Confirmation bias is a concept that is part of normal human psychology. Without discipline of thought and offsetting processes, it can result in reduced organizational acuity in areas that are critical to growth. As a strategist, understanding this topic is essential, because this is one of the few areas where you may need to facilitate an uncomfortable “come to Jesus moment” with senior leaders at some point in your career.
Simplest explanation: It’s like your nose. You see it all the time, and your brain stops noticing it. The second you’re aware that you’re doing this, you notice it again. In the mean time, we just assume it’s still attached to our face.
Confirmation bias is the process by which we seek to confirm our beliefs. Sometimes we want something to be true so badly that we just make it so! Once we have locked onto a belief or assumption, we look for similarly affirmative information and begin to ignore anything that conflicts. In a business context, leaders are always at risk of ignoring information that conflicts with their beliefs, especially when performance is tied to their identity. Because of this, none of us perceive the world entirely objectively; this occurs because of the influence that our desires have on our beliefs.
One of the most pronounced examples I have seen involved an organization that operated in a market with high barriers to entry, that was not well versed in metrics outside financials. The dominant belief was that the organization was nothing short of phenomenal in almost every sense, even though there was very little data to support that view. When new metrics were employed that showed (in great clarity) that the customer base was significantly dissatisfied in many areas, about half of the team dismissed the results as being not true and deleted the metrics from the corporate scorecard. The more you understand risks, the more easily they can be tamed.
Here are some “red flag” examples:
– When there’s a prevailing belief that you are not vulnerable to plausible risks
– Carrying forward past achievements like they’re current
– When beliefs about competitive advantage is not supported by data
– When corporate measurement is not balanced, and tied to strategic objectives
– When plausible future market risks are discounted because of past experiences
The reason you should care about this is because we all do it! At best, this poses a small risk that a current strength receives less focus than something else you believe to be more salient. At worst, this becomes a form of cultural self-deception that could allow risks to emerge at a level where your organization cannot recover.
How do we avoid the negative effects of this natural tendency? Being aware of it is the most important first step, because you’re now aware that your assumptions are to some extent biased and inaccurate. Beyond that, it’s really about processes and data. The reason we engineer organizational processes is to drive human behaviors that aren’t naturally occurring. Some ideas:
1) Build and schedule processes that draw attention to the things that your team doesn’t naturally have time to do (like discussing risks, doing analysis on available data, talking about what it means to your business)
2) Understand the measurement methodologies to the extent where you know what results really mean, not just to the point where you can rattle off the numbers
3) Don’t dismiss things that conflict with your views, give yourself a tap on the shoulder when you feel that tendency
4) Use current planning frameworks and processes
5) Explicitly validate strategic assumptions with the senior group, like a sanity check, as the basis for your strategic plan
6) Get comfortable with leading indicators. Yes, financials are super important. No, they aren’t enough to understand what’s really going on with your business.