HOW LEADERS CAN OVERCOME THEIR BIASES TO SUCCEED IN THE POST-CRISIS WORLD
Research has shown that our ability to deal with a crisis is heavily dependent on our perception of the crisis and consequently, our reaction to it. More than ever, business leaders need to manage their cognitive biases to ensure sound decision making and future competitiveness.
With the COVID-19 crisis holding the world in a tight grip, many executives are struggling with the impact it may have on their organizations. On top of the direct impacts to businesses, leaders suffer from several cognitive biases that could impede their ability to make sound decisions.1 We show how two common and impactful biases - avoidance and short-term focus – can be overcome with the help of a simple technique.
PERCEPTIONS INFLUENCE THE ABILITY TO REACT
Two factors influence how leaders perceive crises.
First, the perceived frames expectations regarding the short-term or long-term effects. Humans have a tendency to reduce their attention to short-term aspects, especially during times This well-studied bias is called hyperbolic discounting, and it influences many aspects of our private and professional lives. In the business world, this bias often induces a “survival mode” in which firms make radical cuts to strategic or innovation programs in favor of operational priorities. Smaller and immediate rewards are often prioritized over potentially bigger, but delayed rewards.
