In a new study, co-authored by London School of Economics (LSE), King’s College London, and Bayes Business School, a framework has been introduced to help organizations mitigate cognitive biases when making decisions.
Dr Barbara Fasolo, of the LSE Department of Management’s Department of Management along with Professor Irene Scopelliti, and Dr Claire Heard, led the research published in The Journal of Management. The research integrates 100 experimental studies in order to identify two main approaches to bias reduction.
The framework categorises the strategies into two types: debiasing (direct engagement with decision makers to help them identify and counter biases) and choice architecture (modification of decision-making environments to influence choices). Each approach is tailored to suit different decision-making situations and organisational contexts.
Debiasing measures include programmes to educate employees on cognitive biases. They also include warnings about potential biases and feedback mechanisms which allow individuals learn from their past decisions. These methods are designed to enhance decision-making abilities by encouraging awareness and critical evaluation.
The choice architecture, however, aims to influence decisions by changing the way options are presented. This may include reorganizing the way information appears, changing default settings or rephrasing alternative options. This method is used to influence behaviour by modifying the environment, rather than changing how people think.
Matching Bias-Mitigation Strategies with Organisational Needs
Research has identified some key factors which determine the most effective time to use each approach. The stage of the decision making process is one factor to consider. Early on, when the organisation is still evaluating information and alternatives, debiasing can be more effective. Employees can be helped to recognise biases by training and warnings. Choice architecture, on the other hand, is better suited for later stages when options have been evaluated and decisions are about to be made.
The complexity and level of uncertainty in a given decision can also influence the strategy chosen. Debiasing interventions can help to develop transferable skills in unpredictable environments where complex and unstructured decision making is common. However, choice architecture works best in structured and routine environments where decision makers can rely upon clearly defined optimal options.
The effectiveness of interventions involving choice architecture is influenced by the trust within an organisation. The employees must have confidence that the people designing decision structures are looking out for their interests. Debiasing interventions that rely on active participation and transparency can build trust through open communication of objectives and expected results.
Bias mitigation in different workplaces
Dr Barbara Fasolo stated, “Cognitive Biases can have a severe impact on organisational performance. From excessive market entry, to discrimination in the hiring process, and suboptimal allocation of capital, cognitive biases are a serious problem.” There is a lot of research on the impact biases have on organisations. However, less attention is paid to how they can be reduced.
The framework takes into account factors like goal alignment, employee turnover and cognitive resources. Choice architecture is more beneficial for organisations with clearly defined and shared evaluation criteria, whereas those with diverse goals might find debiasing to be more appropriate. Choice architecture is a good fit for workplaces with high turnover, since it emphasizes the importance of adjusting the environment over individual learning.
Debiasing can be beneficial to organisations that have stable staff, since employees will develop skills which improve their decision-making.
Dr Fasolo said, “We make a clear differentiation between two distinct bias mitigation approaches, based upon how they operate and how they’ve been tested experimentally. Debiasing equips individuals with the tools they need to recognize and counter biases, whereas choice architecture modifies decision environments to make better decisions more intuitive.
Understanding when to use the different approaches – or combining them – will be crucial for success in an organisation.
