Decision-Making Biases and Errors

Decision Making

The thought process of selecting a logical choice from the available options.

When trying to make a good decision, a person must weight the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation.

How Good Is Your Decision-Making?

Decision-making is a key skill in the workplace, and is particularly important if you want to be an effective leader.

Whether you're deciding which person to hire, which supplier to use, or which strategy to pursue, the ability to make a good decision with available information is vital. It would be easy if there were one formula you could use in any situation, but there isn't. Each decision presents its own challenges, and we all have different ways of approaching problems.

So, how do you avoid making bad decisions – or leaving decisions to chance? You need a systematic approach to decision-making so that, no matter what type of decision you have to make, you can take decisions with confidence.

No one can afford to make poor decisions. That's why we've developed a short quiz to help you assess your current decision-making skills. We'll examine how well you structure your decision-making process, and then we'll point you to specific tools and resources you can use to develop and improve this important competency. 

Decision-Making Biases and Error

Managers use different styles and “rules of thumb” (heuristics) to simply their decision making.

1. Overconfidence bias occurs when decision makers tend to think that they know more than they do or hold unrealistically positive views of themselves and their performance.
2. Immediate gratification bias describes decision makers who tend to want immediate rewards and avoid immediate costs.
3. The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information.
4. Selective perception bias occurs when decision makers selectively organize and interpret events based on their biased perceptions.
5. Confirmation bias occurs when decision makers seek out information that reaffirms their past choices and discount information that contradicts their past judgments.
6. Framing bias occurs when decision makers select and highlight certain aspects of a situation while excluding others.
7. Availability bias is seen when decision makers tend to remember events that are the most recent and vivid in their memory.
8. Decision makers who show representation bias assess the likelihood of an event based on how closely it resembles other events or sets of events.
9. Randomness bias describes the effect when decision makers try to create meaning out of random events.
10. The sunk costs error is when a decision maker forgets that current choices cannot correct the past. Instead of ignoring sunk costs, the decision maker cannot forget them. In assessing choices, the individual fixates on past expenditures rather than on future consequences.
11. Self-serving bias is exhibited by decision makers who are quick to take credit for their successes and blame failure on outside factors.
12. Hindsight bias is the tendency for decision makers to falsely believe, once the outcome is known, that they would have accurately predicted the outcome.