.
Key Takeaway: Confirmation bias can limit innovation and mire us in bad processes, so encourage people—especially new advisors and recent hires—to give their input. Assure them that it will not immediately be judged.
The Bandwagon effect is when a judgment is made based on limited or prevailing information. It causes us to ignore the latest information and strong ideas in favor of others’ opinions. Remember in high school when fashion trends, initiated by just a couple of students, permeated the halls? That’s a version of the bandwagon effect playing out.
More seriously, this bias plays out when one member heavily influences a jury. Many times, during deliberation, an outspoken juror will push the others toward one decision or another.
Experiments have been conducted during which people were asked the size of an object. When the first person in the experiment is a confederate—a member of the research team posing as a participant—and proclaims that the object is larger than it may actually appear, the subjects are likely to give answers that are larger than if they had responded first without that influence. In some experiments, the confederate even caused subjects to give outrageous answers based on the confederate’s initial response.
What’s the best way to respond to the bandwagon effect?
Business growth. Following competitors in the industry can lead to chasing others’ dreams instead of your own. When you notice discussions are focused outwardly, reinforce your own vision and values.
Team growth. In meetings, combat this bias by asking people to submit thoughts and suggestions privately. After group discussion, encourage people to rank priorities privately. You will likely capture more and better ideas this way.
Personal growth. Realize that others are likely hesitant to offer contrarian ideas, despite potentially dire consequences. To capture danger potential, always encourage a “devil’s advocate” when making serious decisions.
Key Takeaway: The Bandwagon effect can cause us to believe that our ideas are great and that new evidence is unnecessary. To avoid stifling innovation, always allow an easy path for contrary opinions.
Affinity bias refers to our attraction to working with people who look and think like us. It tricks us into believing that competent employees and great ideas are always objectively measured.
Affinity bias plays out in discussions about racism and discrimination and when decisions are made—usually subconsciously—that show favor to certain groups over others.
I knew a founder who once asked our recruiter to find “lanky white guys” for technical roles. Fortunately, she dismissed his characterization and implemented role-specific, blind tests. She asked objective questions about solving problems similar to the ones they would face in the role. Her focus on qualifications brought many highly qualified candidates to the company—which was bought by a Fortune 500 corporation a couple of years later.
What’s the best way to respond to affinity bias?
Business growth. Ensure hiring practices encourage a diverse pool of candidates, make sure job descriptions list objective qualifications, use blind screening practices, and conduct unbiased interviews based on work-related criteria.
Team growth. Pay attention to how promotions and bonuses are awarded and ensure they are not being influenced unknowingly by affinity. Check that opportunities for training, networking, and mentoring are fairly distributed.
Personal growth. Know this bias likely affects you and your colleagues. Appoint someone in the company to be responsible for diversity and inclusion best practices.
Key Takeaway: Affinity bias can impact our hiring, promoting, and rewarding practices, so install processes to ensure fair practices and diverse influences.
The framing effect is the tendency to see any information through the lens with which it is presented. It makes us ignorant of other options by usually only presenting one or two ways to view a problem.
In a startup, we may limit ourselves to two options: following the industry norms or breaking them. However, there are numerous other options that follow some industry norms and include making some changes. Google created an advertising network based on the existing model augmented by their strong search engine.
I’ve seen hiring where there is only one candidate available to hire. When the option is whether or not we fill the role, the company is inclined to hire the person. When multiple finalists are interviewed, there is a much better chance of finding a strong fit for the role since you can compare candidates and their perspectives and motivations for the position.
What’s the best way to respond to the framing effect?
Business growth. Open your discussions to allow for a range of possibilities. Often, people present a problem and its solution together, implying that we either solve the problem in a specific way or simply ignore the problem. Always separate the discussion about the root cause from the conversation about implementing a solution.
Team growth. Frame job responsibilities in terms of the team’s initiative and company’s goals, not in terms of whether the person is doing the work or not in the way you would expect.
Personal growth. Apply this framework in resolving your own problems. When faced with a tough decision, step back to determine if you are constraining yourself to one or two options.
Key Takeaway: The framing effect can be challenged by presenting multiple options or solutions to problems. The greater the selection, the more perspectives we will have to better understand the problem and determine the best solution.
Loss-aversion bias (also known as sunk-cost bias) occurs when someone makes decisions based primarily on avoiding loss rather than on possible gains.
You may see this bias framed in terms of resources: “We’ve already spent so much on the project. Why stop now?” This bias makes us hesitant to change course once we have started. We also see its effects when we keep on an employee who performs poorly or cannot handle new responsibilities as the company grows.
Loss-aversion bias applies when you spend money on a major project. After a period of time, you may be far away from the desired outcome. Objectively, it may cost less to scrap the existing work and start over, but we get so committed to the work already completed that we find it difficult to cut our losses and move forward, even if it’s for the best.
What’s the best way to respond to the loss-aversion bias?
Business growth. Evaluate programs on a go-forward basis, deciding to continue based on the program’s metrics. Expenses already made should not be followed by more costs if the program isn’t working.
Team growth. Recognize your temptation to weigh an employee’s future responsibilities against their longevity. Loyalty should be respected, but if someone—even a co-founder—is no longer contributing, find the courage to have a tough conversation. The cost of a generous severance is a fraction of the cost in team growth.
Personal growth. Avoid the temptation to follow one wrong decision with another one by recognizing that the loss-aversion bias will tempt you to stay the course. The more money and time spent, the more you are inclined to continue down the same path.
Key Takeaway: Loss-aversion bias makes us want to stick with the current solution even if it’s not the best option and it costs more than starting over. Be mindful of this bias when evaluating progress and reactions.
Overall Considerations with Cognitive Biases
🧠 If you want to prosper, revisit these biases quarterly. Identify how each one may impact your behavior and, therefore, your success.
🧠 You may want to assign someone on the team to become familiar with these biases. When it comes to major decisions, that person must advocate for the contrarian position to discover any missing perspectives.
🧠 We often confuse comfort for confidence. Learn to question and to challenge your assumptions with data, from other perspectives, and with the knowledge that the right answer is not always the easiest one.
Key Takeaway: Knowing cognitive biases exist will encourage you to make stronger decisions that are more likely to benefit you and the business in the longer term.
* To learn more about Challenge Networks, go here: https://www.webuildscalegrow.com/post/d27a94ed
** Studies show that it takes at least five good encounters to offset the feeling from one bad one: http://bit.ly/3iH3EwI
For a full list of cognitive biases, check here: https://en.wikipedia.org/wiki/List_of_cognitive_biases
Illustration by Elisa Riva who can be found here: https://www.instagram.com/elisa_riva/
Based on over twenty years of experience combined with three years of research, Scale: Reach Your Peak is a modular handbook with over 130 independent topics across 500 pages including leadership, growth, sales, marketing, operations, finance, and teams. Each topic takes five minutes to gain invaluable insights, best practices, practical options, and realistic exercises.