Armchair Critic: Behavioural management in bite-sized chunks

Company decision making is rarely rational

Armchair Critic: Behavioural management in bite-sized chunks
  • Brendan Llewellyn
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PA's Armchair Critic Brendan Llewellyn looks at the concept of management bias within businesses and highlights the potential results which anyone working in an organisation may have witnessed in one form or another ...

Discussion of behavioural biases in financial services has focused on consumer biases and their tendency to produce suboptimal outcomes. Company people contrast consumer bias with their own highly professional approach.

Yet in reality company decision making is rarely purely rational; it is characterised by its own sets of biases, in other words, 'behavioural management'.

Each branch of management or each functional specialism will have its own special kinds of biases but there are some that are common to managers, or indeed any individuals in all companies.

Here's a selection ...

Types of management bias

Results of such bias
Risk aversion bias Decisions are avoided if at all possible, information is amassed until the decision point has vanished - no decisions, no mistakes
Brand bias I can't be sacked for hiring McKinsey, but I can be lauded if it goes well
Integration bias The views of senior management are sought and decisions are made on the basis of assumed congruence with such views- irrespective of the merits of the case
Informational bias Information is partial so decisions are taken based on known data, even where more important, yet unknown data might suggest a different decision
Persuasion bias Leaders or those with most ability to persuade others can drive through decisions, not always the right ones
Exception or outlier bias Undue focus on unusual or marginal business areas - displacement activity
Misdirection bias Focus on good works, create esprit de corps - distracts from the difficult stuff - sometimes known as the Derren Brown management style
Survival or self-interest bias Decisions are avoided which would isolate the manager or their team
Ambition bias Decisions or initiatives likely to create personal or departmental opportunity
Impact bias New leaders wish to make their mark, the "under new management" mantra drives change for its own sake
Externally constructed bias Quarterly capitalism - external investors exerting distinctive pressure on management to deliver shorter-term positive outcomes
Matrix bias The verticals entwine with the horizontals so obfuscation confounds  accountability and renders the external world less relevant
Competence bias Managers will propose developments or support decisions which connect well with their own competencies or preferences
Gravitational bias The gravitational/centripetal pull of the largest companies creates inward-looking culture, behaviour and decisions
Persistency bias The persistent manager, prepared to take proposals to an executive despite many knock backs can exert a disproportionate influence
Trend spotter bias or FOMO The manager over 30 cannot be seen as a luddite so must support the new, even where the new may be transient or irrelevant
Elevation bias Witness the manner of executives meeting on the top floor - they conflate strategic vision with physical perspective
The Cry of the Wolf bias Some managers are mongers of doom, such that their potential role in moderating excess or blowing the whistle is rendered redundant by their reputation
Insead Class of '96 bias Corporate masonry may have waned but the three executives who spent a fabulous summer together at a leading business school may form a permanent power clique
Professional bias Cutting across corporate power lines, the self protective self regard of certain professional groups can dull the impact of those outside this group

You may have seen some of these - and you may have others in mind.  Like all the biases, the more we are aware of them, the less harm they can do.

Brendan Llewellyn is owner of Marketing Edge and director of Adviser Home.

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