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10 Influential Cognitive Bias In Leadership

Written by: Ágnes Vad, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.

 

The human mind is beautifully complex and has enormous capacity, but it does have its limitations. If we were to process all the information in its entirety all the time, we would have no time for anything but our brains’ work. So, the brain needs to find ways to keep information digestion sustainable. This effort leads to distorting as the brain cannot process everything. That’s how our thinking has evolved to simplify the flow of information in some cases, reduce the amount of data by ignoring certain things, or emphasize what’s important to us. This phenomenon is called cognitive bias.


aCognitive biases are typical – regular, and some cases are unavoidable. However, some politicians, marketers, investors, traders, or even company leaders also build heavily on them – in case they are aware of! Having and acting based on bias is entirely human, necessary for us to exist ‒ yet it does mean that the world is somewhat distorted in our minds.


Here are some examples of cognitive bias:

  • You heard that sweets are unhealthy from several people. Because of it, you’ll be more likely to click on videos and read articles that confirm this statement rather than the ones of a different opinion. It is a confirmation bias.

  • People tend to think that (only) women are weak and/or emotional. It is a gender bias.

We differentiate conscious and unconscious bias. People can leverage the impact of the conscious bias more as they are aware of them. Nevertheless, it’s worth noting the unconscious bias as well since you, as a leader or an employee, take your cognitive bias into work with you too!


Impact of Cognitive Bias at Work


As a leader, it is inevitable for you to act on the cognitive bias not to damage your organization’s good work!


If you fail to address different forms of bias within your organization, that has real negative consequences. Coqual (formerly: Center for Talent Innovation) found that real or perceived bias causes disengagement three times higher than at workplaces where bias is managed.


According to another finding from Gallup, employee disengagement costs U.S. companies up to $550 billion per year. Bias has also been shown to impact employee retention and innovation negatively.


The solution might come quickly from this perspective: we just need to identify and act on them! Yep. But look at the graph that is intended to capture all the cognitive bias:

1. Figure: Every Single Cognitive Bias in One Infographic


Easy to see we have a lot of them!


Here is my shortlist for you …

…and also note that ‘creating a shortlist’ is also a sign of a bias, namely simplification <wink>.


1. “Similar to me” Bias

Similar-to-me bias often leads leaders to rate people with similar interests, skills, and backgrounds more than people different from them. In other words, similar-to-me bias causes people to favor individuals similar to themselves disproportionately. While it might seem harmless in principle to associate ourselves with familiar people, the similar-to-me effect can lead to unjust consequences when applied to hiring practices, workplace promotions, and tolerance towards otherness. So remember this cognitive bias that explains our tendency to prefer people who look and think like us!


2. Action bias

As a leader, you might think doing nothing is worse than doing something that might be a wrong step. Being in the front line, you might feel ‘forced’ to be ready to act immediately and without hesitation. In some cases, it is the right attitude; however, be aware that action bias also exists! Action bias favors action over inaction (often to our benefit). It means we have times when we feel it is necessary to act, even if there is no evidence that it will lead to a better outcome than doing nothing would. Our tendency is an automatic reaction, and there is no solid rationale to support it, which has been termed the action bias.


This automatic impulse is a survival instinct that was once incredibly adaptive. Due to how our environment and lifestyle have evolved, the action bias is less necessary for survival than once it was.


3. Projection Bias

Projection bias is when we over-predict future preferences matching current tastes are. The projection bias causes us to make short-sighted decisions and based on current emotions, beliefs, and values that will not necessarily hold up in the long run. At work, this bias impacts innovation as the new products can be over-valued in the market and not necessarily reflect consumer preferences. Working with your team to take a more measured and analytical approach to project future trends helps to reduce this bias.


4. Confirmation Bias

People like to be correct – so as leaders. It is easy for leaders to look at market and business intelligence that supports their positions on strategic matters at an organization. That is why it is vital to ask leaders to directly confront information that better counters organizational strategy to address market realities.

Confirmation bias is about the tendency to search for or interpret new information in a way that confirms our pre-existing beliefs. This typical leadership bias makes it easier for managers and leaders to trust people and information that aligns with their beliefs and values and be more rigid in trusting those who don’t. This bias can lead leaders to make poor decisions because it distorts the reality from which we draw evidence.


5. Proximity Bias

Proximity bias is when leaders give preferential treatment to those physically closest to them. It is recently pretty common in hybrid workplaces where some employees are office-based and others are remote. Remote employees might feel as though they are “out of sight, out of mind” as they’re overlooked for projects and promotions over their in-office peers. Proximity bias disproportionately affects certain workers, including working mothers, those in lower cost-of-living areas, and those with disabilities. This bias is the next big challenge for hybrid and remote work!


