It’s assumed that strategic decisions are rationally derived, well considered, and calculated on the odds of succeeding. However, psychological factors can greatly influence and impair the way decisions are made.

Behavioral research confirms that when making decisions, human beings can appear shortsighted, self-interested, or even optimistic to a fault, and that human bias often impedes objective judgment. In any organization, individuals or groups may drift toward biases, and can engage in power struggles, hidden agendas and personality clashes that result in poor decision-making.

Not all behavior is intentional and people aren’t necessarily cognizant of their biases. Likewise, an organization may have inadvertently fostered a cultural environment that’s non-conducive to the art of decision-making.

Organizations must learn to recognize the human elements that interfere with successful decision-making and address behavioral economics with effective procedures. In doing so, companies can strengthen their guard against disastrous outcomes.

Recognize the signs, manage the process 
There are several conditions that can create turmoil or interfere with an organization’s decision-making process. Here are the two most common culprits.

• Silence is not golden. “Don’t rock the boat” is a common mantra within the workforce and many workers are reluctant to speak up, particularly if their input is contrary. A domineering leadership style can be intimidating, or the organization may have a history of rebuking such individuals in the past, further discouraging opportunity for dissent.

Additionally, people tend to trust higher-ranking superiors and will defer to them during decision-making. Managers in a team-based culture may naturally feel compelled to go along with a dominant leader’s ideas. They may do so out of respect for their positions, their reputations, or their presumed knowledge, though a higher-up isn’t necessarily privy to more insights than frontline subordinates.

No organization wants to arrive at a strategy through false consensus, and suppression of contentious views is a sure way to reach a disastrous decision. Companies must invite dissent, seek out contrary views, encourage examination, and promote provocative questioning.

• Misaligned agendas. Managers often put forth proposals, many which can elevate their own interests or those of their departments, particularly in the short-term. When executives trust the “proposers” and colleagues respect them, they may be overly optimistic and quick to approve of proposals without properly weighing the risks. 

Decision-makers might also seek out only those people and facts that will strongly validate the proposed strategy. Such underlying biases are typically unintentional. People naturally gravitate to ideas that reinforce their assumptions and are quick to accept favorable evidence.

Therefore, it’s important to foster a culture of healthy skeptics who can realistically challenge proposals. Separate proposals from those who advocate them and assign them to other team members and managers to debate or support their merits. Their valuable criticism and viewpoints will help your organization prudently address risks and identify ill-fated strategies.

Count on better judgment
Long-term growth depends on sound strategy, but human nature can lead good decisions astray. By becoming aware of probable behaviors and human tendencies, leaders can work to avoid the pitfalls and make better business decisions.