What Is Cognitive Bias?

In a fast-paced work environment, it’s easy to make quick decisions without thinking about how rational they really are. Sometimes, our own personal biases get in the way of business decisions, without us even realizing those biases are at play. Understanding cognitive bias and knowing how to prevent it from informing business decisions is essential for anyone in a leadership position.

Cognitive bias explained

Cognitive bias is when our judgment is subconsciously influenced by outside factors.

Negative cognitive bias can cause misunderstanding as we apply our own biases to the information we digest. It can be bad for morale if biases interfere with empathy and understanding. Cognitive bias can also have a negative impact on performance, blocking the best work from rising to the top.

Everybody experiences cognitive bias – it’s a natural human process – but it can be avoided.

Types of cognitive bias:

There are many types of cognitive bias, but the following are among the most prevalent in the workplace:

Confirmation bias

Confirmation bias is when your own opinions skew the way you perceive information. This means dismissing or misinterpreting information you don’t want to see – information that counteracts your opinion – and focusing only on information that supports your existing beliefs. We have a tendency to ignore information that doesn’t agree with our perspective while seeking out and even misconstruing information that ‘confirms’ our biases.

Recency bias

Recency bias causes us to negate or ignore information from the past in favor of more recent events. For example, managers may forget the strengths of an employee if they’ve been underperforming more recently. This can come into play when recruiting new employees. For example, by the time you’ve interviewed everyone, the first candidates interviewed may not seem as good as the most recent.

Anchoring bias

On the other side of recency bias is anchoring bias – where the first piece of information becomes the baseline for anything that follows. Perhaps the first candidate you interview for a job is highly skilled with far above-average qualifications, and this might have a negative impact on any interviews that come after. You may have had a hugely successful project that greatly exceeded expectations and, through anchoring bias, your expectations for later projects become too high.

Negativity bias

It’s easier to remember and focus on negatives than it is to focus on positives. Negative experiences from the past can influence decisions you make in the future and can have an impact on how an employer deals with potential challenges or risks.

An example of this could be an employee feeling as though they’re being overlooked because they simply remember the negative feedback more than they do the praise they receive. It could be the issues or challenges of a project making the entire project feel like a failure, despite its legitimate successes.

Halo effect

The halo effect is an example of cognitive bias that occurs when it is assumed that because an individual is particularly good or particularly bad at one thing, they must be particularly good or bad at something else. For example, you might have an employee who truly excels in data analysis, so you assume they would also excel at project management.

This can play into the hiring process, where a lack of charisma or unfavorable interview skills might cloud your judgment of their actual skills and talents, or perhaps the other way around – a great deal of charisma and personality might distract you from a weaker skillset.

IKEA effect

The IKEA effect describes a bias towards work you’ve produced yourself. You might not have the same understanding for somebody else’s work as you do your own – and this can lead you favoring your own contributions over the contributions of others. The IKEA effect can make you apprehensive to hand your work over subconsciously out of fear that your efforts will be undone.

How to avoid cognitive bias

All of these negative cognitive bias examples are avoidable.

To do so, you must take into account every single piece of information with a rational approach. Surround yourself with a diverse team, engage with ideas that will challenge your opinions, and try to view things from multiple perspectives.

Avoid operating based on assumptions and never jump to conclusions. Take time to understand perspectives you disagree with, and take time to reflect on how your own biases may impact your work.

Always seek feedback, and ensure every team member feels their voice is heard by applying radical candor. When making decisions, take a step back to scrutinize yourself and ensure you’ve done so rationally and without cognitive bias.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.