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Posted: 27 Jan, 2021

Spot business decisions before they go wrong and develop expert judgemental skills

On 21st January Adrian Doble, restructuring professional turned Master NLP and CBT Mentor hosted the third in our series of 30-minute mentoring tips for NextGen members and guests.

In his session, Adrian highlighted three key reasons why and how people can make poor decisions in business and in life. Thank you to Anna Nolan of Paul Hastings for moderating the event. If you would like to watch the recording, you can do so here.

Adrian began by stating a scientific fact that while we may think we are rational and logical, 90% of everything we do is unconscious and automatic. Driving a car, (we don’t think about which way to turn the key to start the car, or which pedal to press) brushing our teeth, playing sports. Our unconscious mind does almost all of it for us. Even habits and emotions, such as anger, are a product of our unconscious.

Unconscious thought is fast, making decisions without scrutiny and based only on experience. Our conscious brain on the other hand is slow, deliberate and enquiring but if all of what we do, including decision making, was only with conscious thought, our minds could not cope.

In business, Adrian said that while one might think important decisions are made using conscious, logical thought, this is not usually the case. In fact, 98% of decisions are made unconsciously, which includes business decisions according to psychologist and Nobel Prize winner Daniel Kahneman.

To help us understand how unconscious decisions are made, Adrian shared three common biases that are products of unconscious thinking and will help us to understand how and why people and boards of businesses can make flawed business decisions:

Anchoring bias

The first is anchoring bias. The first price creates the psychological anchor. Everything flows from that. We see this bias in life all the time. For example, in the January sales where our decision to buy might be affected by how much an item is discounted. The original price acts as an anchor that affects our decision and can be wholly irrelevant to the value of the product.

In business, anchors can be used to influence outcomes completely without the knowledge of the other party to a negotiation.

Confirmation bias

Confirmation bias is where our unconscious mind looks for information to support our beliefs. Brexit, Adrian said, was a classic example. Regardless of what side we were on, we all tended to read the news that we liked, which supported our views, and confirmed our opinion. In business, there are countless examples of confirmation bias where boards followed selective information, ignoring market trends and all the facts. IBM, Nokia, Xerox and Kodak are all examples of businesses that have put up unconscious barricades against the facts and let their unconscious bias take over to make the wrong business decision.

Loss aversion bias

Loss aversion bias is based on the fact that our childlike unconscious mind prefers gain over pain. The pain of loss is actually twice as bad as the pleasure of gaining. In a business scenario, this bias is commonly seen at work when directors become so embedded in a project, they can’t let go. In fact, Adrian said that most of the turnaround cases he has worked on were triggered by a bad business decision that the board couldn’t give up. In his opinion HS2 is a living example where, post Covid, the business case is changing yet supporters of the project are unable to bear the pain of loss and let go, no matter how much more than the original budget is spent.

Understanding these biases, Adrian said, is key to developing expert judgement skills and to making good decisions.

Thank you to Adrian for hosting this insightful mentoring session. We hope you’ll join us for more of the webinars and events we have planned for the coming months, a list of which you can see below.

Upcoming TMA Events

2nd February – COVID-21: Present and Future of Corporate Turnarounds. Register here.
25th February – TMA NextGen Mentoring Session and Online Networking. Registration details released soon.
9th March – Cross-border Networking. Registration details released soon.
25th March – Online Webinar in Partnership with Herbert Smith Freehills. Registration details released soon.

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