Biases and Heuristics and
their impact on Decision
Making
Introduction:
A heuristic is a mental shortcut used to solve a
problem; it is a quick, informal, and intuitive
algorithm your brain uses to generate an
approximate answer to a reasoning question.
For the most part, heuristics are helpful,
because they allow us to quickly make sense of
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ANUSHA CLOASGUOLUAT 10
because they allow us to quickly make sense of
a complex environment, but there are times
when they fail at making a correct assessment
of the world. Heuristics are used all the time to
help in our solving problems, by making use of
mental shortcuts your brain does not have to
come up with a new solution every time a new
situation arises.
Cognitive Biases on the other hand are logical
fallacies that are derived from heuristics, these
often can be dangerous because they can drive
us towards making wrong decisions. Within the
context of decision making, biases are
understood as cognitive factors intervening,
unintentionally leading us into making error
laden decisions. Whilst Heuristics are
understood to be mental shortcuts used to
solve problems by means of our brains making
quick, informal and intuitive algorithms to
resolve problems. When our heuristics fail to
produce a correct judgment, they can
sometimes result in a ccogniittiivve biiass, which is
the tendency to draw an incorrect conclusion in
a certain circumstance based on cognitive
factors.
Research exploring systematic biases stemming
from errors and fallacies in human information
processing has recently highlighted several
human computational shortfalls, or downsides
inherent in individual’s judgements and
decisions. Considerable evidence surrounds
biased decision making in the !elds of medicine,
law, employment, policing, accounting and
auditing with recent, research identifying the
in”uence of cognitive biases evident in decisions
in”uence of cognitive biases evident in decisions
made in the medical, aeronautical !elds and in
industrial production.
The Kahneman and Tversky biases and heuristic
program research has had a major impact on
decision making by managers (Akinci and Sadler
–Smith, 2012) and suggests that we are not
reliable decision makers as we tend not to
operate rationally and act in accordance with
normative rules and understanding of the likely
probability of success of our actions but rather
enter biased decisions. Bazerman and Moore
(2014) building on Kahneman and Tversky work,
describe twelve types of bias ranging from the
Availability, Representativeness and Anchoring
to the Con!rmation Bias and identi!ed human
inability to remain objective, or act rationally.
Human desires have been described as overly
coloring individuals’ interpretation of
information causing loss of impartiality by
discounting data while uncritically seeking out
supporting evidence. This Self-serving Bias has
been found to lead people to the false
conclusion they are deciding objectively, and
their decisions are therefore free of bias. A
conclusion, which carries serious implications
for managers and their decisions.
Ovverrccomiing Biiassess iin Decciissiion Makkiing
Examples of several types of decision bias
identi!ed through Kahneman and Tversky’s
research include:
Avvaiillabiilliittyy Biiass: Causes us to rely on
knowledge that is most readily available
knowledge that is most readily available
rather than examining other alternatives
or procedures
Ovverrccon!dencce Biiass: When given
factual questions and asked to judge the
probability of outcome our answers are
incorrect, we tend to be far too optimistic.
Ancchorriing Biiass: Causes us to #xate on
initial information and fail to adjust for
subsequent information.
Sellff–sserrvviing Biiass: Leads us to the false
conclusion we are deciding objectively,
and our decisions are therefore free of
bias
Selleccttiivve Perrccepttiion: Where we see
things from our own perspective, and
organise and interpret
events/information based on this
perception. In”uences what we pay
attention to and the problems we
identify. CONFIRMATION BIAS is a speci!c
case.
The medical !eld has only just begun to
understand the negative impact brought about
by cognitive biases and personality traits
(aversion to risk or ambiguity) on diagnostic
accuracy. One meta study revealed a strong
association between biases of overcon!dence,
information and availability, low tolerance to
risk, and anchoring e$ect in physicians’
therapeutic or management errors. Biases
identi!ed in the study were attributed generally
to System One Thinking, (unconscious
processing). Whereas, System Two Thinking, (the
use of conscious analytical processing), was
described in the study as more likely to
counteract cognitive biases, lead to improved
diagnostic accuracy and a decrease in
management errors (van den Berge & Mamede,
2013.).
