Summary of the article: "The Hidden Traps of Decision Making".
Part of the subject: Strategy Implementation.
Article: 3
Week: 3
Part of the master: Strategic Management
Tilburg University 2016.
Bad decisions can often be traced back tot he 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.
, Sometimes the fault does not lie in the decision-making
process but rather in the mind of the decision maker. The way
the human brain works can sabotage the choices we make.
In this article, first published in 1998, John Hammond, Ralph
Keeney, and Howard Raiffa examine eight psychological
traps that can affect the way we make business decisions:
- Anchoring trap: give disproportionate weight to the first
information we receive.
- Status quo trap: biases us toward maintaining the
current situation even when better alternatives exist.
- The sunk-cost trap: inclines us to perpetuate the
mistakes of the past.
o Perpetuate = make (something, typically an
undesirable situation or unfounded belief) continue
indefinitely.
- The confirming-evidence trap: leads us to seek out
information supporting an existing predilection and to
discount opposing information.
o Predilection = a preference or special liking for
something; a bias in favour of something
- The framing trap: occurs when we misstate a problem,
undermining the entire decision-making process.
- The overconfidence trap: makes us overestimate the
accuracy of our forecasts.
- The prudence trap: leads us to be overcautious when
we make estimates about uncertain events.
- The recallability trap: prompts us to give undue weight
to recent, dramatic events.
The best way to avoid all the traps is awareness! Forewarned is
forearmed. However, executives can also take other simple
steps to protect themselves and their organizations from these
mental lapses. The authors in this article describe what
managers can do to ensure that their important decisions are
sound and reliable.
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