Final Lane4 Article

Decision-making: a short-cut to success? By David Heaton & Dr David Fletcher, Loughborough University

LEADING EXPERTS IN HUMAN PERFORMANCE

RESEARCH ARTICLE

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A Lane4 Research ArticleDecision-making: a short-cut to success?2

Executive summary

Without doubt, decision-making is an essential component in the management of every single successful organisation. Whether this is in regard to investment, recruitment or training, businesses can’t flourish if decisions are ineffective.

It’s estimated that over half of the decisions made within business are made without detailed consideration and judgement. This warrants an analysis of the factors that influence decision-making to help employees improve their decision-making, particularly when under pressure.

Heuristics are fundamental to decision-making. A heuristic is a mental shortcut; a quick, informal, and intuitive algorithm used by the brain to generate an approximate answer to a question.

However, heuristics can result in cognitive biases; errors in thinking that result from us trying to simplify our thought processing. Consequently, the overall purpose of this research was to discover the extent to which decision-making is influenced by heuristics and cognitive biases.

Specifically, this study explored the extent to which football coaches’ decisions are influenced by these factors, which are most influential on coaches decision-making, and whether or not these factors were perceived as likely to improve or impede decision-making.

This study discovered that five most predominant heuristics or biases influencing coaches decision-making were: familiarity and simulation effects, the ‘hot hand’ fallacy, the focusing bias and outcome bias. These five factors were also perceived by coaches as likely to result in effective decisions, despite the fact that research evidence has shown cognitive biases to result in false assumptions, illogical conclusions, and inaccurate judgements.1 This finding supports previous insights about the challenging nature of cognitive biases: “An insidious feature of cognitive failures is that we have no way of knowing that they’re happening: We almost never catch ourselves in the act of making intuitive errors.”21 For an overview, see Kahneman (2011). Thinking, Fast

and Slow.2 Kahneman, Lovallo, & Sibony (2011). Before You Make That Big Decision. Harvard Business Review, June, p.4.

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A Lane4 Research Article Decision-making: a short-cut to success? 3

The issue Decision-making drives organisations. From revenue and profit to growth and innovation, it’s how managers ensure that their company is flourishing and that they are staying ahead of their competitors.

Making the right decision and at the right time can be the making (or if the wrong decision, breaking) of a business. So, if there were a way to increase the likelihood of a successful decision, which at the same time is quick and relatively effortless, this could be invaluable to business leaders.

A heuristic is a mental shortcut used to solve a particular problem; a quick, informal, and intuitive algorithm used by the brain to generate an approximate answer to a question that requires reasoning.

However, heuristics can also result in cognitive biases; the tendency to draw a preconceived conclusion or make thinking errors as a result of trying to simplify our thought processing.

These decision-making short-cuts play a vital role in both business and sport, where decisions must often be made very quickly.

Consequently, if decision- makers can be helped use short-cuts whilst maintaining the quality of decisions, this presents a potential source of competitive advantage.

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Research design The Cognitive Bias & Heuristic questionnaire was developed specifically for this piece of research.

It was made up of 8 questions relating to common heuristics and 10 questions relating to cognitive biases (shown in Table 1).

These 18 were selected due to their relevance and dominance in both cognitive and sport psychology literature as predominant in coaches’ decision-making.

The questionnaire adopted two broad measures - frequency of use and perceived effectiveness, to identify the extent to which each was used by coaches and the extent to which they judged them to be effective.

A total of 120 qualified football coaches (holding FA/UEFA coaching badge) answered frequency questions on a 6 point Likert scale (never, rarely, sometimes, often, very often or always), and perceived effectiveness on a 7 point Likert scale (extremely likely, very likely, likely, neither, unlikely, very unlikely or extremely unlikely).

Table 1. The 18 heuristics and biases explored in the questionnaire

Heuristics Definition

Familiarity Decisions are made for a present situation due to their successfulness in the past even though the two contexts may differ

Simulation A simplified mental strategy according to which individuals determine the likelihood of an event based on how easy it is to picture the event mentally

Take the Best

The individual chooses an item that gives the first cue of being more worthy

Recognition Decisions are made based on what an individual recognises

Availability A tendency to overestimate the likelihood of events due to their increased presence in an individual’s memory

Social Proof Decisions are made to please others e.g. supporters, owners etc

Take the First The individual chooses the first choice that is possible

Affect Decisions are made based on emotion

Cognitive biases

Focusing The tendency to place increased importance on one aspect of an event

Hot Hand The belief that a person/tactic that has provided previous success is likely to provide further success in additional attempts

