In this third article in our series on effective decision making, we explore decision making errors. In our first two articles, we looked at heuristics, the mental tricks we use to filter the huge amount of information that we are bombarded with each day, and biases, preferences that we display in our choices that deviate from what might, with perfect knowledge, seem optimal. In this article, we examine the errors that can occur in our decision processes either because of these biases or from other sources. Understanding our mistakes is vital if we want to reduce the number of them, prevent recurrences, and learn.
“Effective decision processes aren’t just about preventing errors. They are about understanding errors, knowing how to react, and how to learn when the inevitable mistakes do happen.”
As with heuristics and biases, errors are often misunderstood. There are two common misconceptions. The first is that effective decision making is all about avoiding errors. In theory, that is fine but in practice it is not always possible; situations change, and our cognitive processes have limitations. In many cases prevention is not possible. In some cases it is not even desirable; if we never make mistakes, we cannot learn. Effective decision making does entail trying to reduce the number of mistakes we make but it also involves knowing how to react and what actions to take when they do happen.
The second common misunderstanding is the belief that all errors are bad. This leads to a fear of failure and a tendency to create narratives to explain mistakes away. It an organisation, it can also lead to a blame culture that eats away at trust. The truth is that not all errors are bad. Some are down to plain bad luck and some can even be positive, if they result from controlled experimentation in the pursuit of innovation or discovery.
We can and should, however, try to reduce the number of damaging errors we make and to ensure that we do not repeat the preventable ones. To do this, we must really understand errors. If we do not try to understand the mistakes we make and how they came about, we cannot hope to learn from them.
The first step in managing errors is to identify the type of error we are dealing with. Amy Edmondson, in her book The Fearless Organisation (2018), provides a useful framework of three types of mistake:
Preventable errors are the mistakes that are made when someone has not followed an approved process. These are the errors that we must try to eliminate.
Complex or process errors occur when someone has correctly followed an incorrect process or where a correct process has been followed but an extraneous factor (either a temporary one or a permanent change) has rendered the process ineffective. These are hard to anticipate and therefore difficult to prevent. The primary goal should be to learn from them and improve or adapt processes accordingly.
Intelligent failure is where a calculated gamble in the pursuit of innovation or improvement does not pay off. Far from being avoidable, these errors should be welcomed and celebrated as an opportunity to learn and grow.
The golden rule for dealing with any type of error is not to stigmatise it. If people fear retribution, they will attempt to resolve mistakes themselves, or worse, hide them. Self-resolution is not ideal, other than for the simplest slip. Many mistakes happen when we are operating sub-consciously, using what Daniel Kahneman (2011) describes as “System 1”, the fast, intuitive part of our brain. It is quick but it can also be imprecise. What is generally required when something goes wrong, is our more deliberate and analytical “System 2”. However, fear of being blamed or castigated for making a mistake is guaranteed to trigger the fight, flight, or freeze response that puts us straight back into System 1, where we are exposed to all the biases and preferences that can lead to further bad decisions.
“There are three key steps in error resolution: Breathe, reframe the issue towards finding a solution, and then learn so that it doesn’t happen again.”
The first step with any error resolution is, therefore, to pause for breath, gather our thoughts, and ensure that that the situation is stable and under control. If people are rushing around and not communicating, further errors are likely to ensue. Indeed, most of the major corporate disasters of the past thirty or forty years have come about from small mistakes that have escalated when people tried to hide them and then compounded them with further poor decisions.
The second step is to reframe the conversation towards finding a solution rather than looking to blame someone. Once everyone is focussed on achieving the best outcome, things can move forward.
The third step depends on the type of error. Preventable errors come about because people were unaware of a process, lacked the skills to execute a task properly, or were distracted by something else. To resolve these mistakes, we must first identify the behaviours that led to the mistake, then try to educate the relevant people. Education and prevention of recurrence should be the primary goals, learning from an error in one part of an organisation can prevent it happening elsewhere. However, if there are repeated offences, sanctions may be necessary.
With complex or process errors, the most important thing is to remove any hint of personal blame. If the process is faulty then it is the process that needs to change not the operator. Building better processes must be a collective effort because if someone unilaterally makes a change, others will not understand or will not be committed to the new process and further errors may result. It is also vital to understand the context of the error. It may be that the process was not faulty at all, but the context shifted or there was an unexpected external stimulus. If these can be identified, the process does not need to be changed and all that may be needed is reassurance that the existing process is sound.
Finally, there are intelligent errors, the ones that result from a controlled experiment in the pursuit of innovation or improvement. We should celebrate these as learning opportunities but also to demonstrate that the courage to try something new is an important part of growth.
Why then, do people and organisations continue to make the same mistakes time and time again? Part of the problem is what we refer to as the great paradox of decision making: There is a simple cognitive bias that prevents us from correcting our cognitive biases. It is called the “outcome bias”. The outcome bias states that we tend to judge the quality of a decision based on its outcome alone. This is problematic because good decision processes do not always deliver good outcomes and bad decision processes don’t always lead to bad outcomes. Sometimes good processes deliver bad outcomes, and bad processes can deliver good outcomes. This may be a result of a situation change or just down to luck.
When we evaluate a decision on the outcome, rather than the process, we may end up discarding good processes that delivered bad outcomes and keep bad processes that delivered good outcomes. We do not learn from our mistakes, and that prevents us from improving our decision-making processes. It is therefore vital that we use the framework outlined above to categorise errors and understand where the mistake originated before we make any assumption about the process.
In our next article we will look at how we can reduce errors and make better decisions. We will look at techniques to mitigate the key drivers of faulty decision making, which are information overload, uncertainty, and conflict. We will examine individual decision making, where heuristics and biases play such an important part; competitive decisions, where two or more decision makers may be operating with incompatible interests and imperfect information, and we will look at collective decisions where social preferences and group dynamics are major factors.
Edmondson, Amy C. 2018. The Fearless Organization. Vol. 7. Wiley.
Kahneman, Daniel. 2011. Thinking Fast and Thinking Slow. Farrar, Strauss and Giroux, New York, NY.
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