Author: Anna Pajak, Institute for Sustainable Technologies – National Research Institute
Every decision that we make is more or less conscious, more or less significant, and may have different consequences. Fundamentally, it can either lead us to the success, or take into trouble. To read this words you probably had to make a couple of decisions (unless there is someone forcing you to do it, in what, indeed, is pretty hard to believe). Anyway, they probably weren’t the ‘decisions of your life’, and you don’t expect that they would have enormous consequences for your future (even if we are pretty sure they will!). Looking at the length of the text, it may promise relatively small investment of resources (time), to overcome some obstacles to effective decision-making. Sounds pretty good, doesn’t it?
So, let’s go to the point.
Our mind is pretty good in programming itself for an ‘automatic mode’ – that’s great news, in some ways, but can be disastrous when it comes to important strategic choices. While it is very helpful to automatically react on the red light on the cross roads and unconsciously hold the break, without deliberating it every single time, similar routine behaviors, based on the same brain programs and ‘path dependency’ mechanisms, may negatively and significantly affect vital processes within organizations. Behavioral economics have a lot to say about it (nowadays more appreciated thanks to Richard Thaler’s Nobel Prize in Economics, 2017).
In his book Thinking Fast and Slow, another Nobel Memorial Prize in Economics laureate, Daniel Kahneman, explains how our brains work and juxtaposes two different modes of our thinking: System 1. Fast, instinctive and emotional; and System 2. Much slower, more deliberative, and logical. In both modes, there are cognitive biases that lay on the ground of them. And, there are many of them. They result from previous experience, they are fruits of our values and tradition, they are an expression of our beliefs and of how we perceive world and people around us, and finally, create our assumptions about reality and affects expectations and images of the future, referring to Bell (1997) , ‘the possible’, ‘the probable’ and ‘the preferable’, in turn influencing our choices.
When previous successes make us overoptimistic.
Phil Rosenzweig described some behavioral conditions as the halo effect , based on the concept of Edward Throndike (1920) who underlined human tendency for making specific inferences on the basis of a general impressions. Is the company XYZ most successful in the industry in rising sales and profits, and ahead of all the competitors in case of implemented innovations? It is not very difficult for our brains to believe that the strategy of XYZ’ is the right one for the future, and the mechanisms that have worked so far will continue to work. Or, an absolute faith in trends and overestimations of current positions (to remind just one, but notable example of Nokia). Of course it works both sides. What is more, we are very likely to believe that the situation may last forever. And it simply moves us to turn the logic off. In the moment when we really need it to work at the top speed. According to Hammond, Keeney and Raiffa (2006), the eight psychological traps may sabotage our choices by affecting the way we make decisions, the mentioned ‘eight’ are: The anchoring trap, that leads us to give disproportionate weight to the first information we receive.; the status quo trap that biases us toward maintaining the current situation, regardless of better alternatives existence, the sunk-cost trap that often leads to the continuation of projects without any views of success; the confirming-evidence trap leading us to seek out information which support an existing belief and to discount other; the framing trap occurs expressed through misstating a problem, undermining the decision-making process; the overconfidence trap that leads us overestimate the correctness of our predictions; the prudence trap that implies indiscretion when making estimates about uncertain events; the recallability trap that may lead us to give undue weight to recent, dramatic events.
The power of conversation.
Let’s say, we are aware of our cognitive biases. Can this knowledge protects us from their negative effects? Unfortunately not. It was observed that the awareness of the effects of cognitive biases isn’t enough to improve the quality of the decisions made by individuals or organizations. Furthermore, (and now get ready for truly bad news), we can’t do anything with our own biases, there is no way to eliminate them in ourselves because of simple reason: we cannot really see them as they are, even if we know they exist. The hope for organizations comes from the fact, that we are doing much better in spotting biases in others’ thinking. Khaneman, Lovallo and Sibony in their book, Before You Make That Big Decision (2011), propose to move from the ‘individual’ to the ‘collective’, in other words, the only way to somehow overcome the biases (at the collective level) is to move the focus from the decision maker, to the decision-making process. It is though crucial to challenge our assumptions and we need other people to do that.
The decision making process is though one of the important qualities for the futures thinking and future oriented organizations and one of the key future competences in case of individuals. Angela Wilkinson (2017) underlines the role of strategic conversation as an element of strategic foresight within organization, which opens up a ‘safe space for disagreement’ and support immersive learning. Conversations, in contrast to discussions, make revealing, testing and challenging deeply held assumptions, possible. Therefore, as a collective (learning) process, strategic conversation provides fresh and new perspectives of the situation and support discovering and designing new options for action.
What is in common for foresight and strategic decision making is that both are the strategic component in the organization management and can support each other. On the line foresight – decision making, by using strategic foresight as one of the supporters of decision making process (e.g. by providing the scenarios of the possible consequences of the decisions made today); on the line decision making – foresight, by providing the methodology and analyses of strategic decision making management processes for indicating critical points in the process. Conjunctive aspects for both processes are: 1) they require similar resources, from which most are intangible assets based on human capital and leadership, like atmosphere of trust, openness and valuing diversity, promoting learning by doing and tolerance for failure within organizations; 2) to flourish, they should be based on continuous and structured activities, and process approach, not an ad hoc actions; 3) to play a proper role for organization have to be part of organizational culture (consistency); 4) when possible, they should make usage of both, quantitative and qualitative methods in their analytical approach.
References and further reading:
Bell, W. (1997). The Purposes of Futures Studies. The Futurist, November-December 1997.
Hammond, J. S., Keeney, R. L., Raiffa, H. (2006). The Hidden Traps in Decision Making. Harvard Business Review, January 2006.
Kahneman, D., Lovallo, D., Sibony, O. (2011). Before You Make That Big Decision. Harvard Business Review, June 2011.
Rosenzweig, P. (2007). The halo effect, and other managerial delusions. McKinsey Quarterly, February 2007.
Wilkinson, A. (2017). Strategic Foresight Primer. European Political Strategy Centre, November 2017.