Organizational Bias: The Curse And The Cure

August 28, 2019

Workplace bias is not new. From new hires and vendor selection to budget allocations and goal setting, everyday business strategy is fraught with it. The primary bias that we accumulate with knowledge and experiences permeates in our day to day office works and results in wrong or even insidious decisions. Once implemented, these decisions cannot be undone and can even impact the organization’s overall performance.

THE CURSE

McKinsey defines biases as “a predisposition of a psychological, sociological or even physiological nature that can influence our decision making.” Biases can be categorized into several types, each with its varying degrees of causes, effects and the like. This article dwells into the 9 most prominent ones:

Unconscious Bias - The most prevalent form of bias is subliminal in nature. Organization leaders are not even conscious of the micro-moments, where they make decisions based on their preconceived notions. This is mostly a social phenomenon and applies mostly to people practices in the organization. One only need to look at the biases in hiring, performance management, succession planning promotions, especially in leadership positions and primarily any business function that has a social typecasting angle to it. Another role that unconscious hiring plays is to hamper the growth of innovation in the enterprise. Given the criticality of this function, any detrimental effect to it cannot, and should not, be tolerated.

Cognitive Bias - Cognitive bias forms the basis of most behavioral economics and organizational dynamics studies into organizational preferences today. We do wish it were easy to understand and remediate, but the sheer number of categories and types of these biases hinder every conceivable function of the organization greatly and do not provide much respite for the rectifiers. For starters,

Confirmation Bias - Referring to the interpretation of patterns based on one’s preconceived notions, confirmation bias is one of the most common. Business leaders have their preset ideas and interpret the available data to reinforce the preset perspectives instead of exploring the data for innovations. Common examples include interpreting Business Intelligence or Financial Statements data.

Conformity Bias- The infamous “herd mentality,” this kind of bias serves to bend one’s thinking into conforming with what the majority believes. The human mind tends to fuse with the collective opinion, and conformity bias in the organization can have serious consequences. Common examples include mediocre performance being accepted as standard, or business strategies that follow what other organizations are doing, without consideration of unique implications to the organization.

Authority Bias - Considering an authoritative figure as the most accurate and overarching decision maker and not exploring other opportunities falls under this category. Blindly following reliable leadership is not uncommon in most organizations and is seldom analyzed, until failure. Examples include blind acceptance of senior leadership decisions and unsupervised hiring based on leadership recommendations.

Loss Aversion Bias - Loss Aversion Bias refers mostly to the fear of exploring better or more viable options to a decision that has already been taken for fear of losing out on the projected benefits. This bias has been largely prevalent in companies undergoing a transformation, whether in technology or restructuring. Avoiding the exploration of opportunities for fear of loss is relatively standard across organizations of all scales. Examples include negative attitudes towards acquiring new technology platforms, new strategic business units, and overall functional diversification of the organization in the marketplace.

Self-Serving Bias - This refers to biased decisions whose sole purpose is to enhance one’s own self-esteem, regardless of the outcome. This ails many strategic leaders in the organization, especially in severely competitive environments. The urge to establish oneself at the authoritative and right decision-maker often leads to decisions that are unproductive to the overall organization. Examples include bias in hiring submissive employees, counterproductive use of data to establish one’s point of view, among others.

Strategic misrepresentation - This is a common and often dangerous bias in the organization, prevalent at most levels, but all-pervasive, especially at the strategic level. Strategic misrepresentation involves focusing on only the benefits and growth of a strategic decision, discarding the costs and risks required. Decisions that are based solely on the optimism of benefits and projected accordingly to management or leadership comprise strategic misrepresentation. Examples include diversification projects, new technology implementation projects, and others such.

Status quo Bias - The most common form of organizational bias if there was any, adhering to the status quo out of fear of change of progress has laid many organizations, large and small alike, by the wayside, as newer models of innovation have taken over. The modern, automated, and digitally transformed economies worldwide have claimed several casualties thanks to the status quo bias, and it is likely to claim more in the future. Examples include failure to adopt new business models, failure to embrace technologies and automation, failure to adhere to more modern, more innovative best practices, and a whole host of others.

THE PROMISED CURE

Enter the bias-free, rational thinking business strategist. In the corporate world fraught with bias at almost every level and every business function, the rational business strategist is the primary source of identifying, avoiding, and finally eliminating biases that affect the workplace and hinder organizational progress. While the remedial methodologies may vary greatly based on the need of the particular organization, the easy to implement ones include

BRIEF NOTE: Almost all organizational strategy should ideally be based on Type 2 thinking. This means slow, calculative and conscious thought through analyses of all situations to arrive at the solution. This is different from Type 1 thinking, which usually refers to instinctive and unconscious, accelerated thinking which is significantly more prone to errors in decision making.

Lateral thinking

A constantly evolving approach to strategic business decision making coupled with a search for newer, more innovative and more creative problem solving approaches define lateral thinking. A rigorously constructed cross functional lateral thinking approach to strategic and operational decision making, if correctly implemented, can form the basis of a bias free workplace. This initiative is usually taken by business strategy executives and consultants who are well trained and keenly aware of organizational biases and are knowledgeable in the areas of the constructs of lateral thinking in organizations.

External Audits

Business strategy consultants are often hired as external auditors, and have the potential to play a major role in avoiding conscious and cognitive biases in the workplace, through careful assessment of the decision making mechanisms in an organization. This is a fast developing market segment in itself, and is largely looked upon as an on-demand source of expertise for removing biases and analyzing the reasoning behind most decision making at the workplace. Regular external auditing ensures that an unbiased resource is constantly at work to identify and eliminate workplace bias through optimized strategy implementation.

Standardization

One of the most feasible ways to remove workplace bias is the implementation of technology to facilitate autonomous decision making through analytics and augmented intelligence. Standardization of strategic business decision making has the potential to increase the accuracy of the forecast and predictive decisions by as much as 70%. With over 71% of organizations today considering automation and AI as a “first” approach in their transformation processes, the demand for tech savvy business strategy professionals who can participate and lead this transformation is immense. Getting the right skills to automate decision making processes, based on conditions, is projected to be a high trajectory career for future business strategists, almost a must-have skill, as enterprises increase their dependence of data and insights and reduce human bias from the entire process.

Diversity

Creating a diverse workforce has been in the radar for most large corporations for quite some time now, but the focus has vastly increased in the recent past. The key area where diversity plays a large part is in completely eliminating a “single social group” mindset from decision making. A diverse workforce brings with it a diverse set of perspectives and opinions on business situations, and go a long way in reducing bias in almost every aspect of business, from hiring to borrowing. This paves the way for a more balanced decision making in the entire organization, across functions and operations.

At the core of reducing operational and strategic bias lies the business strategy professional. Companies are increasingly reliant on skilled, vetted and certified strategy professionals who understand the need for removing bias at every step of business operations and lay out the roadmap accordingly. The demand for this skill is immense, so get certified in this new exciting area of business strategy now to propel your career forward!