Hardwiring That Can Lead to Bad Decisions

Scientists have identified five ways in which we are hardwired that strongly influence how we think and make decisions.  We may not even be aware that we are using these shortcuts to make decisions because they are subconscious or intuitive to us. Becoming aware of our biases can help us make better decisions.

Rational versus Emotional?

Psychologist and political scientist Herbert Simon in 1957 laid the groundwork on the limits of rationality when he attacked classical economics and game theory. Simon’s work made it clear that we must take the real world’s messiness and irrationality into account when making decisions.

“Research indicates that people are myopic in their decisions, may lack skill in predicting their future tastes, and can be led to erroneous choices by fallible memory and incorrect evaluations of past experiences,” wrote psychologist and Nobel Prize laureate Daniel Kahneman.

Neuroscientific research also proves that the brain is influenced by subconscious emotional reactions from its more primitive centers. We’re not in control of our reasoning capabilities as much as we’d like to think.

Scientists have identified several hidden currents and forces that affect our judgment.  They include:

Loss aversion – our tendency to go to great lengths to avoid possible losses

Commitment – our tendency to stick with the status quo

Value attribution – our inclination to imbue a person or thing with certain qualities based on initial perceived value

Diagnosis bias – our blindness to all evidence that contradicts our initial assessment of a person or situation

Certainty bias – where overconfidence leads us to discount inconvenient facts

Each of us is susceptible to irrational behavior’s irresistible pull. Only when we gain insight into our irrationality can we see the extent to which it affects our work and personal lives. Fascinating patterns emerge, and we can master our behaviors and decisions when we connect the dots.


Loss Aversion:  The pain associated with loss is stronger than the joy of a gain.

For example, if egg prices go down, sales go up. But if egg prices rise proportionately, sales dip by 250 percent. This response contradicts economic theory, which dictates that consumers should react to price fluctuations with equal intensity, regardless of whether price rises or falls. In reality, we illogically overreact to perceived losses.

This also explains why people are much more likely to buy meat when it’s labeled 85 percent lean instead of 15 percent fat. Similarly, twice as many patients opt for surgery when told there’s an 80 percent chance of survival, as opposed to a 20 percent chance of dying.

Commitment:  Wanting to stick with the status quo.

When we’ve invested our time and money in a project, it’s difficult to let go–even when things clearly aren’t working.

History shows us how hard it was for Lyndon B. Johnson and George W. Bush to find solutions to the wars in Vietnam and Iraq, respectively. They were strongly influenced by the forces of commitment and aversion to loss.

When CEOs and boards of directors are charged with making critical strategy decisions, determining the best outcomes often proves challenging when strong egos and competitive personalities are added to the mix.

Value Attribution: The brain looks for shortcuts.

It takes enormous energy to consciously work through all possibilities and risks when weighing important decisions, so the brain looks for shortcuts. But these shortcuts also present traps because they largely occur without our awareness.

Value attribution serves as a quick mental shortcut to determine what’s worthy of our attention. When we encounter new objects, people or situations, the value we assign to them shapes our future perceptions of them.

For example, when Joshua Bell, one of today’s finest violinists, participated in a field study for the Washington Post, people assumed he was an average street performer.  While Bell, dressed in jeans and a baseball cap, played a $3.5 million Stradivarius, subway travelers rushed by without paying attention. Bell certainly sounded far from mediocre, but commuters attributed a value of lesser performance quality based on his appearance and that he was playing in a subway station.

The Bell experiment illustrates why we may turn down a pitch or idea based on appearances, rumors or any other peripheral value. It also explains why we may blindly follow the advice of someone who has been highly recommended.

Becoming aware of our brain’s tendency to make assumptions can help us prevent disastrous mistakes and missed opportunities.

Diagnosis Bias:  The misguided first impression.

When we encounter new people at a party, we quickly diagnose them by placing tags on them, such as “approachable” or “standoffish.” This helps us quickly decide if we want to engage them in conversation.

By employing this mental shortcut, we can fail to see a person’s good qualities. Nowhere is this clearer than in job interviews.

Managers value their intuition and think they have a refined ability to truly see and understand an applicant. They overestimate their ability to form objective opinions and underestimate their subconscious biases.

The Certainty Bias:  Overconfidence and certainty can create blinders.

After gathering as much information as possible and weighing all of the arguments, leaders must make decisions and embrace an attitude of certainty and confidence. Persuading others to execute the plans is the next step.

Certainty, however, can lead to other errors, such as failure to adjust plans, when required, and shutting out conflicting information. The only way to counteract the certainty bias is to encourage dissonance.

Perhaps Alfred P. Sloan, president of General Motors in its prime, said it best. After adjourning a meeting shortly after it began, he announced:

“Gentlemen, I take it we are all in complete agreement on the decision here… Then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.”

