Years ago, through the book Judgment in Managerial Decision Making, I became acquainted with the concepts of “decision psychology” or, in other words, “behavioral economics.” The gist of the main idea of ​​this interdisciplinary science is this:

We humans do not act as rationally as we think when making decisions and actions! Our human minds have been formed over the centuries to create and act quickly and without thinking through a large number of mental shortcuts (heuristics). And the fact is that this mental way of making decisions usually works in more than 99% of personal and everyday life situations! But beware of that one percent exposed to mental errors (biases).

Obviously, the same person with the same mental characteristics in business and organizations has to make decisions and take action. There is a big difference between personal and everyday life; Because the cost of wrong decisions and activities can be so high that it can even affect the organization’s existence.

However, many decisions and actions are generally of the same type of routine in organizational life.

In past week I wrote another text about cognitive biases that you can find it here.

9 Common cognitive biases that affect our decisions

From the point of view of Pareto law, 20% of decisions and actions are of a strategic and fundamental nature.

As a result, if something goes wrong with them, they will have terrible consequences for the organization.

Therefore, managers at different organizational levels must be familiar with decision-making psychology principles and know “how not to make decisions.” They have been trained on “how to make decisions” in courses such as Decision Making and Operations Research Methods in Industrial Management and Engineering courses.

In this week’s text, citing this article in Ink, we review five simple ways to reduce the impact of mental errors on managerial decisions. Here I have integrated them in similar cases.

5 the impact of mental errors on management decisions

1- In the field of Unconscious Bias, as much as you can read and learn to recognize situations that are subject to mental errors (Thinking, Fast and Slow by Daniel Kahneman – Founder of Decision Psychology – along with Bizerman.

As I mentioned at the beginning of the post, these are the best options. Still, there is also a lot of helpful content available on the Internet, including this fascinating Wikipedia page.

2- Implement a 360-degree feedback approach in your organization so that everyone can give feedback to you and each other, thus combining different perspectives to minimize the possibility of ignoring some aspects of decisions and actions. Also, ask people you trust (inside and outside the organization) to critically and impartially review your strategic choices, not to mention that they should not be your victims; Rather, they should be knowledgeable, independent, and ruthless in their expert comments

3- Try as much as possible to make decisions based on facts and data (Facts); Not based on your inner sense (note that the latter in its place can be an important factor in decision making, but its choices are not necessarily always correct!) This requires both systems and processes for collecting and redistributing data in the organization and Creating a transparent organizational culture in which managers and other organization members are constantly exchanging ideas and data.

4 – Be careful not to fall into the trap of confirmation (Confirmation Bias); It means looking only for facts and information that confirm your opinion, decision, and action and ignoring the rest of the data.

5- Think about the people who will influence your decision or action and seek their opinion.

The above solutions may seem simple, But human science and experience have shown that the simple steps to make the right decisions and take effective action can have miraculous results.