6. Halo effect

The halo effect claims that positive impressions of people, brands, and products in one area positively influence our feelings in another area. For example, when a leader assumes that a good-looking person is also an overall good person in an interview. This error in a judgment reflects one’s individual preferences, prejudices, ideology, and social perception. When the halo effect takes hold of our decision-making, it can hinder our ability to think critically about other peoples’ traits. Therefore, we may mistakenly judge others unfairly and miss valuable opportunities. As a leader, it may lead us to hire not the right person for the right job.


7. Optimism Bias

When we are short in time and resources, we tend to overestimate the positive benefits and disregard the negative consequences of our actions. It can lead us to overlook essential information and take specific ideas forward by addressing particular flaws.


The optimism bias triggers us to overestimate the likelihood of experiencing positive events and underestimate our chance of experiencing negative events. Note that it is necessary to have some optimism! Optimism encourages us to persevere, even in the face of hardship or rejection. It pushes us to believe in our abilities. It nudges us towards focusing on the positive without becoming preoccupied with the negative. Yet, overall it is essential to be aware of how our optimism can blind us to adverse outcomes and result in poor decision making.


8. Survivorship Bias

Survivorship bias is the act of focusing on successful people, businesses, or strategies and ignoring those that failed. Examples of survivorship bias are noticeable in various fields, particularly in the business world: students in business school can recall how unicorn start-ups were commonly applauded within the classroom, serving as an example of what students should strive for — an archetypal symbol of success. Even though Forbes reported that 90% of start-ups fail, entire degrees are dedicated to entrepreneurship, with dozens of students claiming that they will one day find a start-up and become successful.

Survivorship bias occurs when a visible successful subgroup is mistaken as an entire group due to the failure subgroup not being visible – look at the illustration from The Decision Lab.

2. Figure: Survivorship Bias


9. Illusory Correlation Bias

Illusory correlation bias is when we (tend to see) see an association between two variables (events, actions, ideas, etc.) when they aren’t actually associated. People like to base their decisions on the relationships between various phenomena. We notice that certain events consistently happen simultaneously or after others, leading us to conclude they are related while this isn’t necessarily true.


As a leader, you must be visionary, forecast events, and see patterns at places where others can’t see any lines. For example, a business leader might see that sales usually grow simultaneously as the golfing season begins, but they aren’t sure why. They know that the product tends to sell more in May, which happens to be when golf season opens. So the firm stocks up on product supplies for May…


10. Dunning-Kruger Effect

People like being knowledgeable – so as leaders. However, when the Dunning-Kruger effect impacts your brain, you tend to believe you know something while, in fact, you don’t. Due to the Dunning-Kruger effect, you may not know what you are good at because you assume that what comes easily to you also comes easily to others. Therefore, you are robbed of the ability to spot your specialties and talents. Understanding the Dunning-Kruger effect can help you discern when to trust your skills and seek advice from others who view you more objectively than yourself.


In Summary


As you probably recognize, some biases are easier to capture, while others are harder to act on. The better goal is to keep those biases in check to address the correct problems with the appropriate ways of thinking and not repeat similar patterns on multiple projects.


Practicing mindfulness can considerably help you reduce leadership biases and increase your ability as a decisive leader. So the next time you have to make a decision, try intentionally questioning your own beliefs and being critical. As a result, your judgment and thoughts will likely become more accurate and relevant, bringing you closer to reality.


If you’d like to understand better and work on your individual bias list, reach out to me for further support.


Follow me on Facebook, Instagram, LinkedIn, and visit my website for more info!


 

Ágnes Vad, Executive Contributor Brainz Magazine

Ágnes Vad is a certified human potential and business coach with 18 years in marketing and 10+ years in cross-cultural leadership roles. Ágnes started her professional career in the multinational world in the marketing domain and built her thorough business acumen in parallel via the international leadership roles she was promoted to. She has been showing passion for working and leading people starting from the beginning of her career. She is a proud winner of the Leadership and Marketing Awards at her company. After 18 years, she decided to follow her passion and became a coach entrepreneur in 2019. In the last 2.5 years, she became an experienced and recognized professional in the coaching domain and has cc. 500 hours of coaching experience. She works with individuals and also with teams as a coach. She focuses on activating and maximizing human and leadership potential, emotional intelligence (EQ), mindfulness, and resilience.


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