Managers forced to re”ect on their decisions
can be made more deliberative in their thinking
and more careful in decision making through
greater use of their objectivity in forming
judgements. With greater use of deliberation
and care in analysis comes an ability to override
many of the errors and biases implicit in the use
of System One processing. Considerable
bene!ts can become available to managers in
their decision making when using the objective,
deliberative System Two form of thinking.
Improvements to information processing,
decision making through greater objectivity can
be realised through removing oneself mentally
from the problem, undergoing training in
statistical reasoning, adopting an opposing
point of view, or making use of linear models in
our processing. A greater use of analytical
reasoning is being advocated for managers as a
means of improving their decision-making. This
process calls for conscious, deliberate e$orts in
individuating other people and events in our
forming judgements rather than using more
generalised, category-based information (such
as all people who re X are of the category Y and
that is all they will ever be). Cognitive
deliberation has been found to reduce biases by
more readily !lling in incomplete information
available on individuals’ characteristics.
Please refer to the attached handout for a more
thorough review of the literature on biases and
progression in thought.
Cllassss Handoutt:: Short Paper on 21st Century
Research into Decision Biases, Adj. Professor B.
Partridge (2017)
Heurriissttiiccss and Decciissiion Makkiing
The reliance on a$ect, or our feelings, in
processing information and making decisions
has been termed the “a$ect heuristic’, an
experiential mode of thinking which has played
a major role in our survival as a species (Akinci &
Sdaller-Smith, 2012). Traditional research into
biases and errors in decision-making has tended
to discount the role of heuristics in decision
making sighting the boundaries between
overcon!dent -biased judgements and intuition
(a$ect).
Understanding the styles of the decision maker,
the task at hand and the environment, has given
rise to a new recognition of the relationship
between heuristics and biases ‘and intuitive
expertise and their contribution to intuition at
work in decision making. With this
understanding has come a greater appreciation
of the importance of heuristics in our decision
making. Heuristics are not necessarily the stu$
of errors and biases but rather useful, real and
e$ective ways of overcoming uncertainty.
The question remains for many, how do people
make decisions under conditions of severe time
constraints and limited availability of
constraints and limited availability of
information? The rational response to the
question would be to consider all the
information available, weigh all the pieces of
information with care, and compute an
optimum solution, possibly relying on the
support of a computer to speed the process of
decision-making. A football coach would suggest
otherwise as players would !nd the need to
solve the balls’ trajectory, speed and positioning
of the player and ball using di$erential
equations. All of which would prove to be far too
onerous, complex and time consuming for the
player. The coach would instead make use of a
heuristic in helping the player judge the speed
and likely placement of the ball. This use of a
heuristic does not make the coach irrational but
rather a fast and frugal decision maker. Indeed,
we make use of this and other heuristics in our
everyday lives, most of the time.
The hyper expectations held on managers to
behave rationally in all their decision making,
are themselves, irrational. The world is
uncertain and in an uncertain world there can
be no optimal solution for all problems. Rather,
managers need to make the best use of the
information available by accepting some
information and rejecting others. It is the
human condition however to allay uncertainty in
others and it may be useful therefore to have
people ‘rationalise’ their decisions to create an
‘illusion of certainty. The use of heuristics strives
to address the rational decision makers’
dilemma of failing to meet expectations on their
estimating and making use of appropriate
estimating and making use of appropriate
probabilities by understanding that there is
uncertainty in all our decisions.
Essential Resources:
Bazerman, M & Moore, A.
(2014). Judgements in
management decision making.
Retrieved from
https://lesa.on.worldcat.org/oclc/154800238
Behavioural decision research provides
many important insights into managerial
behaviour from negotiation to investment
decisions by examining judgment in a
variety of managerial contexts. Embedded
with the latest research and theories, this
book provides an opportunity to
understand own decision-making
tendencies, learn strategies for
overcoming cognitive biases, and become
better decision makers.
Pinder, M. (2017). 16 Cognitive
Biases that could kill your
decision making. The Innovation
Blog. Retrieved from
https://www.boardo!nnovation.com/blog/2017/08/02/16-
cognitive-biases-that-kill-innovativethinking/
Broadly speaking, cognitive biases can be
split into two types: information
processing and emotional biases.
