08 Dec After Biases What’s Left?
Biases aren’t bad.
They help us deal with life’s complexities. They help us be patient with old people, subservient to policeman, suspicious of people in black ‘hoodies’ and more. Without them, we’d be lost in a world of complexities. Can you imagine what it’d be like having to treat each experience anew?
Biases are subtle. We don’t even realise they’re present. They are programmed in, almost to the stage that they’re hard wired. And they have helped survive from earliest Stone Age communities, through to today. A bias to action saved us from a dangerous situation in the past, say a dangerous animal in the jungle, just as it would save us from an accident as we cross the road.
From our earliest days, we have to make decisions with incomplete information. “Was that sound I heard in the bushes something that I can eat, or something that wants to eat me?” Because we have difficulty with ‘not knowing something’ the human brain fills in the gaps when information is lacking. So, we tell ourselves a story that helps us deal with our world. And this is where biases help.
“Ahah,” you say, “now we have Google, and Wikipedia, we have access to all the formation we need!” Now we suffer from information overload. And the way the brain handles this? You guessed it. Our biases come forward to help.
Some biases are bad. They guide us to make poor judgements and poor decisions. We hold back from trusting someone who wants to help us, as we’re suspicious of their intent. What do you think when your manager comes to you with an ‘opportunity’? We assume that car salespeople are going to take advantage of us. All homeless people should just go out there and get a job. And so on.
Because of our biases, we can limit ourselves in the way we act/decide, how we address change, how we adopt new ideas, how we treat other people, and even how we think about ourselves – perhaps the most dangerous of biases.
So, we need to be more ‘bias aware’.
Bias Awareness – Become a Better Person
Bias awareness makes us better communicators, salespeople, managers and team leaders, and even human beings. Bias awareness does this by helping us listen better. Bias awareness does so, by opening our mind to possibilities that we don’t know exist. Bias awareness helps us avoid going into a situation preprogrammed, with our minds already made up.
This article focuses on ‘bias awareness’. Future articles will discuss ways of improving decision making by establishing structures to use our experiences productively. Our experiences are important factors in establishing and reinforcing our biases. (Does this in part explain why older people – be gentle, I’m one – with more life experiences than younger people, appear to be more biased, even to the level of bigotry, a term you probably wouldn’t use to describe a younger person?)
Leadership and Management – A course to make you bias aware
The theme is Bias Awareness – Become a Better Person. Perhaps, the theme and the title will bias you to join us in Sydney on Leadership and Management (July 26&27), as this is just one topic on this unique and informative program. See our website for more information – www.ronpollak.com.au.
Before you read further, please don’t be turned off because I use some sales examples to help explain biases that affect us. I think you will find, as I did, that the examples are equally relevant for a whole range of other situations. So, please read on.
Five Groups of Bias
Apparently, there are dozens of biases that have been identified by behavioural economists. This article breaks them down into five groups.
The five groups are:
- Action-oriented biases
- Pattern-recognition biases
- Confirmation Bias
- Recency Bias
- Stability biases
- Loss aversion
- The sunk-cost bias
- The status-quo bias
- Interest biases
- Social biases
- Sunflower Management
Action-oriented biases are evident when we make quick decisions, sometimes because we’re overly optimistic about the outcome, and our ability to achieve them, and we don’t equally look at the down-side. Perhaps because we are over-confident.
Management often talk about the optimism bias. That’s when someone who puts forward a proposal for a project thinks it’s wonderful and everyone else should see it equally as innovative and hugely likely to be a success.
From a sales perspective, we sometimes choose to act, early in the sale, to ‘close the sale’. Sometimes this is before we have asked all the relevant questions, and uncovered all the needs.
Have you ever heard a salesperson say, “Look, you know all the detail, let’s cut to the chase?” Here, the salesperson is possibly uncertain about some details of the sale, so reverts to an area that they are comfortable; haggling over price.
Pattern-Recognition Biases cause us to fill in the gaps, when we don’t have all of information.
Here, the salesperson predicts that he’s won the sale, when the customer starts asking what the salesperson believes are non-critical questions, such as, “What colour does it come in?”
And, when a customer/prospect doesn’t call back within a reasonable timeframe (‘reasonable’ as judged by the salesperson), the salesperson projects that the customer is seeking other quotes. The salesperson starts to worry, and prepares himself to reduce the price, offers more options and so on.
In this group of biases, there’s the Confirmation Bias, where we look for evidence that supports our beliefs.
For example, the salesperson has lost a sale. He calls the customer to find out why. The customer is apologetic and says that price was the major contributor for the competitor receiving the business. Now, the salesperson is convinced that price was the most important factor, and he has corroborated in his own mind that this was indeed, the main reason that the company lost the business.
