Avoiding Decision-Making Bias

People expect decision-makers to be ethical, responsible, and unbiased—but being unbiased is a lot harder than it sounds, according to Norma Montague, assistant professor of accounting at Wake Forest University in Winston-Salem, N.C. Discussing five types of bias to look out for, Montague offers suggestions for overcoming it and maintaining objectivity, primarily by simply being aware that it is happening. Though her focus is on bias in accounting, her advice applies to decision making across professions.

The word bias has a negative connotation, but in reality, it is most often unintentional. Most of these unintentional biases are a result of “heuristics," or mental shortcuts that allow people to make quick, efficient decisions—like using memories of a similar event to make decisions about a current problem. Often, but not always, high quality decisions can result from this method of decision-making.

"The problem arises when individuals rely on these shortcuts unwittingly or when the shortcuts lead individuals astray,” says Montague. "In those cases, decisions may be systematically biased.” 

Montague’s research focuses on five types of biases that can influence decisions, but if recognized, they can be avoided. The first, “availability,” means the decision-maker is inadvertently relying on information that is most readily available. This influence can become a problem when it prevents the decision-maker from considering fully the decision at hand or generating additional ideas.

The second bias Montague identifies is “anchoring and adjustment,” which means focusing on a preliminary numerical value and making adjustments to it to arrive at the true value, though sometimes, insufficient consideration leads to an incorrect value.

"For example, auditors are particularly vulnerable to this bias since they typically begin their process with management-provided anchors, such as financial statements,” she says.

“Overconfidence” is another source of bias, where decision-makers overestimate their own abilities, sometimes causing them to make judgments too quickly without careful consideration. “Confirmation bias,” on the other hand, occurs when people only seek or interpret evidence in ways that supports their beliefs or expectations.

Finally, the “rush to solve” bias occurs when people fail to consider all possible data before making a decision. Time and budget can contribute to this bias, but decision-makers run the risk of making a poor decision as a result.

The best way to avoid these biases, she says, is to become aware of them and apply "professional skepticism" to all of your own decisions.

"Often you can improve your decisions by 'considering the opposite' or explaining why your initial assessment could be incorrect,” she says. "This exercise forces you to take the time and mental effort to thoughtfully consider the limitations of your chosen solution."

Source Contact Information

Institution:
Wake Forest University School of Business
Title:
Assistant Professor of Accounting
Email:
montagnr@wfu.edu
Phone:
336-758-4302 (office)
Institution:
Wake Forest University School of Business
Title:
Sr. Associate Director of Communications
Email:
skordas@wfu.edu
Phone:
336-758-4098 (office) 336-317-1781 (cell)