HC3031 - Managerial Biases in Global Business Decision-Making: Trends

This presentation aims to raise awareness about common biases in managerial decision-making and their impact on organizations. It defines decision-making as the process of selecting an option from alternatives, highlighting its reliance on mindfulness and analytical thinking. The presentation categorizes biases into ability, information, and escalation of commitment types, detailing sub-biases such as overconfidence, hindsight, availability, confirmation, and anchoring biases. It further discusses the negative impacts of biased decision-making, including incorrect hiring, performance evaluation, and succession planning. The presentation suggests strategies to overcome biases, such as utilizing a proper procedure, challenging the status quo, seeking multiple opinions, and practicing reflection. It concludes that effective managerial decisions rely on critical and analytical thinking, and organizations should strive to minimize biases in their decision-making processes.

Biases in
Decision-
Making
Managerial decision-making:
Being a Trend in Global
Business
Student Details:

2
Purpose of the
presentation
 The purpose of this presentation is to
create awareness on common biases
within managerial decision-making
process.
 Post creating awareness of common
biases and their impact on
organizations, we will discuss
measures to overcome them
considerably.

3
Purpose of the
presentation
 Identify common biases which impact
manager’s thinking and DM
 Understand how it matters for
organizations
 Learn to overcome common biases for
making better decisions

4
What is decision-making
(DM)
 For managers, decision is the process by
which they can choose one option out of
many other alternatives.
 Thus, DM is the process of:
 Finding a problem
 Allocating weights to the decision criteria
 Analysing and selecting an option to resolve
 Implementation of the selected alternative
 DM is a mind oriented activity which
requires mindfulness and analytical thinking
to make decisions in any situation.

5
Common biases (CB)
 CBs are decisions or prejudices which are
not really balanced and fair to all.
 Tendency of believing or seeking out info
for preserving self opinions and beliefs
 CB is a gap amid how one reason and
how they should have reason
 CBs causes managers to make incorrect
or bad decisions

6
Types of CBs
 Majorly, there are three
Types of CBs:
 Ability type bias
 Information type bias
 Escalation of commitment
bias

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Types of CBs
 Ability type bias: this bias is further
segmented into overconfidence and
Hindsight bias.
 Ability bias occurs when managers are
given factual queries as well as asked to
judge the likeliness of the correctness of
the answers, and the managers tend to
be far too optimistic.

8
Types of CBs
 Information type bias are sub-categorized into
three common types of biases:
 Availability bias: managers rely on knowledge
readily available than finding other alternatives
 Confirmation bias: managers believe what they
want to believe while favouring info which
confirms pre-existing preconceptions
 Anchoring bias: managers influenced through
info which is already known.

9
Impacts of bias oriented
DM
 Incorrect hiring and recruitments
 Incorrect performance evaluation
 Affected succession planning and
promotions
 Building low-performing teams

10
How to overcome bias
issues
 Utilise a proper procedure
 Begin with a clean picture
 Always challenge the status quo
 Always seek multi opinions
 Always look for more info & relevant
data
 Try practice reflection on own views and
values

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How to overcome bias
issues

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Summary
 Managerial decisions are not based on
optimization functions rather on
decisions
 Managers should practice critical
decision-making and analytical thinking.
 An organization should work to reduce
common biases from DM processes
 Without CBs, managers can take right
and effective decisions.

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References
Business Development Bank of Canada, 2018. Top 7 decision-making tips for managers.
[Online] Available at: https://www.bdc.ca/en/articles-tools/entrepreneurial-skills/be-
effective-leader/pages/7-decision-making-tips-managers.aspx.
Ferrell, O.C. & Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. UK:
Nelson Education.
Greco, S., Figueira, J. & Ehrgott, M., 2016. Multiple criteria decision analysis. New York:
Springer.
Ingram, D., 2019. What Are the Steps in the Decision-Making Process of a Manager?
[Online] Available at: https://smallbusiness.chron.com/steps-decisionmaking-process-
manager-10601.html.
Llopis, G., 2013. 6 Reasons Leaders Make Bad Decisions. [Online] Available at:
https://www.forbes.com/sites/glennllopis/2013/05/28/6-reasons-leaders-make-bad-
decisions/#57430b2b2b9f.
Luhmann, N., 2018. Organization and decision. London: Cambridge University Press.