business decision

Problem Solving and Business Decision Making

Ever have that feeling of a ‘full brain’ – your head hurts (you touch your forehead) and you can’t take in another thing? Trouble is in these changing and volatile times there is always a lot to think about and seemingly not quite enough time to think.

We have at last updated our Employment Today article on Problem solving and Business Decision making of which an extract is available here with a link to the full PDF you are free to download.

Contemporary neuroscience is revealing two important things about our problem solving and decision making. Firstly that we have a limited bandwidth for complex decision making and indeed our thinking is often rather more biased than we might like to admit.
One of the best ways to enhance our decision-making capability is to understand these limits and natural biases.

“The human understanding once it has adopted an opinion draws all things else to support and agree with it” Francis Bacon

Neuroscience informs is that we think in neural networks and for efficiency sake our brain tries to automate what thinking it can. We all develop a theory of how the world works and we need this to successfully navigate ourselves around in a changing world. This automation in thinking allows us to take many things for granted so we can focus our limited mental resources on the new and different and interesting. Trouble is that once we have formed an opinion we have adopted a “Bias” and it can be hard to change this belief.

Here is an example where our assumptions can mislead us: suppose your best friend up to now successful manager in another company is warned for poor performance.

That probably doesn’t fit your view of him so first information that doesn’t fit is discounted there must be some mistake it will get resolved. Secondly it is distorted so you may assume that there is another agenda here like a personality clash…
The bottom line is that we are not clinically evaluating all new information but what we see and perceive is so influenced by the filters of everything we have in our long term memories (values, beliefs, experiences etc.).

Here is another common source of problem solving bias: Jumping on What Springs to Mind
This is a kind of information retrieval theory; basically the first thing that comes to mind has a disproportionate effect on our reasoning and opinions. A classic experiment by Solomon Asch in the 1940’s asked people to form an opinion on someone who were described as “intelligent, industrious, impulsive, critical, stubborn, and envious.” If the word were presented in that order the opinions were more positive than if the words were reversed. The adjective presented first created a favourable or unfavourable impression.

Another aspect of this retrieval is recency. Things that we have experienced more recently have disproportionate impact. Have we not experienced this in appraisals?) Lastly strongly emotional events are tagged by the brain for easy retrieval and are more likely to influence our thinking depending on if we are feeling good or feeling bad.

We all have our decision making biases but we can reduce there effect by being aware of them and through an act of will choosing to look for evidence that disproves our theory.

What gets in the way of good decision-making?

The limited capacity of our PFC for one. Then there are all sorts of biases that creep into our ‘rational’ thinking too. For example, if you love your own idea, you may dismiss evidence that contradicts your idea – confirmation bias; if you put too much emphasis in one area it is anchoring (bias); and loss aversion makes us too cautious.

A McKinsey study conducted in 2011, of over 1000 business investments, showed that when organizations tried to reduce the impact of bias, they increased their ROI by 7%.

Problem solving and making good decisions about complex issues where there isn’t necessarily one right answer, and to help check against biases requires good process. Judgement of even the best leaders can be flawed. Kahneman, Lovallo and Sibony from Harvard have created a 12-question checklist to support a good decision-making process; to check that alternatives have been explored and to consider influences such as self-interest, overconfidence, loss aversion or attachment.

So take your time for important decisions use a structured approach to weigh up pros and cons, check out your decisions with others using 2 minds is usually better than one for reducing biases

Back to that bandwidth issue, much of our complex decision-making requires the use of our pre-frontal cortex (PFC). This is the executive function of the brain, also used for problem solving, learning, planning, memorizing, recalling and inhibiting. The pre-frontal cortex is relatively slow, energy intensive and has small capacity with a narrow peak performance window.

We always imagine we can do complex tasks all day long. The truth is that most people can do a few hours of quality work in a day. Our rational conscious resources are very limited and we should respect those limitations”. “We may only have 6 – 10 hours of really productive work time each week.” Now that you appreciate that   your best thinking is a limited resource would you make different decisions on how and when you used it?

Read the article in full for some tips on how to use your brain to make better decisions.

Get a full copy of the article right here on our resources page

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