No business leader is perfect, but when making the most impactful decisions for a company’s future, these leaders are expected to exercise all manner of caution, preparedness, and critical thinking possible for the future of its stakeholders and employees. As a result, proficient decision-making skills are becoming increasingly important nowadays, and given Omicron’s adverse effect on the labor market, these choices will naturally become progressively heavier as uncertainty and volatility increase.
However, one common shortfall shared by many entrepreneurs today is the issue of the “anchoring effect,” wherein most people practice the cognitive bias of placing too much importance on whichever piece of information is presented to them first. And while it may not appear like the biggest of problems at face value, it can severely harm careful deliberation and discussion on business development, increasing the likelihood of inefficiencies and exposure to risk.
Failure to See the Bigger Picture
While mileage can vary from industry to industry, these “anchors” are what cause business leaders to fail in seeing the bigger picture and accounting for external threats that are present in the business environment. You see, businesses can no longer afford to adjust only to their immediate surroundings but must consider the influence of larger, cascading trends that cause shifts in emerging demand and create economic disruptions. Specifically, these biases increase (1) the risk of a narrow-minded perspective and (2) the risk of errors and unethical behavior going undetected.
- Risk Of A Narrow-Minded Perspective: Being open to different perspectives and understanding the professional opinion of other business partners are key practices in becoming a successful entrepreneur. However, when a business leader uses the initial information presented as a standard for all subsequent decisions to be made, the underlying value of subsequent data may be overlooked and given unfair treatment. For example, while Meta’s current performance is less than desirable, past performance isn’t always indicative of future value, meaning that opportunities for growth and momentum must not be approached lightly.
- Errors And Unethical Behavior Go Undetected: Apart from the risks of a narrow-minded perspective employed in business decisions, the “anchoring effect” is also followed by the risks of errors and unethical behavior going under the radar. Often, when business leaders place too much focus on a single specific business function, these create gaps in adjacent core operations and lead to weaknesses in the internal system. As a result, bad actors and people with ulterior motives may use the opportunity to exploit hard work and introduce errors into the information system.
Always Seek to Expand Your Understanding
Nevertheless, despite the many risks associated with cognitive biases in business decision-making, when business leaders emphasize the core component of expanding their understanding, it’s not impossible to overcome this challenge. Namely, we recommend that leaders uphold the concepts of (1) never being afraid to go into further detail, (2) surrounding themselves with a good and passionate team, and (3) encouraging feedback and extra questions from constituents.
- Never Be Afraid To Go Into Detail: Although going into extra detail with every talking point brought up in a meeting can create time constraints, a comprehensive grasp on all related factors can improve the delivery and finalization of any business plan. In fact, it’s always the smallest of details that lead to eureka moments, and if speed causes you to stumble over potential areas for innovation, then taking your time should be the priority.
- Surround Yourself With A Good Team: Successful businesses aren’t built by the vision of one person but are founded by collaborative input and teamwork exercised by every employee across all levels of management. For example, it’s the combined network of industry professionals that enables solutions providers such as Bannersolutions.com to commit to same-day delivery and robust inventory management. And when preparing your company for its next milestone, you can’t achieve sustainable progress without the right people beside you.
- Encourage Feedback And Questions: Last but not least, to enrich your perspectives and add different points of argument in the decision-making process, business leaders must encourage feedback and extra questions from their team members and employees. At the end of the day, there’s only so much a select group of people can brainstorm regarding a company’s future roadmap, so hearing what everyone else in the firm has to say can help reach a better consensus.
Circumstances can change drastically over time, and no matter how skillful you are in decision-making, there will be moments of weakness when “anchors” prevent you from approaching problems with an unbiased outlook. Therefore, always challenge your perspective as a business leader and think of the bigger picture before following through with any decision that was summarized haphazardly.