Making More Effective Decisions

A recent Harvard Business Review article recommends a decision audit to identify key organizational needs, using the following short survey:1

How do your organization’s decision abilities stack up against the competition?

Quality: When looking back on critical decisions, how often have you chosen the right course of action?

Speed: How do you rate the speed of your critical decisions in comparison to your competitors’?

Yield: How often do you execute critical decisions as intended?

Effort: How much effort does your company put into making and executing critical decisions?


Blenko, M., Mankins, M., Rogers, P., “The Decision-Driven Organization,” Harvard Business Review, June, 2010.

Selecting Your Coach – Remember Your Feedback

Once you have decided that coaching is the developmental approach you would like to take, the next step is to choose the right coach for you.  Recommendations from colleagues are helpful in terms of coaching effectiveness, but coach selection also requires some important personal considerations.  Will you benefit more from a coach with an outside perspective or internal shared experiences of your organization?  How do you want to feel when you are working with your coach?  Do you want a peer or an authority figure?  How do gender, race, industry experience or other characteristics influence the way you will work with your coach?  How important is it to you that your coach have a primary relationship with you and not share your feedback with your boss or HR department?

In Your Executive Coaching Solution (Davies-Black, 2007), Joan Kofodimos suggests that a coach should:

  • Provide structure in the development process
  • Maintain confidentiality
  • Balance supporting and challenging you
  • Help you ask for and receive feedback
  • Assist in clarifying your true strengths, values and purpose
  • Broaden your perspectives
  • Teach concepts and skills
  • Influence how others view you

In addition, experienced coaches are also careful not to hinder your ability to learn, grow and change.  They want you to take independent action and are not there to be your cheerleader, your therapist or your de facto manager or boss. Most importantly, you want to pick a coach who can raise your developmental issues as an objective party and can show you how your behaviors affect others.

Coaches need to demonstrate that they understand and respect your values and concerns. You’re more likely to open up to a coach who creates a safe, confidential and non-judgmental environment.  However, it is equally important that coaches provide challenges that motivate you to perform beyond your usual habits and behaviors. There will be times that your coach’s role will be to confront you directly and encourage you to see the impact of your actions; and probe the motives and assumptions underlying your behaviors.

Returning to Joan Kofodimos’ list, it is important that you understand how a coaching experience is structured.  The usual steps are:

  1. Establish the coaching relationship
  2. Set expectations and the time frame
  3. Seek feedback from others using instruments, interviews, or other tools
  4. Review feedback
  5. Create a development plan
  6. Work the plan including implementing new behaviors
  7. Hold regular coaching meetings to review and assess

Regarding feedback:  it is very important that you receive authentic feedback from which to build your developmental plan.  Skilled coaches understand confidentiality and how to solicit important data from your peers, subordinates, superiors and other stakeholders.  Over time, one of the results you can expect from a coaching experience is that you will grow in your ability to create relationships where you can ask for honest feedback on an ongoing basis.

Instead of encouraging dependence, your coach should teach you how to manage your development in the future. After an initial assessment, a good coach shows you how to form links with colleagues and teaches them how to frame useful, specific feedback instead of vague judgments.

Your coach will teach you to ask for feedback and manage the conversation without being defensive. This includes learning how to determine which feedback is relevant and valid, prioritize the issues you need to address and figure out how to handle them.

So now that you have a clearer idea of the coaching process and the key role that your coach plays in helping you establish your feedback loops, you should have a better idea of what kind of coach will bring out the best results for you.

This is article also appears on TheCoachingAssociation.com blog.


Yes! You can use this article in your company newsletter, blog or website as long as you add the following bio box:

Barbara Demarest (www.barbarademarest.com) received her MBA from the Babcock School of Management at Wake Forest University and her BA from Duke University. After 20 years at the Center for Creative Leadership, Barbara launched a coaching practice to help executives and entrepreneurs position themselves, their products, and their organizations.  You can find Barbara’s profile on www.thecoachingassociation.com.

Executives & Entrepreneurs Need to Innovate and Execute

Someone who can innovate and execute is indispensable to employers and is often a skill that leads to entrepreneurial success according to an article by Jonathan Fields (click to read his blog post on the subject).

Here’s an excerpt from the post:

“Truth be told, though, there’s one person who’s even more valuable than the pure creator/problem-solver. And, that’s the Creator-Operator—the individual who can not only create anew, solve problems and map out innovative pathways, but also possesses the ability to execute, to bring those plans to life. People who can do both are extraordinarily rare finds, because creation and implementation are very different processes and almost always inhabit different brains and bodies, too. Most peoples’ minds just don’t function well on both levels. Which is why those folks tend to rise quickly up the ranks and often become entrepreneurs.”

These rare finds are also challenges for coaches.  Have you had the opportunity to coach or mentor a Creator-Operator?  What approach did you use to help these talented people develop?

