LSE Module 8 Unit 3: Accounting for Managers and Cognitive Biases

This assignment explores the impact of cognitive biases on managerial decision-making within the context of accounting. The student identifies and analyzes two key biases: hindsight bias, where past events are perceived as more predictable than they were, and confirmation bias, where indiv...Read More

Running head: ACCOUNTING FOR MANAGERS 1
Accounting for Managers
Student’s Name
Institutional Affiliation
Question 1

ACCOUNTING FOR MANAGERS 2
Cognitive bias affects the way an individual makes judgemental decisions. I believe
that I am affected by Hindsight bias. As a manager, I have a tendency of seeing the event to
be more predictable once they have already occurred (Murata, Nakamura, & Karwowski,
2015). It is hard to predict the outcome of an occurrence before it happens. There is no way
of knowing the result before an event occurs. There are times when I give my subordinate
work, but when they fail to perform as expected or the outcome of a project is poor, I usually
tend to believe that I knew this is going to happen. According to research, Hindsight bias
affects human beings because they tend to distort their original predictions. Besides, many
people tend to view outcomes as inevitable and make an assumption of their ability to foresee
the future (Anderson, 2018).
Question 2
As a manager, I always want to give my best while working so that the outcome could
one of the best as compared to the rest of the teams. However, I am prone to be affected by
Confirmation Bias. This could be the case since I tend to trust only that set of data or
information that confirms my preconceptions (Althubaiti, 2016). As a result, I could end up
ignoring or even dismissing relevant information from my peers or research that completely
disagrees with my own idea. For instance, I may be given a project of determining the best
investment decision for the company. However, because of my preconceived mindset, I
might end up ignoring the most factual and valid investment idea while trying to confirm my
pre-conceived idea (Jain, Jain, & Jain, 2015). If the research proves otherwise, I might be
forced to find other sources of information that would prove my preconception as the best
move for the company.
Question 3

ACCOUNTING FOR MANAGERS 3
Debiasing techniques can be described to be attempts aimed at reducing the influence
of cognitive biases on people to help them think rationally and optimally (Sibbald, Sherbino,
Ilgen, Zwaan, Blissett, Monteiro, & Norman, 2018). Increasing personal accountability is the
technique that I will use to curb confirmation bias. Understanding that I would be held
accountable for any given decision that I make and that it could be subjected to scrutinization,
I will ensure that the choices I make have adequate proof regardless of my preconceptions.
For hindsight bias, I will consider using simple explanations instead of complex ones
(Correia, 2018). This Debiasing technique utilizes the overkill effect in that people prefer
simple explanations to complex ones. Using these techniques will improve my judgment and
decision-making process since they will get rid of all the cognitive biases.
References

ACCOUNTING FOR MANAGERS 4
Althubaiti, A. (2016). Information bias in health research: definition, pitfalls, and adjustment
methods. Journal of multidisciplinary healthcare, 9, 211.
Anderson, K. L. (2018). The Effects of Hindsight Bias and Experience on Auditors'
Judgments Involving Clients with Going-Concern Issues. International Research
Journal of Applied Finance, 9(8), 364-373.
Correia, V. (2018). Contextual debiasing and critical thinking: Reasons for
optimism. Topoi, 37(1), 103-111.
Jain, R., Jain, P., & Jain, C. (2015). Behavioral biases in the decision making of individual
investors. IUP Journal of Management Research, 14(3), 7.
Murata, A., Nakamura, T., & Karwowski, W. (2015). Influence of cognitive biases in
distorting decision making and leading to critical unfavorable incidents. Safety, 1(1),
44-58.
Sibbald, M., Sherbino, J., Ilgen, J. S., Zwaan, L., Blissett, S., Monteiro, S., & Norman, G.
(2018). Debiasing versus knowledge retrieval checklists to reduce diagnostic error in
ECG interpretation. Advances in Health Sciences Education, 1-14.