Articles

The Brain Science of Decision Making for Business Leaders

Monday, 08 June 2009 16:50

Each day, intelligent leaders make mistakes, with devastating consequences.

Our daily decisions are generally small and inconsequential. Others are incredibly important, affecting people's lives and well-being.

In last week’s tip I focused on two factors that may cause flaws in a business leader’s decision-making processes. This week it is all about how our brains work in the decision-making process and how we cope with complexities.

Authors Sydney Finkelstein, Jo Whitehead and Andrew Campbell have studied how smart leaders make catastrophic decisions. In a book, Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You (Harvard Business School Press, 2008), these experts show how the brain's thinking processes can distort judgment.

The brain uses two processes that enable us to cope with complexities:

Pattern recognition
Emotional tagging

Both help us make excellent decisions most of the time. But in certain conditions, these processes can mislead us, resulting in poor judgments and bad decisions.

Pattern-Recognition Flaws

Most of the time pattern recognition works remarkably well. But when something looks familiar—yet truly is not—we can be fooled into thinking we understand it.

This problem is called a “misleading experience,” and it’s a major contributor to faulty reasoning. Our brains house memories of past experiences that connect with inputs we are receiving. But when the past experiences are not a good match with the current situation, we form wrong conclusions.

Another problem arises when our thinking has been primed before we receive the inputs. For example, we may have made previous judgments or decisions that connect to the current situation, but they may, in fact, be inappropriate. This causes us to misjudge the information we are receiving—faulty thinking known as a “misleading prejudgment.”

Emotional Tagging

Emotions are essential in the decision-making process. While most of us pride ourselves on our ability to be analytical and rational, our brains simply do not work this way. We depend on emotional input to focus our thinking and make choices.

Emotions primarily work on our bodies in unconscious ways and we cannot eliminate their effect, as hard as we may try. Most of the time, emotions are helpful, but they can sometimes lead to disaster. We need some way of anticipating when our emotions may cause a problem.

Here are four sources of emotional tags that can interfere with sound decision making:

1. Intense emotional experiences: We may have powerful memories of successes, failures, fears or pleasures that we’ve experienced in the past. These emotions usually help us, but strong memories can also mislead us.

2. Previously made judgments and decisions: We can tag previous judgments and decisions with strong emotions. When these judgments are sound our emotions help us focus. But if the judgments are misleading, our emotions can cause us to cling to them.

3. Personal interests: We often have personal interests at stake in the decisions we make. If these decisions affect only ourselves, our emotional tags will help us reach the right answer. But when our personal interests conflict with our responsibilities to others, our judgment can be unbalanced.

4. Attachments: As social animals, we are designed to become attached to other people. We can also become attached to a group or tribe, places and even possessions. If the decision we’re about to make is likely to affect one of our attachments, the emotions generated can impair our thinking.

Reference: Coach2Coach newsletter, May 27, 2009; S. Finkelstein, J Whitehead and A. Campbell. Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You (Harvard Business School Press, 2008)