Do-It-Yourself Career Development

With corporate downsizing at an all-time high and entrepreneurs and small businesses on the rise, many of us are finding we have to “do-it-yourself” in some areas where we might once have had help.  Specifically, we have to actively manage our own careers, including keeping an eye on our own training and development.  Whether you were one of the “lucky” ones still working at Shrinking, Inc., or one of those sent away to find greener pastures, you need to be much more “hands-on” about your own career.  You can’t just coast and boast any more.  From high-potentials to CEOs and from sole proprietors to small business mavens, keeping your skills, experiences and perspectives up to date is necessary to marketplace survival.

People learn from key experiences, from key relationships and from active engagement with new information through classes, workshops, books or other media.  Let’s take a look at each of these learning opportunities.

Key Experiences – you are on your own either because your company who once had career ladders and high-potential programs is now furloughing people and cutting retirement benefits or you’re now a sole proprietor or always was a small business person.  What can you do to get the important experiences you need to keep yourself, your products, and your business in the game?

  1. Make your volunteer time work for you. Take a look at where you are already volunteering.  Do you do things to support your kids’ activities?  Do you volunteer at a soup kitchen or help with Special Olympics?  See if there is a way to gain some experiences that fit your career needs.  For example, maybe you’ve seen that all the new hires at your company seem to have computer skills that you don’t have.  They talk about social media and websites, and you can’t keep up.  So try to learn a little something about websites for your child’s hockey team.  Set up a Google site or a Yahoo! Group to organize the team’s schedule, announcements, and contact information.  It’s a pretty safe place to learn – low risk and it doesn’t cost as much as going to a class on corporate communication.
  2. Evaluate opportunities for learning potential. Maybe the assignment you just received from your boss is the same work you’ve been doing for the last several years.  Is there anything about the assignment that could stretch you or teach you something new?  Does this assignment offer you the chance to teach someone else what you know and allow you to develop mentoring and delegating skills?  Take the time to look at what you are already doing and see if there is a way to add a little bit of just-in-time learning to the mix.
  3. Write it down. The time may come, and let’s hope it is your own decision and not a surprise to you, that you will have to find another job.  By writing down your experiences as you have them and updating your resume, your LinkedIn profile or any other documentations of your work history, as you are doing things, you will be in a position to just edit and improve and not have to create your work success sheet from memory.  Writing down your accomplishments and experiences also provides a moment of reflection.  Pat yourself on the back and take note that you finished a project, sold a contract, wrote a paper, helped a person or whatever reflects the experience for you.

Key Relationships – people learn from other people.  You have a chance to build on relationships as part of your personal career management strategy.  Is there someone in your network or at your office from whom you can learn something new that would help you in your career?  Is there a transferable skill that you think you will need to have mastered before you change jobs?  Is there a perspective that someone else might have that you would like to understand so that you can do your job more effectively?  Is there a person you could mentor and in teaching someone else more fully embrace your own skillset?

Active Engagement with New Information – here’s a place where we can all “do-it-ourselves” because of the wonderful gateway of the internet.  It isn’t always necessary to travel and sit in a classroom to learn something new.  Download a podcast, read a book review, commit 30 minutes a week to learning something new that will enhance your career.  We’re all victims of information overload, but new information that is relevant to either your current job or the one you plan to take on next, is critical to your success.  Take the time to read, listen, and learn.  There’s a wealth of good information out there for you to soak in.

And don’t forget that there is help – even for those of us who feel we are doing a lot of do-it-yourself work these days.  There are executive coaches, performance coaches, online tools and resources, groups to join – in person and online – and if you are in a large enough and healthy enough organization, your HR department.  Take advantage of these resources, but understand that when all is said and done, it is up to you to see what you need to secure your future, set a plan, and then work the plan.

Sometimes Lists Make Me Happy

I really enjoy lists.  I once dated a guy who called me the “girl of 100 lists” from the Go Go’s song of the same title which extols the virtue of list-keeping.

Sometimes I run across lists that make me think or make me angry or make me happy.  Today’s find came about because I was looking for lists of successful women for a project I am working on.  I found some lists of successful celebrity women and successful women authors and some successful women philanthropists.  These lists all made me happy and somehow feeling part of something cool in the world.

Then I found this  list of women who are succeeding at the highest levels of corporate finance.   I’m not a big reader of Treasury & Risk Magazine, but that’s where I found this list within an article called Knocking More Cracks in that Glass Ceiling.  Ever since getting my MBA I have a great appreciation for the finance folks, so I took a look at this list with interest.  These are impressive people in tough situations.

So why did this list make me particularly happy?  Well, I guess it’s because I actually have been fortunate enough to meet two of the women on it – Amy Woods Brinkley and Jolene Varney.  Knowing some of their personal qualities and still seeing them succeed in the rough and tumble world of finance, well that made me happy.  Congrats to all of you who make important lists.  It’s fun for those of us who know you a little bit to see you succeed and to keep cracking that glass ceiling.