In our experience, while price is always a factor, it is rarely the real reason. If you were the customer, wouldn’t you too blame price, in anticipation that the next time around your company would be able to get a better price from your supplier?
(I don’t want to stay off the topic, but you should read my related blog on Cognitive Dissonance, http://ronpollak.com.au/called-cognitive-dissonance/.)
The Recency Bias is another confirmation bias. Recency biases occur when we put too much reliance on one’s own recent or memorable experiences.
So, if you’ve lost the last three sales ‘on price’, how do you think you’re going to go into the next sale?
Stability biases have us remain on the same course, even when circumstances change.
Anchoring is a stability bias. Let’s say, you’re trying to sell a new product with new features. The customer understands the added benefits over the product he’s been purchasing for the last five years, but refuses to pay more than he paid last time. “We’ve always paid $X. I can’t spend more!” In this example, he looks at the new item, anchored to the value/price of the product he’s experienced with.
Loss Aversion, means we worry more about the negative more than the positive arguments. So, your customer is more concerned about the fact that your ability to deliver on time and in the right quantity has a 3% failure rate, than your success in delivering exactly what the customer asks for 97% of the time.
The Sunk-Cost Bias, means we won’t give in trying to sell to a customer, because we have spent so much time into trying to make the sale. This, even when it’s obvious that the sale is lost.
The Status-Quo Bias, stops us from dealing with change. “We’ve always done things this way. If it ain’t broke don’t fix it!”
As a consultant, I often see successful businesses avoid change, even when the need for change is screaming in their face. You may have heard the fable of the frog in hot water
The Fable: The boiling frog is a parable describing a frog being slowly boiled alive. The premise is that if a frog is put suddenly into boiling water, it will jump out, but if the frog is put in tepid water which is then brought to a boil slowly, it will not perceive the danger and will be cooked to death. Boiling frog – Wikipedia https://en.wikipedia.org/wiki/Boiling_frog
Interest biases arise when the best solution for the business conflicts with the needs of the individual. So,
salespeople ‘bottom-draw’ sales to the next month, when they will achieve a better personal result. (Bottom-drawing occurs when a sale is delayed, by placing it in the bottom draw, until after the end of month/quarter/financial year.)
a customer account is given favourable treatment, because we’ve done business together for so long. In this case emotions affect the situation.
the salesperson, who works for a company that professes a high value on honesty, integrity and openness in its dealing with customers, overpromises a delivery schedule, to win a sale.
Social biases occur primarily, because we avoid conflict. We are social animals, after all. We can’t exist as a community if there is a great deal of conflict. Our predilection is ‘to go with the flow’.
Have you heard of “Groupthink”? It’s readily apparent in emergency situations. Say, you’re in a shopping centre and there’s a sudden explosion. Someone shouts, “This way,” and everyone follows.
Here’s an example for a salesperson who is trying to avoid Groupthink.
In our example, the salesperson is trying to win a new account away from a competitor that has a long-term relationship with the customer. The salesperson has won the support of the Operations Manager, who will use the product. But there are many others who will have an impact on the decision to change supplier. Are you going to rely on the user alone?
Even when you have an advocate in the customer’s management team, there’s a high likelihood that whenever the issue is raised, another from the management team will speak up to defend the existing relationship, even in spite of hard evidence. But, it’s not loyalty that’s the problem, it’s the fact that someone will speak out, and the sheep will follow.
One of the ways to circumnavigate the ‘Groupthink’ bias is to find a first follower. There’s a wonderful TED Talk from Derek Sivers, “How to Start a Movement”, that clarifies the importance of the ‘first-follower’. The first-follower is an understated leader. People follow the first follower, rather than the initiator. As Sivers says, “It’s the first-follower that turns a lone-nut (the initiator) into a leader.”
So, thinking you’ve done all you can, when you have convinced an important person in the customer’s buying group, is flawed. You are best to find a first-follower for your ‘advocate’.
In avoiding conflict too, there’s what the behaviourists call “Sunflower Management”. This is the tendency to think that management ideas are better than their own. So, we don’t speak up. It’s not our role. Perhaps this could be called, the Emperor’s New Clothes bias.
In business today, it’s hugely likely that your competition will have a product or service that is pretty close to yours. If you are the market leader, you will struggle to keep ahead for long. Apple has Samsung and HTC nipping at its heels.
It’s likely too, that your people are just as good as anyone in your industry, and if they are better, it’s not by much and it’s not for long. (People move regularly from business to business within all industries.
In the short term, those organisations that focus on making their people greater self-aware will help them succeed.
Biases are just element of our successful Leadership and Management course.