Outcome The tendency to judge a decision by its eventual outcome as opposed to the quality of the decision at the time it was made

Illusion of Control

The tendency to overestimate one’s degree of influence over external events

Negativity A psychological phenomenon by which humans have a greater recall of unpleasant memories when compared to positive ones

Optimism The tendency to be over-optimistic, overestimating favourable and pleasing outcomes

Escalation The tendency to continue with a decision, due to prior investment, even though new information suggests that the original decision was wrong

Confirmation The tendency to search, interpret and remember information that confirms one’s preconceptions

Information The tendency to seek information even when it cannon necessarily affect action

Ostrich Ignoring an obvious, negative situation



Findings Coaches identified all of the heuristics and cognitive biases assessed (those listed in table 1) as influencing their decision-making to some extent.

The most commonly used heuristics were the familiarity and simulation effects, with average scores shown in Table 2.

Familiarity Effect - decisions are made for a present situation due to their successfulness in the past even though the two contexts may differ.

Simulation Effect - a simplified mental strategy according to which individuals determine the likelihood of an event based on how easy it is to picture the event mentally.

Table 2. The most frequently used heuristics

Mean Rating (1=Never, 6=Always)

Familiarity 4.25

Simulation 4.23

Take the Best 3.34

Recognition 3.14

Availability 2.72

Social Proof 2.68

Take the First 2.63

Affect 2.59

As shown in Table 3, the most commonly used cognitive biases were the focusing effect, hot hand fallacy and outcome bias.

Focusing Effect - the tendency to place increased importance on one aspect of an event.

Hot Hand Fallacy - the belief that a person/tactic that has provided previous success is likely to provide further success in additional attempts.

Outcome Bias - the tendency to judge a decision by its eventual outcome as opposed to the quality of the decision at the time it was made.

Table 3. The most frequently used cognitive biases

Mean Rating (1=Never, 6=Always)

Focusing 4.62

Hot Hand Fallacy 4.46

Outcome bias 4.12

Illusion of Control 4.00

Negativity bias 3.88

Optimism bias 3.68

Escalation bias 3.58

Confirmation bias 3.54

Information bias 3.36

Ostrich effect 2.53

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Unsurprisingly, the heuristics and biases that were found to be the most frequently used in the decision-making process were also those perceived by coaches as the most likely to be effective (as shown in Tables 4 & 5).

Although these factors have been shown in academic research to have the potential to impair decision-making quality by leading to false assumptions, illogical conclusions, or inaccurate judgements, on average coaches perceived most as likely or very likely to be effective.

Table 4. Average perceived effectiveness - heuristics

Mean Rating (1=Extremely likely to be effective, 7=Extremely unlikely to be effective)

Familiarity 2.59

Simulation 2.74

Take the Best 3.29

Recognition 3.52

Availability 3.66

Take the First 3.83

Affect 4.03

Social Proof 4.13

Table 5. Average perceived effectiveness - biases

Mean Rating (1=Extremely likely to be effective, 7=Extremely unlikely to be effective)

Confirmation bias 3.46

Focusing bias 2.78

Hot hand fallacy 2.59

Illusion of Control 3.12

Negativity bias 3.20

Information bias 3.45

Escalation bias 3.23

Optimism bias 3.45

Ostrich effect 3.45

Outcome bias 2.91



Implications

The research offers an insight into the cognitive dynamics of decision-making by coaches. The type of decision-making made by coaches to determine how they instruct, advise, and direct their players, is not isolated to sport.

Similar decision-making processes take place in nearly every walk of life. As in sport, in business, instruction has to be clear, accurate and relevant, yet often decisions need to be made quickly and instinctively.

Decision-makers in business should be made aware of the cognitive factors that are likely to influence their decisions, and attempt to engage in greater conscious reflection on the likely effectiveness of these decision-making strategies.

Business leaders may also wish to consider the decision-making ‘ethos’ employed within their organisations.

Finally, given the difficulty of ‘catching ourselves’ making intuitive thinking errors in decision-making, it may be necessary to create explicit strategies for decision-making, such as ensuring that important decisions are made by teams rather than individuals, for example.

However, clearly this more conscious, reflective type of decision-making takes additional time and resource, and it simply wouldn’t be feasible or appropriate to approach all decisions this way. Therefore, it’s important to weigh up the benefits of intuitive decision-making, against the potential consequences of making the wrong decision.

lboro.ac.uk


© Lane4 Management Group Ltd 11/2014 including all models & frameworks. All Rights Reserved.

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