BEHAVIORAL DECISION STRATEGIES APPLIED TO LEADERSHIP

There’s no denying it; all employees, from high-level executives to frontline workers, make avoidable mistakes: from underestimating the time needed to complete a task, neglecting or ignoring information revealing a planning failure, to not taking advantage of beneficial company policies, ignoring important points presented by clients, and so forth. The fact is, it’s undeniably challenging to reconfigure the human brain to undo the patterns that lead to these errors, with insufficient motivation and cognitive biases being the main causes of poor decision-making.

In addressing this issue, behavioral science along with neuroscience has much to teach and contribute to within organizations. The solution may be much closer than one might imagine, consisting, in summary, of the following approach: modifying the environment in which decisions are made so that people are more likely to make choices that produce good results.

Therefore, in this work, I will focus on this theme on some fundamental pillars to strategically design actionable points derived from the direct application of behavioral psychology, applicable to a wide range of organizational problems ranging from reducing turnover to rectifying flawed strategic deadlines. It is divided into:

1. Understanding how decisions are typically made.
2. Determining the problems.
3. Identifying specific underlying causes.
4. Designing the solution.
5. How to choose the right leverage.
6. Rigorously testing the solution.

1. HOW DECISIONS ARE NORMALLY MADE

Fundamentally, for didactic clarity, we can summarize our decisions based on two mental mechanisms: the unconscious and the conscious. The unconscious operates independently, automatically, instinctively, and emotionally, generating intuitive responses to problems through mental shortcuts like habits, triggers, and mental anchors. Conversely, consciousness involves the deliberate formation of thoughts, logic, and deliberation.

It’s crucial to understand that our unconscious is shaped by a lifetime of accumulated data; furthermore, we cannot discount genetic assignments and human instinctive principles. The unconscious processes information from our sensory and somatosensory systems, forming the reality in which we interpret life and often arriving at correct conclusions almost effortlessly, using intuition and general rules through qualitative analysis of the present moment with past experiences. However, this processing is prone to errors. On the other hand, we also have mechanisms to construct methodical, strategic, and logical thoughts. This occurs at a conscious level, aiding in rational analysis of information processed at the unconscious level and assisting in better reasoning proposed by intuition or intervening when emotions hinder judgment – and to correct hasty judgments. Thoughts and feelings are also at a conscious level.

Often, however, we allow our intuitions or emotions to flow without being controlled by analysis or deliberation, commonly referred to as being on autopilot. This can lead to poor decision-making. Allowing living according to the unconscious, “autopilot,” has negative effects, such as leading to poor plan execution, even if people have a lot of experience on the subject and the best intentions and genuine desire to achieve their goals. It’s not surprising that, as it’s based on past experiences, many opportunities and ways of seeing and constructing the reality of the moment are affected by limiting beliefs. These beliefs are not formed by one or another experiential issue but by the combination of various memories. For example, the fear of flying is not necessarily related to airplane accidents. I’ve had cases where it was correlated with the person’s drowning as a child. Therefore, unlike consciousness, which tends to focus on more strategic and structured outcomes, the unconscious seeks concrete and immediate results and forms its decision structure by correlating various past experiential learning information at various moments in life.

This doesn’t mean that consciousness possesses the truth and the best decisions, and the unconscious is prone to errors. Often, in certain circumstances, we have intuitive reactions, which, in turn, are rich contributions to the decision-making process. For example, if an investment opportunity triggers an emotional response of fear, it helps the person to be cautious and more careful (conscious) in analyzing if the investment, which unconsciously appears to be very risky, really is. In this case, consciousness will work under the emotional response referenced together with other factors that can be estimated by the unconscious – such as the long-term strategic value of the investment, in this example.

You’re probably wondering why we don’t use consciousness in most of our decisions, and you can find the answer yourself; just take a moment to reflect on how many choices you make in a day, from waking up, brushing your teeth, taking a shower, having breakfast, choosing clothes, shoes, perfume, changing gears in the car, navigating traffic, to conversations at work, choosing words, and so on. There are thousands of decisions we make every instant in life, and if you had to stop to think about each one, what would your day be like? Involving consciousness requires cognitive effort that puts you in the present moment; there’s only consciousness in the now, but it’s a scarce resource – it simply isn’t continuous because there isn’t enough time to guide all the decisions we have to make. Excessive conscious cognitive activities lead to mental exhaustion that directly impacts motivation.

• DEFINITION OF THE PROBLEM

There’s another misconception that has become common in organizations: wanting to address all problems with behavioral development tools. In my experience over the years, I believe that before any guesswork, leaders should determine if:

• Human behavior is under the problem perspective: Some issues—such as high job demands or employee burnout, for example—can be addressed with strategic changes in organizational policies as well as in the way employees perceive and react to a situation. Others, also very common, may result from a more technical nature—such as employees’ lack of knowledge in defining and working with technologies that could facilitate and improve work performance. It’s unlikely that these problems will be solved using behavioral techniques and tools unless their resolution involves a change in human behavior—such as encouraging teams to participate in discussions, meetings, and training sessions that can help understand new market technologies, supporting them to deal with a process of change.

