Decision traps related to data analysis custom essay paper
Many decision traps are linked to the process of gathering information, analysis and forecasts. The most common of them are (Russo and Shoemaker, 1989):
ü overconfidence on personal judgment – inability to collect all available information because of being too sure of personal assumptions and opinions or being too cautious while forecasting the outcomes of the alternatives;
ü shortsighted shortcuts – unjustified trust to commonly available information, to common forecasts or to group opinions as well as using the “rule of thumb” without justification;
ü anchoring – preferring the solution or giving more weight to the information that came first;
ü overwhelming with information – gathering more information than it’s needed to analyze the alternatives; “past a certain point, more information will make you increasingly confident about your knowledge, but may do little to improve the accuracy of your predictions” (Russo and Shoemaker, 1989).
In my personal experience traps related to shortsighted shortcuts and anchoring have been quite common. “All too often managers attach values to their own and others’ behaviors, form attitudes toward ‘desired’ and ‘undesired’ behavior, and develop biases involving what works and what does not work” (Belasen, 2000).
For example, when a neighboring company was about to rent a new office, they made a mistake in price bargaining because they were caught by anchoring decision trap. The owners of the office prepared a costly business proposal which in fact was on top of market prices. The counteroffer of the company included lower prices, but the lowering was very modest. As a result, this company is renting an office for a price 20% higher than its market value is. However, if they took the time to study rent prices in the selected area and lease terms, this company could save at least 20% of payment.
A good example of shortsighted shortcuts is using forecasts for decision-making. Many business forecasts are based on statistical analysis of previous periods, but if the environment is rapidly changing or new factors came to action, relying on these forecasts might lead to fatal errors in final decision.
In order to avoid decision traps related to data analysis, it is recommended to gather data appropriate to all points of view (generated during framing), to avoid using only recent information and only one or two opinions on the problem. Thinking on the problem personally before searching for information will allow avoiding shortsighted shortcuts and anchoring. While looking for experts and advice, it is recommended to choose people with totally different outlook and worldview. Careful estimate of own beliefs and judgments as well as of their motives is required to minimize overconfidence effects.
3. Findings and feedback traps
The last group of decision traps is related to making conclusions and getting feedback. Here the following traps can be determined:
ü shooting from the hip – rejecting a systematic procedure of analysis, keeping the research information only in memory and thus making a fast solution;
ü group failure – giving away to the opinion of the most active and leading individuals in the group due to assuming that the group itself can represent an expert;
ü failing to learn from feedback – not interpreting the feedback information due to inability to have a critical look or being too obsessed with hindsight;
ü not keeping track – suggesting that learning on mistakes is inevitable and will take place automatically;
ü failure to audit the decision process – lack of organized approach to decision-making which leads to repetition of the previous mistakes.
The most impressive trap for me here is the trick of group thinking. I have often witnessed that during group thinking sessions, it is not the smartest person who leads the discussion, but the most authoritative one, or the most influential person. Moreover, if there are several groupings in the collective, the opinion of the strongest will likely dominate.
Even if participants are aware of this trap and are trying to be objective, there is always unconscious tension for a participant to concede to the opinion of the nice or friendly person. This phenomenon is more inherent to flexible people: “being too teachable can substitute for having a firm opinion or point of view, or it can block firm decision making” (Cameron, Quinn and DeGraff, 2007)
People often have a subconscious desire to agree with the majority, and the only cure from this trap, in my opinion, is to modify the process of group discussion. For example, elements of voting might be integrated. Moreover, the groups for discussion have to be selected with maximal variety in views and world outlooks. Leaders should ignite a certain level of conflict and disagreement to reach optimal group thinking results.
Also, as a common means of eliminating conclusion-based decision traps, it is recommended to keep track of the decision-making process, of all analyzed alternatives as well as of feedback and critique.
Decision traps in any process of decision-making are almost inevitable. Furthermore, for complicated business decisions, where stress, time limits and great number of shareholders hinder the process of thinking, decision traps are even more likely to appear. These cognitive biases may also interact and amplify one another.
However, awareness is the only protection from such psychological traps and hidden decision-making factors. When the person responsible for decision-making has the information about these traps and follows the steps for minimizing the effect of these biases, the choices made by this person will be more efficient and confident.
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