fundamental of communication

The Hidden
Traps in
Decision
Making
Making decisions is the most important job of any executive.
It’s also the toughest and the riskiest. Bad decisions can
damage a business and a career, sometimes irreparably. So
where do bad decisions come from? In many cases, they can
be traced back to the way the decisions were made—the
alternatives were not clearly defined, the right information was
not collected, the costs and benefits were not accurately
weighed. But sometimes the fault lies not in the decision-
making process but rather in the mind of the decision-maker.
The way the human brain works can sabotage our decisions.
Heuristics are unconscious routines to cope with the
complexity inherent in most decisions.
 In this article, we examine a number of well-documented
psychological traps that are particularly likely to undermine business
decisions. In addition to reviewing the causes and manifestations of
these traps, we offer some specific ways managers can guard
against them.
1, THE ANCHORING TRAP
How would you answer these two questions?
Is the population of Turkey greater than 35 million?
What’s your best estimate of Turkey’s population?
If you’re like most people, the figure of 35 million cited in the first
question influenced your answer to the second question. Without fail, the
answers to the second question increase by many millions when the
larger figure is used in the first question. This simple test illustrates the
common and often pernicious mental phenomenon known as anchoring.
When considering a decision, the mind gives disproportionate weight to
the first information it receives. Initial impressions, estimates,
 The effect of anchors in decision-making has been documented in
thousands of experiments. Anchors influence the decisions not only of
managers but also of accountants and engineers, bankers and lawyers,
consultants and stock analysts. No one can avoid their influence; they’re
just too widespread.
But managers who are aware of the dangers of anchors can reduce their
impact by using the following techniques:
Always view a problem from different perspectives. Try using
alternative starting points and approaches rather than sticking with
the first line of thought that occurs to you.
Think about the problem on your own before consulting others in
order to avoid becoming anchored by their ideas.
Be open-minded. Seek information and opinions from a variety of
people to widen your frame of reference and to push your mind in
fresh directions.
Be careful to avoid anchoring your advisers, consultants, and others
from whom you solicit information and counsel.
 2, THE STATUS QUO TRAP

we make decisions rationally and objectively. But the fact is, we all carry biases, and those biases
influence the choices we make. Decision makers display, for example, a strong bias toward alternatives
that perpetuate the status quo.
The source of the status-quo trap lies deep within our psyches, in our desire to protect our egos from
damage. Breaking from the status quo means taking action, and when we take action, we take
responsibility, thus opening ourselves to criticism and to regret.
Once you become aware of the status-quo trap, you can use these techniques to lessen its pull:
Always remind yourself of your objectives and examine how
they would be served by the status quo. Never think of the status quo as your only alternative. Identify
other options and use them as counterbalances, carefully
evaluating all the pluses and minuses
Ask yourself whether you would choose the status-quo
alternative if, in fact, it weren’t the status quo.
Avoid exaggerating the effort or cost involved in switching from
the status quo.
Remember that the desirability of the status quo will change
over time.
 3, The Sunk-Cost Trap
make choices in a way that
justifies past choices, even when the past choices no longer seem
valid.
Why can’t people free themselves from past decisions?
Frequently, it’s because they are unwilling, consciously or not, to
admit to a mistake. Acknowledging a poor decision in one’s
personal life may be purely a private matter.The sunk-cost bias shows up with disturbing regularity in
banking, where it can have particularly dire consequences.
Try these techniques:
Seek out and listen carefully to the views of people who were
uninvolved with the earlier decisions and who are hence
unlikely to be committed to them.
Examine why admitting to an earlier mistake distresses you. If
the problem lies in your own wounded self-esteem, deal with it
head-on.
Be on the lookout for the influence of sunk-cost biases in the
decisions and recommendations made by your subordinates.
Reassign responsibilities when necessary.
Don’t cultivate a failure-fearing culture that leads employees to
perpetuate their mistakes.
 4,The Confirming-Evidence Trap
You’d better not let that conversation be the clincher, because
you’ve probably just fallen victim to the confirming-evidence
bias. This bias leads us to seek out information that supports our
existing instinct or point of view while avoiding information that
contradicts it.
There are two fundamental psychological forces at work here. The
first is our tendency to subconsciously decide what we want to do
before we figure out why we want to do it. The second is our
inclination to be more engaged by things we like than by things
we dislike—a tendency well documented even in babies.
It’s just that you want to be sure it’s the smart choice.
You need to put it to the test. Here’s how:
Always check to see whether you are examining all the evidence
with equal rigor. Avoid the tendency to accept confirming
evidence without question.
Get someone you respect to play devil’s advocate, to argue
against the decision you’re contemplating.
Be honest with yourself about your motives
In seeking the advice of others, don’t ask leading questions that
invite confirming evidence.
 5, The Framing Trap
The first step in making a decision is to frame the question. It’s
also one of the most dangerous steps. The way a problem is
framed can profoundly influence the choices you make.
The framing trap can take many forms, and as the insurance
example shows, it is often closely related to other psychological
traps.
Estimating and Forecasting Traps
All of the traps we’ve discussed so far can influence the way we
make decisions when confronted with uncertainty. But there’s
another set of traps that can have a particularly distorting effect
in uncertain situations because they cloud our ability to assess
probabilities. Let’s look at three of the most common of these
uncertainty traps:
 Estimating and
Forecasting Traps
The Overconfidence The Prudence The Recallability
Trap Trap Trap.
Even though most of us we frequently base our
are not very good at When faced with high- predictions about future
making estimates or stakes decisions, we tend events on our memory of
forecasts, we actually to adjust our estimates or past events, we can be
tend to be overconfident forecasts “just to be on overly influenced by
about our the safe side. dramatic events—those
accuracy. That can lead ”Policymakers have gone that leave a strong
so far as to codify impression on our
to errors in judgment and, memory.
in turn, bad overcautiousness in
formal decision procedures. A dramatic or traumatic
decisions. “worst-case analysis, event in, your own life can

also distort your thinking.
For each of the three traps, some additional precautions can be taken:
1. To reduce the effects of overconfidence in making estimates,always start by considering
the extremes, the low and high ends of the possible range of values. This will help you
avoid being anchored by an initial estimate. .
2, To avoid the prudence trap, always state your estimates honestly and explain to anyone
who will be using them that they have not been adjusted
3, To minimize the distortion caused by variations in recallability,carefully examine all your
assumptions to ensure they’re not funduly influenced by your memory.
Forewarned Is Forearmed
the best protection against all
psychological traps—in isolation or in combination—is pawareness. Forewarned is forearmed.
Even if you can’t eradicate thedistortions ingrained into the way your mind works, you can
build tests and disciplines into your decision-making process that
can uncover errors in thinking before they become errors in
judgment. And taking action to understand and avoid
psychological traps can have the added benefit of increasing your
confidence in the choices you make.
Thank
You!