Decision making is a critical function in our personal and professional lives. None of us would be in positions of authority without demonstrated abilities to discern issues and make good choices. Our reputations and livelihoods depend on it.

Each day, however, intelligent people make mistakes, with devastating consequences. Why do good leaders make bad decisions? How can we reduce our margin of error?

Our daily decisions are generally small and innocuous. Others are incredibly important, affecting people’s lives and well-being. The daunting reality is that smart people make enormously important decisions with the best information and intentions, and they sometimes go terribly wrong.

Even great leaders make bad decisions:

• President Kennedy is famous for the Bay of Pigs blunder.

• President Hoover failed to inflate the economy after the Wall Street Crash of 1929.

Authors Sydney Finkelstein, Jo Whitehead and Andrew Campbell have studied how smart leaders make catastrophic decisions. In Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You (Harvard Business School Press, 2008), these experts show how the brain’s thinking processes can distort judgment. Think Again identifies four errors of thinking and four safeguards to help us avoid bad decisions.

Neuroscientists and experts in decision making now understand more about how the brain works and how we are prone to several types of faulty thinking when faced with a set of circumstances that require a decision.

The brain uses two processes that enable us to cope with complexities:

• Pattern recognition

• Emotional tagging

Both help us make excellent decisions most of the time. They have survived evolutionary selection precisely because they give us distinct advantages over lesser animals in the food chain.

But in certain conditions, these processes can mislead us, resulting in poor judgments and bad decisions.

Complex decisions always involve personal interpretations and judgment. That’s what makes them difficult to get right. You need debate and consensus — but even with both, two important questions arise:

1. How do you know when you or those debating your premise are coming from a biased position?
2. How do you know when your consensus is nothing more than groupthink?

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The complete 2,000 word article includes these important concepts:

Flaws of Decision Making
Old-School Decision Processes
The Brain Science of Decision Making
Pattern-Recognition Flaws
Emotional Tagging
Safeguards
Identify Biases and Implement Safeguards

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The Brain Science of Bad Decisions June09- 2000 word Article

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Before making an important decision, prudent managers evaluate the situations confronting them — and often fall into one of the eight traps of faulty thinking.

Some managers are too optimistic and overconfident: They overestimate success and underestimate the range of potential outcomes. On the flipside, other managers are cautious to a fault: They take costly steps to defend against unlikely outcomes.

These are just two of the well-documented psychological traps that ensnare most managers at some point in their careers. Other pitfalls that distort our reasoning abilities and cater to our biases are identified:

• We have a tendency to stick with the status quo.
• We only look for evidence that confirms our preferences.
• We are likely to throw good money after bad to defend our position and avoid admitting a mistake.

The way a problem is framed can influence how you develop solutions. To avoid this trap, you need to reframe the question in various ways to see how your thinking may change based on each version.

We can’t always avoid the distortions ingrained in the way our minds work, but we can build in tests to make our decision-making processes more reliable, thus improving the quality of the choices we make.

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This is a brief synopsis of a 2000 word article suitable for consultants’ newsletters for executives and leaders in organizations. It is available for purchase with full reprint rights, which means you may put your name on it and use it in your newsletters, blogs or other marketing materials. You may also modify it and add your personal experiences.

There are two versions of this article: 2000 words and 1000 words (approximate word counts). The full article covers the following sub-topics:

The Brain Science of Decisions
The 8 Traps:
The Anchoring Trap
The Status-Quo Trap
The Sunk-Cost Trap
The Confirming-Evidence Trap
The Framing Trap
The Estimating and Forecasting Traps:
The Overconfidence Trap
The Prudence Trap
The “Recallability” Trap
There Are No “No-Brainers”

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All word lengths are approximate.