Thursday, March 19, 2009

Leaders Fall Into Seven Decision-Making Traps

GolfSandTrapj0231687 If you had all the time and money in the world to put forth a maximum effort whenever you had a decision to make, do you think you could make accurate decisions? Many leaders say yes. But that’s the problem with decisions, isn’t it? You don’t have all the time or money in the world. Research says that when you decide how to address any issue, you are subconsciously weighing a trade-off between effort and accuracy. (1) This trade-off between effort and accuracy leads to what Professor Hammond and his colleagues call, “the hidden traps in decision-making.” (2) Like sand traps to a golfer, these decision traps can bog you down and keep you from achieving your goal – an excellent decision.

This blog identifies the most common traps leaders fall into. Subsequent entries will discuss them in more detail, and how you can use the eXpansive Leadership Model (XLM) to avoid these traps and improve your day-to-day decision-making.

1. Anchoring Trap – The inclination to give a disproportionate weight to the first information we receive.

2. Status Quo - The tendency to stick to the status quo, to leave well enough alone and go with the flow.

3. Sunk Costs - The predisposition to continue an endeavor once an investment in money, effort, or time has been made.

4. Framing Trap – The propensity to be influenced by different reference points (i.e., frames)

5. False Assumptions – The proclivity to assume something is true without evidence to support it.

6. Missed Signals – The penchant to ignore warning signs.

7. Competition Trap – The urge to win during a competitive challenge that blinds leaders to reality.

The product was called Strategy - an interactive CD-ROM that automated medical marketing. I spent two years and a truckload of money creating and marketing this innovative product. It failed miserably because I fell victim to these traps. (I'm still convinced it would have been a bestseller... if more people bought it! :-) My early profit projections were based on optimistic market penetration, thus subjecting me to the perils of the anchoring trap. The status quo trap reared its ugly head when I refused to kill the project when I realized the project was in deep trouble. Sunk costs almost buried me because my ego encouraged me to throw good money after bad. I fell into the framing trap by comparing my losses to the many Silicon Valley entrepreneurs who were struggling. I also made a number of false assumptions, including the belief that users would spend time entering data and that physicians cared about marketing. Finally, I missed many signals, including hints from colleagues in the medicine who were not enthusiastic about my product.

Just like a sand trap in golf, these decision traps are hazards to be avoided. Future blogs will show you how to use the XLM to shoot past them.

Keep on eXpanding,


1. John W. Payne, James R. Bettman, and, Eric J. Johnson, The Adaptive Decision Maker, Cambridge University Press, New York, New York, 1993, page 2.

2. John S. Hammond, Ralph L. Keeney, and Howard Raiffa; The Hidden Traps in Decision-Making, Harvard Business Review, January 2006, pages 118 -- 126.

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