Have you heard of confirmation bias? It’s a cognitive error that occurs when people allow their personal beliefs to distort their judgement. Unfortunately, confirmation bias is all too common in the business world. In fact, it’s one of the main reasons why businesses fail.
But what is confirmation bias in business and how can you avoid it?
The good news is that our experts are here to help. Throughout this guide, we’ll explore confirmation bias in business, how it can impact your decision-making, and exactly what you can do to avoid it.
What is Confirmation Bias?
Confirmation bias is the tendency to search for, interpret, or remember information in a way that confirms our previously existing beliefs, or cognitive biases. These pre-existing beliefs can be about anything: politics, business, relationships, etc.
As a psychological theory or phenomenon, confirmation bias was first proposed by Peter Wason in 1960. He argued that people tend to interpret new evidence as confirmation of their existing beliefs, rather than as disconfirmation.
This tendency to look for confirmation of beliefs can lead to the dismissal of new or alternative information that contradicts what we already think. It can also result in a failure to question our own assumptions, which can lead to bad decision-making.
Confirmation bias could be compared to website cookies. Cookies collect information which lets cookies settings reject or let in specific content. Confirmation bias similarly lets us interpret information to match our beliefs and preconceptions, letting some in and rejecting others.
What are Confirmation Biases in Business?
Making critical decisions is hard enough, but it’s even harder when we’re subject to confirmation bias. Confirmation bias can impact businesses in many ways, from the products they develop to the way they market them.
There are many ways that confirmation bias can creep into business decision-making. For example, a manager might only look for information that confirms their belief that a new product will be successful while ignoring evidence to the contrary.
This type of thinking can lead to bad decisions because it means that we’re not considering all of the available information. It can also lead to a lack of creativity because we’re not open to new ideas that contradict our existing beliefs.
Examples of Confirmation Bias in Business
Some common examples of confirmation biases in business are:
- The sunk cost fallacy: This is the tendency to continue investing in a project or product simply because of the money that has already been spent, regardless of whether or not it is actually worth pursuing.
- The primacy effect: This is the tendency to give more weight to information that comes first, regardless of its quality. For example, a manager might make a decision based on the first proposal they receive, without considering any alternatives.
- Availability bias: This is the tendency to base decisions on information that is easily available, rather than on more reliable data. For example, a manager might rely on their gut feeling when making a decision, instead of looking at the numbers.
- The interview process and hiring process: A manager might interview a job candidate and only ask them questions that confirm their cognitive bias that the candidate is qualified for the job. Alternatively, they might only pay attention to the parts of the candidate’s resume that confirm their beliefs.
The Problem with Confirmation Bias in Business
In business, confirmation bias can have some disastrous consequences. For example, if a manager only looks for information that confirms their initial idea for a project, they might not consider any of the potential risks. This can lead to costly mistakes and can interfere with a company’s ability to achieve sustainable business growth.
Throughout the hiring process, this type of thinking can lead to bad hiring decisions because it means that we’re not considering all of the available information. It can also lead to a lack of diversity because we’re only looking for people who confirm a specific preconceived notion.
Similarly, confirmation bias can lead to groupthink, where a team or company only considers information that confirms their existing beliefs. This can result in poor decision-making and a lack of creativity. It can also lead to reduced productivity as team members become resistant to new ideas.
Other potential issues with confirmation bias in business include:
- Incomplete data: When we only look for information that confirms our beliefs, we might miss important data that contradicts those beliefs.
- Misguided actions: If we’re only considering information that supports our beliefs, we might take actions that are not actually in our best interests.
- Discrimination: If we’re only considering information that supports our beliefs, we might unfairly discriminate against people or groups of people.
Overcoming Confirmation Bias: Business Basics
Step 1: Understanding your own bias
Avoiding confirmation bias starts with understanding your own biases. We all have them, and they’re often based on our personal experiences and beliefs.
The first step is to become aware of your own biases. Once you know what they are, you can start to question them. For example, do you tend to lean towards candidates that share your alma mater? Identify your own existing opinions and how they could impact your business choices.
If you’re not sure what your biases are, try asking a friend or colleague for their honest opinion. They might be able to give you some insight into the way you think and decision-make.
Step 2: Critically evaluating information
Once you’re aware of your biases, you can start to question the information that you’re presented with.
Don’t take information at face value. Question it, and look for evidence to support or refute it. Be sure to consider all of the available information, even if it contradicts your existing beliefs. By critically evaluating the information you’re presented with, you can avoid flawed decision-making based on confirmation bias.
To build successful teams through your leadership, it is also important to encourage critical thinking throughout your workforce, especially when it comes to decision-making. Try to create an environment where people feel comfortable questioning the status quo and offering new ideas.
Step 3: Crafting a replicable decision-making process
To come to an unbiased conclusion and avoid poor decisions, it’s important to have a replicable decision-making process in place.
This process should involve thorough market research and collection data from multiple sources, considering all of the available information, seeking contrary advice to gain a full picture and making a decision based on that information.
By following this process, you can ensure that your business decisions are not impacted by confirmation bias, or that the level of confirmation bias you see will significantly decrease.
Step 4: Working with a Business Growth Coach
To avoid confirmation bias, it can be vital to seek information and advice from an objective, third-party source. A business growth coach can help you to understand your own biases and develop a decision-making process that helps you to overcome them.
Working with a coach can give you the tools you need to make unbiased decisions that are in the best interest of your business. By gaining an outside perspective, you can avoid the pitfalls of confirmation bias and make decisions that help your business to grow.
Looking For Expert Business Growth Strategies?
At Growth Idea, our business consultants offer expert advice and guidance to businesses looking to grow. We can help you to identify your biases, develop a decision-making process and overcome any challenges you’re facing.