Leadership: Decision-Making Biases and Pitfalls Case Paper

Globalization and profuse technological infusion have created complexities in the business environment that have posed a major challenge for business managers. Decision-making has become intricate due to the transformation of processes and operations and the markets uncertainties, competition, external forces, and target market preferences (Acciarini et al., 2020). This paper discusses some of the commonly known decision-making or cognitive biases relevant to the given cases.

Case Scenario 1

In the first scenario, the Chief Financial Officer (CFO) is a victim of anchoring bias. It is said that she relied heavily on one piece of information and disregarded various other factors that might have caused the failure of marketing efforts (Ezzeddine, 2014). Other critical factors that could have caused marketing failure might include technological or political/legal changes. Jumping straight to the conclusion afterward by depending on the data of one year, which was also several years old, is not a true depiction of intelligent decision-making. The bias resulted from dependency on the data that was not only outdated but also happened only once.

Also, another scenario of cognitive bias comes from the employee from whom the CFO asked whether the drop in sales came from cutting marketing costs. The employee said, no. Overconfidence bias could be the reason as the employee wanted to show that she is good at her work and that she knows only marketing would make the reason (Hammond et al., 1998). She relied too heavily on her work experience and the field she was related to. Hence, she might have overlooked other possibilities. Again, taking a piece of old data information too seriously cost the company that appeared only once, which could have been other unexpected market factors.

Prevention of anchoring bias is easy with a simple solution. Letting others sometimes take charge in giving suggestions from all directions (Hammond et al., 1998). Organizations welcome diversity since perspectives of different background people help the company see through different directions. The tentative decisions could lead to more well-developed future frames, working like a counseling session. Also, it could be seen in the form of negotiations between the leader and subordinates, where their proposal would be weighed across several costs and benefits. The final defensible position should then be made, for which consent of all the negotiators or subordinates must be taken. When approval of the maximum number of employees is gained, it could be estimated as the most favorable decision for the company to produce a magnified positive impact for all employees.

Case Scenario 2

The CEO presents a prime example of overconfidence bias since he thinks he knows how to overcome the odds when the mergers fail. He seems to rely blindly on his capabilities to handle tough times despite others telling him that it might not be a good decision (Hoffman, 2012, p. 16). He thinks his skills and successes in the past have supported him well and that he could not do wrong this time. He ignores the information provided by others that includes a warning that the company would have to suffer huge debts if they go for a merger with a...

…part of the organizational culture as they put in their time and effort in helping the leader to reach a final and more sensible decision (Hammond et al., 1998). It would help them feel included in the organization and feel like belonging. They would be encouraged to work for the company with integrity and honesty. The encouragement needs to be continuous from the leader, either extrinsic or intrinsic rewards.

Conclusion

Although all of the biases mentioned earlier lead the manager to make wrong decisions that could lead the company to suffer from heavy losses, processing the right information with as many possible alternatives is crucial. The faults should be identified promptly before the damage becomes irreversible. The human brain tends to work in complex ways, and each individual has a distinct way of processing situations. However, acute proximity is needed to reach the final and well-researched decision with clarity.

The most dangerous form seems to be the confirmation bias, as it is the prejudice the human mind is constantly involved in daily. It is also referred to as wishful thinking or motivated reasoning since it is the way the brain processes information based on one preferred way (Peters, 2022). It is the persons wish to believe things rather than thinking rationally and considering that alternatives might be stronger than what seems. The favorable they tend to make is because of the motivation behind those decisions they want to achieve. However, the same bias could be divided into motivated and unmotivated reasoning, in which unmotivated logic appears when one-sided partiality is seen in the decision in a…