Your decision-making process may well be the undoing of your business, and you might not even realise it.
Whether you make decisions about strategy quickly or slowly – or whether you go on gut instinct or rely on evidence-based action – the hidden influence of confirmation bias could be obscuring the truth about your business from you.
As Professor Raymond S Nickerson defines it, confirmation bias is a type of cognitive bias “that connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a hypothesis in hand”.
Confirmation bias is evident in all aspects of our lives and is often seen at play in business strategy, decision-making and leadership.
Like many cognitive biases, confirmation bias is partly so problematic because we usually don’t even know it’s a factor. We all like to think of ourselves as lucid and rational people, but that belief in itself could just be a bias blind spot?
For big and small
Confirmation bias can be an issue for big and small businesses. It’s a little like one of those software bugs that can sit dormant for years until it is triggered and wreaks havoc. Strategies are pursued, decisions taken, and things are all going well, until they’re not and people are scratching their heads and wondering where it all went wrong.
The problem with confirmation bias is that it might not hinder our outcomes, at least not as far as we can tell. As Mark Chussil writes in this article for the Harvard Business Review: “When you think you know the answer, you sincerely believe it’s a waste of time to keep looking for it. It feels like continuing to search for your keys after you’ve found them.”
“If it ain’t broke, don’t fix it”, as the old saying goes. The only problem with that attitude is your competitors are thinking beyond the thing you don’t think needs fixing. They’re seeing forest and all you can see is tree. Confirmation bias can lead to myopic and selective thinking that precludes the possibility of disruption.
Big businesses have a tendency to develop a corporate culture that encourages groupthink, in which the leadership group or even the wider employee pool will follow the same line of thinking and hold similar opinions on company matters.
One of the big dangers with that is we might find illusory comfort in size; confirmation bias blows out to industrial sized proportions. A recent example of this phenomenon is the furore surrounding the Samsung Galaxy Note 7 recall.
Samsung has been talking about the need to reform its top-down, rigid hierarchical corporate structure for several years now, especially as it continues to grapple with top-end competition from Apple while Chinese smartphone makers nip at its heels at the cheap end of the market.
After all, how could 489,000 employees worldwide possibly be wrong?
Discounting the vast majority of those employees, we can probably narrow down the Samsung decision-making cohort to a few hundred executives and key managers. In this group, who are the dissenters? Who are the ones asking the hard questions?
Speaking to Fairfax, David Sehyeon Baek, head of international affairs at the Gyeonggi Centre for Creative Economy and Innovation, a tech startup accelerator in Seoul, said Samsung has developed a dangerous sense of infallibility about its processes and products.
“All the big companies have the possibility to be trapped into groupthink – ‘we are Samsung, we cannot fail’ – and that is where you start to make mistakes all the time,” he said.
“But why did it happen? Because there’s a lack of diversity in terms of people, and maybe it’s because they’re too much into groupthink,” he said.
This type of groupthink leads to people-pleasing, “yes men” behaviour, where executives are fed information from the shop floor that will keep them happy. So the information being supplied up the chain is skewed to reflect favourably on strategies already being pursued, leading to distorted perceptions of what is actually going on.
For smaller businesses, the confirmation bias problem might manifest in situations where the founder of the business may have a strong vision for the company, but no one is holding them to account for the policies or strategies being pursued to fulfil that vision.
This can be mitigated to some degree if there are two or more founders or leads in a company who can question each other openly and constructively in order to counterbalance ideas and strategies.
However, the prevalence of confirmation bias can be very strong in a small business scenario because of the force of personality of many founders, and also because early success can set in place biases which may not guarantee continued success, especially as a company matures from the startup phase into becoming an established organisation.
In his foundational work on confirmation bias, Professor Nickerson identifies what he calls the “primacy effect”, which leads to people entrenching information or insights acquired at the early stage of a process, for example, in the starting of a company:
“When a person must draw a conclusion on the basis of information acquired and integrated over time, the information acquired early in the process is likely to carry more weight than that acquired later.”
In both the case of big and small businesses, there needs to be space in the culture of a company for dissenting voices and a spirit of inquiry. Even successful strategies and seemingly sound decisions must be open to scrutiny.
While confirmation bias is very hard to eradicate completely, we do need to be conscious of its influence and nurture a culture that is open and inquisitive.
Fi Bendall is chief executive of The Bendalls Group, a business that leads STRATEGY : ADVOCACY : MOBILE delivering the business acumen to drive effective positive results in a disruptive economy for the C-suite. Fi has recently won a Westpac/AFR 2015 100 Women of Influence award.