Saturday, August 1, 2009

The 8-Hidden Traps in Decision Making

Like any small business, running a motel requires many decisions to be made in any given day.

Most decisions are made on the fly and are based on experience and instinct, however there are other decisions that require more time to evaluate and ponder.

When running a motel, most decisions simply involve allocating resource to meet guests' needs in the most efficient manner and more often than not, decisions do not have to be qualified or measured.

There is of course a mystical trend of qualifying and measuring business decisions based on supposed social and environmental concerns. This only serves to cloud and complicate what should be a simple process based on common sense and reason.

Even after discounting modern mysticism, apparently making a decision isn't as easy as it seems. A Harvard Business Review article has identified eight psychological traps that are likely to affect the way we make business decisions.

The best way to avoid the hidden traps in decision making is to be aware of them:

1. The anchoring trap leads us to give disproportionate weight to the first information we receive.

2. The status-quo trap biases us toward maintaining the current situation--even when better alternatives exist

3. The sunk-cost trap inclines us to perpetuate past mistakes.

4. The confirming-evidence trap leads us to seek out information supporting an existing predilection and to discount opposing information.

5. The framing trap occurs when we misstate a problem, undermining the entire decision-making process.

6. The overconfidence trap makes us overestimate the accuracy of our forecasts.

7. The prudence trap leads us to be overcautious when we make estimates about uncertain events.

8. The recallability trap leads us to give undue weight to recent, dramatic events.

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