Psychological Barriers to Effective Decision-Making

Psychological Barriers to Effective Decision-Making

Discuss the various Psychological barriers to effective decision-making.

The process of making decision is entirely complex in nature since it entails psychological, social and emotional components. For effective communication to be realized one should accurately define and understand the problem at hand and the process of making this decision is interdisciplinary in nature that it involves applying social psychology, group dynamics, and management theory. Cognitive biases in most cases however cause enormous challenges in making effective decisions since they are hidden difficulties, they are often subconscious.

Research particularly in the field of psychology have shown that human beings are inherently weak when it come to making complex plans and choices in situations with a variety of sources of risks and uncertainty. Our reliance on gut feelings always leads us in making mistakes, we tend to stick to our guts since it's our nature and seize something that initial looked good to us and hold to it irrespective of the amounting negative evidence attributed to it, most of the time we are over-ready to justify our own past decisions and always seeking evidence to support the judgments we made rather than critique it.

This false optimism keeps us functioning despite the recognized reality that most projects fail and in the end we end up doing bad business. (Andrew .t.c. et al. 2010)

The common barriers include: personal confidence, confimation bias, the "sunk cost trap," and the "recency effect."

Personal overconfidency: personal overconfidence often causes poor judgment and most of the time resulting in poor decisions often high risk decisions by downplaying the negative factors.

Overconfidence mostly leads managers not to give sufficient importance to others whose opinion may differ from their own, this kind of barrier is predominant to people who are high performers and are highly self-confident.

To overcome this however it's advisable than when managers are negotiating for contacts they propose a review of contracts to be done by their supervisors or members of their group, but caution should be taken since groups may be also prone to overconfidence trap by being mostly dependant on their own assessments of the situation .

Confirmation bias: this kind of barrier comes into light when individuals have to justify their decisions to those of other people, this leads them to entirely rely on the information which is consistent with their existing views and supporting their well taken decisions and ignoring any contracting view to their views (Raymond s.n1998).this often occurs when a manager for instant of an organization has an excellent history of performing quality and good work, the manager may feel overconfident in his ability to fulfill a contract to supply a new or different type of service or goods because of this excellent history, cordial working relationships to some extent may also lead to confirmation bias.

This defect is often unconscious and most people are often not aware that they are doing so, thus it's encouraged that a group decision making and listening to advice of others reduces the possibility of this kind of barrier to occur.

The sunk cost trap: in many cases a lot of resources are invested to a particular project which at times turns out to be fruitless, many people in decision making positions tend to think that with a little increase in finances words the project, time and effort they can be able to salvage a rather expensive project which has proven beyond doubt fruitless, this tendency to escalate commitment to a course of action in which a lot of investment has been done is what I known as the sank cost trap.

This often leads to unproductive excises of literally throwing money to bad ideas in an unending effort to see that the project succeeds, thus making people to think and pay more intention on the money and time and effort already spent rather than how the additional resources can be spent more profitably.

The recency effect: most manager at times have an overreliance on the most readily available information to make decisions, it commonly occurs when carrying out annual performance evaluations of employees where recent performance of the employees plays a major role than accomplishments that have taken place in the earlier periods of review, this has an adverse effect has it may lead to the deviation of the set desired goals. (John k.bochardt 2010)

Anchoring bias: in most cases the price tags on products often if not always affect the purchasing negations between consumers and retailers, and most of the time consumer's end up paying higher prices for the product than necessary. This notion that sometimes leads us to allow initial reference point to distort our estimates is what professor Roberto refers to anchoring bias.

From a marketing point-of-view anchoring bias can come about when negotiating the renewal of a contract with either an advertising company or negotiating a new contract.anchouring bias occurs through the use of previous contractual terms as the reference point when negotiating for a new contract. By unconsciously using anchoring bias the marketer may contract and pay for services which are not profitable for the company

Illusory correlations: "illusory correlation refers to the fact that we sometimes jump to conclusion about the relationship between two variables when no relationships exist." Professor Roberto observes. For instant when managers hire potential workers placing too much weight on the candidates verbal presentation skills believing that there is a strong correlation of these skills with the ones require to perfume the job effectively, thus this illusory correlation may eventually lead to hiring non-performers who present themselves in an excellent manner verbally.