Errors and Common Biases in Decision-making

Availability Bias: Under this bias, the decision-maker makes his decisions and judgements on the basis of the information, data and facts that are freely and easily available, then it can be remembered easily which helps in decision-making.

Overconfidence Bias: This bias arises when the decision-maker is given factual data and is asked to evaluate the probability that his choice is correct. In this case, the decision-maker overestimates his accuracy and is confident about his decision.

Anchoring Bias: The manager relies on first-hand information rather than entire information. Hence, he fixes his attention on the information received first and the decision is made on the basis of this information only. The subsequent information is ignored.

Hindsight Bias: This bias makes the decision-maker believe that he had accurately anticipated the outcome, even when the outcome is known.

Representative Bias: The decision-maker assesses the probability of occurrence of an outcome by linking it with a preceding outcome.

Randomness Error Bias: Here, the decision-maker takes a decision on the basis of random thoughts, facts and information. He tries to find meaning in randomness and imaginarily links the events with superstitions.

Escalation of Commitment Bias: This the most challenging bias for a decision-maker. The decision-maker stays and continues with the decision made by him, even when there is clear evidence that it is incorrect. This is because the decision-maker feels he has devoted his efforts, time and energy in taking the decision and convinces himself that his decision is right.

Confirmation Bias: This is also personal bias where the decision-maker focuses on seeking out information that restates his decisions from the past. Similarly, if any information contradicts his preconceived notions, then such information is rejected in the first place.

Risk Aversion Bias: Many decision-makers try to play safe by not indulging in risky decision-making. They select only those course of actions where the outcome is cent per cent known. Hence, they avoid risk by preferring a certain thing over an uncertain outcome.

Indecisiveness Bias: If the manager is fearful about the outcome then he may become indecisive.

Other Bias: The nervousness of making a decision may lead to a delay in decision-making. Many managers postpone the decision-making process which leads to making decisions under stress of lack of time. This hampers thorough analysis of alternatives and may lead to a poor decision. The decision-maker sometimes focuses on the symptoms of the problem rather than the root cause. He should be capable of separating causes and their symptoms. Sometimes, the method used in analysing and quantifying the problem may also be inappropriate as per the situation.