The five most common thinking errors made by managers and their psychological backgrounds

What it’s all about

Every day, managers are faced with a multitude of decisions that significantly influence the direction and success of their area of responsibility. However, despite their experience and expertise, they are not immune to cognitive biases and thinking errors that can negatively influence their decision-making. These often have deep-rooted psychological backgrounds that shape human thinking and behaviour. This article explains five of the most common thinking errors that managers make in their day-to-day work and the psychological mechanisms that underlie these errors.

Confirmation bias

Confirmation bias describes the tendency to interpret, seek and remember information in such a way that it confirms one’s own beliefs and expectations. Many managers tend to favour data and opinions that support their existing views and decisions, while ignoring or devaluing contradictory information.

This thinking error is deeply rooted in the human psyche and has evolutionary roots. The brain seeks stability and consistency, and the confirmation bias helps to avoid cognitive dissonance – the uncomfortable feeling that arises when conflicting information is present. By seeking information that confirms our beliefs, we reduce stress and uncertainty.

Availability Heuristic

The availability heuristic is a cognitive error in which people judge the likelihood of events based on the ease of their recollection of similar events. Some leaders make decisions based on information that readily comes to mind rather than considering more comprehensive and potentially more relevant data.

This heuristic is based on the way our memory works. Events that are emotionally charged, happened recently or are strongly anchored in our memory come to mind more quickly. This mechanism helped our ancestors to react quickly to potential dangers, but can lead to misjudgements in modern, complex decision-making.

Overconfidence bias

Overconfidence describes the tendency to overestimate one’s own abilities, knowledge and judgements. In this case, people tend to assess their decisions as safer and their judgements as more accurate than they actually are. This can lead to risky decisions and an underestimation of risks.

Overconfidence can be fuelled by the desire for self-esteem and recognition. People tend to overestimate their own abilities in order to feel better about themselves and to assert themselves in social hierarchies. This tendency is often reinforced by positive feedback and past successes, which create a distorted image of one’s own abilities.

Anchoring effect

The anchoring heuristic describes the tendency to rely too heavily on an initially presented piece of information (the “anchor”) when making decisions and to distort subsequent judgements in the direction of this anchor. Managers are often influenced by initial information or numerical values, even if these are irrelevant or chosen at random.

This error in thinking results from the human tendency to make relative rather than absolute judgements. The brain uses anchors as points of reference to reduce uncertainty and enable faster decisions. In negotiations or strategic planning, however, this leads to sub-optimal results, as subsequent judgements and decisions are unconsciously adjusted to the anchor.

Hindsight bias

Hindsight bias is the tendency to overestimate the predictability of an event after it has occurred and to believe that it has already been foreseen. When managers make this mistake, they tend to judge past decisions as more obvious and the results as more predictable than they actually were.

The hindsight bias helps to maintain one’s own self-image as competent and predictable. It reduces the cognitive dissonance that arises when you realise that you were wrong in the past. It also facilitates learning from past events by creating a narrative coherence that allows the past to be seen as logical and consistent.

Conclusion

The thinking errors described above are deeply embedded in the human psyche and influence leaders’ decision-making in subtle but significant ways. By becoming aware of these cognitive biases, leaders can begin to reflect on and potentially improve their decision-making processes. A close examination of the psychological underpinnings of these thinking errors can be the first step in minimising their impact and making more informed decisions.