Information processing biases are
statistical, quantitative errors of judgment
that is easy to !x with new information.
Emotional biases are much hard to
change as they are based on attitudes and
feelings.
Wireless Philosophy. (2015).
Critical Thinking -Anchoring
Boas. YouTube. Retrieved from
https://www.youtube.com/watch?
v=NFiDdbquWJY
In this video, the cognitive scientist Laurie
Santos (Yale University) explains the
phenomenon of anchoring. She shows
how arbitrary information sometimes can
sometimes act as an anchor that a$ects
our judgments in unexpected ways.
Professor Bertels. (2016).
Decision Making Biases.
YouTube. Retrieved from
https://www.youtube.com/watch?
v=0ocW1RfENzU
An easy to apply set of examples of biases
including the planning fallacy where
groups consistently get planning times
wrong as individuals overestimate their
own contribution rates and underestimate
the likely time to completion of the
project.
Shah, J. (2016). How to use
Shah, J. (2016). How to use
psychology to overcome your
biases. Retrieved from
https://www.forbes.com/sites/theyec/2016/12/01/howto-
use-psychology-to-overcome-yourbiases/#
7a72a09e6d9f
A cognitive bias is essentially the tendency
to make decisions in an illogical way and
allow our emotions and preferences to
creep into our decision-making process.
Pressure from key decision makers or the
incorrect/selective use of data can
sometimes cause managers to make poor
decisions that lead to undesirable results.
A good decision usually results from a
combination of common sense, research,
and good judgment. Making decisions
based on incomplete information and
uncon!rmed hunches can lead to missed
opportunities.
USCMarshall. (n.d.). How to
reduce Bias in Decision Making.
Retrieved from
http://info.marshall.usc.edu/faculty/critthink/Supplemental%20Material/Reducing%A 27 slide show devoted to critical thinking
from researchers at USC Marshall. Slide
show illustrates several types of biases
and errors in human information
processing and o$ers means of
overcoming biases when making decisions
in the workplace.
Patel, D. (2017). How to
overcome cognitive bias and
use it to your advantage.
Retrieved from
https://www.hu#ngtonpost.com/entry/howto-
overcome-cognitive bias-and-use-it-toyouradvantage_
us_5900$f3e4b00acb75f1844f
For most people, their cognitive biases are
related to memory. You may remember
an event or situation in a di$erent way
from how it really happened for a
multitude of reasons. However, that missmemory
can eventually impact the way
you think and lead to biased opinions,
thoughts or decisions. Even if your
cognitive biases aren’t particularly
harmful, or noticeable, chances are you
have them.
Soll, J.B., Milkman, K.I. & Payne,
J.W. Outsmart your own biases.
HBR. Retrieved from
https://hbr.org/2015/05/outsmart-yourown-
biases
Suppose you are evaluating a job
candidate to lead a new o#ce in a
di$erent country. On paper, this is by far
the most quali!ed person you’ve seen.
Her responses to your interview questions
are “awless. She has impeccable social
skills. Still, something doesn’t feel right.
You can’t put your !nger on what—you
just have a sense. How do you decide
whether to hire her?
Partridge, B. (2017). A TUA Class
Handout on Decision Making.
Review of the Decision-Making
Literature: An Early 21st Century
Progression
A student handout bringing together the
50 most relevant decision-making
research papers produced this century
allowing students to more easily access
readings using one location rather than
entering long and complex literature
searches on decision making. Brief notes
typically overview research papers and
give references for more in depth
research by students.
Newkirk, A. (2014). The
Interactions of Heuristics and
Biases in the Making of
Decisions, Expose Magazine. Retrieved
from
https://projects.iq.harvard.edu/expose/book/interactionsheuristics-
and-biases-making-decisions
Heuristics are simpli!cations and use
fewer cognitive resources, they also, well,
simplify our daily lives. Furthermore, since
people mostly use these shortcuts
automatically, they can also pre-empt
analytical thinking in situations where a
more logical process might yield better
results. Although heuristics are useful
results. Although heuristics are useful
shortcuts for everyday judgment calls,
they can lead people to make hasty,
sometimes incorrect decisions about
issues that are more complicated.
