Tottenham Report: Hush? What’s that sound? Is it noise or is it bias?

March 21, 2023 10:00 PM

Tottenham Report: Hush? What’s that sound? Is it noise or is it bias?

Photo: Shutterstock
  • Andrew Tottenham — Managing Director, Tottenham & Co
March 21, 2023 10:00 PM
  • Andrew Tottenham — Managing Director, Tottenham & Co

In a previous commentary, I wrote about how noise and bias can affect decision making in an organisation. In this post, I explore it further and provide ideas to help reduce the impact of both. 

To recap, “noise” refers to randomness in judgments or decisions that can arise, even when the same people making the decision are presented with the same information on multiple occasions. This variability can arise due to factors such as mood, distractions, fatigue, and not inconsequentially the order in which information is presented. Noise can result in inconsistent decisions that do not align with the decision makers’ or the organisation’s values or goals.  

“Bias,” on the other hand, refers to systematic variations from rational decision making or from the ideal decision maker. Bias can arise for many reasons: mental shortcuts, biases in the data collected, interpretation of the data, or even organisational pressures.  

The difference between noise and bias can be easily explained using an analogy. 

A person is given a rifle and is asked to shoot multiple times at a target, aiming for the bullseye. If the resulting holes in the target are all over the place, that would be noise. But if the holes are in one particular area of the target, for example, all near the 7 o’clock position, that would be bias. 

How do we get noise out of the system? A number of methods can reduce the clamor.  

Standardising the decision-making processes with clear and consistent pathways helps. This could include using decision-making frameworks, checklists, and other tools to ensure that decisions are based on relevant information and criteria. 

We can also use data to inform decisions. It is surprising how many organisations do not. The proper use of data can reduce the impact of noise on subjective judgments.  

Decision-making processes can be rendered more transparent and decision makers can be held accountable for their decisions. Decide what would be a successful outcome ahead of time and track the outcome to evaluate the effectiveness of that decision. 

Diverse perspectives and expertise can be involved in decision making. This could involve creating cross-functional teams, seeking input from external experts, and encouraging diverse viewpoints within the organisation. 

Finally, decision makers can be trained on how to recognise and avoid sources of noise. This can involve providing decision makers with feedback on their decisions, as well as opportunities for training and development. 

To reduce the impact of bias, an organisation can use similar methods.  

One of the most difficult biases to reduce is “groupthink” and is more prevalent than is generally known. I am sure many of us have encountered products or seen investment decisions and wondered, “Who on earth thought that was a good idea?” The Sinclair C5 comes to mind – google it! 

For example, a senior team comes together to discuss an investment in a new product. The marketing team appears to be very enthusiastic about it and champions the idea. The CFO, on the other hand, is not convinced, believing that many other companies are moving into this area and will dilute the opportunity; the proposed investment could be put to better use elsewhere in the organisation. The marketing team and CEO view the CFO as typically staid, conservative, and risk averse and immediately discount her contribution to the discussion. 

The bias here is that of typecasting. The CFO believes, possibly not unreasonably, that she will be typecast in the role of the project nixer; as soon as she opens her mouth, the rest of the room will roll their eyes. For her part, the CFO is typecasting the others in the room, assuming that the marketing team are a bunch of risk takers and will be opposed to any view that says that not spending money on this is a better idea. 

The CFO changes her behaviour accordingly. 

This is “role theory”, a concept in psychology that says that most people see themselves and others according to certain defined roles, for example, as a teacher, manager, of financial officer. They adopt the behaviour associated with that role and expect their colleagues to do likewise. 

In this example, the CEO is strong-willed and believes he is open to new ideas and will listen to opposing views. In reality, he has already made up his mind and will close down the discussion (we have all met them). The result is that the team comes down heavily on the side of the investment and no other viewpoints or alternatives are truly considered. 

What can be done to improve this situation? Needless to say, the CEO needs to create a safe space where ideas and counterpoints can be openly discussed, where people are willing to put their “heads above the parapet”.  

The other thing that could be done is to implement a process around decision making. Part of that process should include the question, “What do we have to believe for this to be a sensible decision?” This necessitates an analysis that could include a wider fact base and counter positions.  

Creating a process does something else. The process in and of itself creates that safe space where people can be open about their opinions, without thinking that airing them could be a career-limiting move.  

The most obvious way to reduce the impact of bias is to raise awareness of the different types of bias that can impact decision making: confirmation, availability, and anchoring biases, among others. 

As with noise, use a structured decision-making process, including using decision-making frameworks, checklists, and other tools to ensure that decisions are based on relevant information and criteria, and not influenced by bias. 

Use data! Collect it and analyse it. Make sure it is relevant and what is collected is not biased.  

Involve diverse perspectives and expertise in decision making; create cross-functional teams, seek input from external experts, and encourage diverse viewpoints within the organisation. Do not shut down discussion. 

Encourage dissenting opinions. Dissent and constructive criticism can reduce the impact of groupthink and confirmation bias.  

Monitor and evaluate decisions. This enables you to identify and correct biases that may have influenced decisions.  

We are all human; we see the world through our own eyes and whether we like it or not, we are all biased. 

Overall, reducing the impact of bias in decision making requires a combination of process improvements, data-driven decision making, diversity and inclusivity, dissenting opinions, and monitoring and evaluation. By taking these steps, businesses can make more objective and informed decisions that lead to improved outcomes.