World.Minds. (2012). Gerd
Gigerenzer Heuristics that make
us smart. YouTube. Retrieved
from https://www.youtube.com/watch?
v=PIsNt_7sah4
A most interesting video showing the
founder of heuristics research talking of
the need tom use heuristics in making
better decisions. Most of the rational
approaches to decisions are placed under
the managing risk category while
heuristics under the management of
uncertainty. The message is clear: less is
more, and we don’t need complex
solutions involving likely future expected
values to solve complex solutions.
Learn Liberty. (2017). What are
heuristics? YouTube. Retrieved
from
https://www.youtube.com/watch?
v=ReFqFPJHLhA
We all use heuristics to make everyday
decisions — but sometimes they blind us
to the truth. Therefore, we need to do
something that does not come easy:
accept that our ideas might be wrong.
Video provides an overly pessimistic view
Video provides an overly pessimistic view
of the value of heuristics without noting
the bene!ts.
Learning Activities:
Learning activities are not part of
summative/graded assessment; however, they
are designed to prepare you for incremental
graded assessment and expand your learning.
These activities encourage a community
learning experience between peers, and provide
opportunities for facilitators to o$er formative
feedback, throughout a module, to the student
cohort. Students should spend 1-2 hours per
module on learning activities.
LLearrniing Accttiivviittyy 4..1:: Biiassess
Review the resources on bias.
- Provide an example from your
personal (workplace)
experience on the Anchoring
Bias, Con!rmation Bias,
Availability Bias - How does System One
processing impact on bias in
your decision making? - How does System Two
processing work to limit the
degree of bias in your decision
making? - Is bias due to laziness in
processing, a lack of
motivation, or something else? - What is self-serving bias?
- Managers are known to have a
similarity bias when they select
people for their teams who are
most like them. This can have a
long term negative e$ect on
team decision making. What
form might these negative
e$ects take? - How would you overcome the
e$ects of Similarity Bias in your
workplace?
Record your answers in Discussion Forum
4.1.
To participate in the Discussion
Forum, click here to scroll to the
bottom of this page then click on the
“Moodduullee 44 — Diissccuussssiioonn FFoorruum” link.
LLearrniing Accttiivviittyy 4..2::
Ovverrccomiing Cogniittiivve
Biiassess:: Reducciing tthe E$eccttss
off Worrkkpllacce Biiass
Read the resources on cognitive bias. - How does individuation reduce
bias in decision-making? - What process can you put in
place to reduce bias in your
workplace? - How might your team deal with
System One –System Two
con”icts in your project?
con”icts in your project? - How will you deal with bias in
decision-making made under
conditions of great uncertainty,
or where there is a strong
safety risk? - What actions will you take to
reduce behavior related to
negative stereotyping in your
workplace? - How will you minimise the
e$ects of self-interest bias held
by your team members? - Create a self-development plan
that involves the use of a daily
diary to identify bias and lists
action steps for improvement.
Record your responses in Discussion
Forum 4.2.
To participate in the Discussion
Forum, click here to scroll to the
bottom of this page then click on the
“Moodduullee 44 — Diissccuussssiioonn FFoorruum” link.
LLearrniing Accttiivviittyy 4..3:: Etthiiccss
Review the resources on ethics. - Explain the essential
di$erences between Morals
and Ethics in decision making - How does your organization
communicate socially
acceptable, ethical behavior to
acceptable, ethical behavior to
employees and external
stakeholders? - What are the core values of
your workplace and how are
they expressed and made
known to team members and
stakeholders? Consider tacit
and formal knowledge. - How does your organisation’s
ethical framework support the
organisation’s objectives and
managers’ decision making? - What is the nature of ethical
codes or standards of practice
in your organization supporting
managers’ decision making? - Is ethics and training on ethics
seen as a cost, or as a bene!t
to your organisation? - Would major decisions made
by managers in your
organisation be given positive
headlines in the press, or less
positive? How to improve? - How would you describe the
qualities of the ethically
competent manager-decision
maker in your organization?
Record your response in Discussion
Forum 4.3
To participate in the Discussion
Forum, click here to scroll to the
bottom of this page then click on the
bottom of this page then click on the
“Moodduullee 44 — Diissccuussssiioonn FFoorruum” link.
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