• Employees are acting wrongly regarding their best interests: Most behavioral techniques and tools assist in carefully guiding employees to make better choices. They are more effective in situations where employees feel more encouraged to rethink and exchange choices contrary to their best interests in line with those of the company, provided they understand them to be more convenient for them.

• The problem can be precisely defined: There are situations in which organizational problems are already intertwined with organizational culture, and in this sense, comprehensive change (change management) is necessary to break the organizational status quo. But, in many cases, complex organizational problems can be broken down into smaller pieces, which are easier to handle.

• DIAGNOSING UNDERLYING CAUSES

Here, we really need to get into the main objective of this article, which summarizes many of the problems in organizational environments that are directly related to two main causes of poor decision-making: insufficient motivation and cognitive biases. To determine which of them is causing the problematic behavior, companies should, at the very least, focus on two fundamental questions:

• First: Is the problem caused because people cannot take any action? If so, the high likelihood should be attributed to a lack of motivation.

• Second: Are people acting in a way that introduces systematic errors into the decision-making process? If so, the high likelihood should be attributed to cognitive biases.

The two possibilities described are by nature mutually exclusive, but recognizing the difference between them is a good starting point.

Almost always, motivation and bias problems are directly related to much more unconscious issues, that is, it is the perspective that the person creates in the environment in which they are present. Therefore, it is valid to consider which aspect of the situation is interfering incorrectly with the trade-offs between the available issues and what can be done to intervene and correct the problem.

In common sense, it is believed to be possible to successfully diagnose the underlying causes by putting oneself in the place of the person making the decision (or who is unable to make it) and asking, “What would I do in this situation and why?”

This proposal mainly arises because many of the identified issues have some relation to failed communication, lack of transparency, or non-collaborative environments. Often, leadership fails to listen to their team to understand the advantages and disadvantages of the actions taken by management, for example, many feel repressed and cannot express preferences. Simple inertia, fear, insecurity, lack of clarity, prevent them from thinking differently.

A common example easily found in the market is the turnover of employees primarily working in agile teams, where lack of motivation can be the main root of the problem. For instance, a client requested an analysis of the possible reasons leading to high employee turnover. It was soon realized that many employees felt exhausted and remained in their roles for a short time before resigning. Through individual interviews at various levels, the relationship between leadership actions and people’s behavior was identified. The problem became clear regarding the integration process of employees into projects, which focused heavily on inspiring them with the company’s culture but overlooked actual integration. Training failed to create an emotional bond between new hires and senior project collaborators, leading them to see the relationship as transient rather than personal. The environment demonstrated that people were demotivated, and the stressful aspects of the work, such as constantly dealing with new team members, frustrated clients, and rigid procedures, created a toxic environment that couldn’t retain employees, causing them to leave the company shortly after being hired.

• DESIGN THE SOLUTION

It’s crucial to note that everything is based on diagnostic ability to identify the underlying source of a problem and then begin designing a solution. For example, in the book “Nudge: Improving Decisions About Health, Wealth, and Happiness” by Richard Thaler and Cass Sunstein, one of the options to be addressed in organizations is the idea that it’s possible to improve people’s decisions by carefully structuring how information and options are presented to them. Thus, companies can “nudge” employees in a certain direction without taking away their freedom to make decisions for themselves. An application of this strategy was used at Google, for example, which, concerned about its employees’ weight gain and health, implemented a simple choice strategy in its cafeterias in an attempt to promote healthier eating habits. When employees arrive to get a plate, they encounter a sign informing them that people who use larger plates tend to eat more than those who use smaller plates. Thanks to this simple change, the proportion of employees using small plates increased by 50%.

Many people get lost trying to find elaborate solutions to behavioral problems when often the solutions are simple. Adjustments in the choice environment can yield significant improvements at low or zero cost. Simple things like changing the order in which options are presented, altering the words used to describe them, adjusting the process by which they are selected, and carefully choosing patterns.

Here’s a classic example: for many years, companies in the United States offered optional enrollment retirement plans. Employees who didn’t take the initiative to join weren’t included. More recently, companies have automatically enrolled their employees, adopting an opt-out system. Under this system, employees have a fraction of their salary (e.g., 6%) deducted as a contribution to the plan unless they take the initiative to choose something else. This is being adopted today because studies have shown that, on average, only half of employees at companies with optional enrollment systems enroll in the plans of those organizations in the first year of employment. Automatic enrollment generates participation rates of 90% or more. By changing the default, companies haven’t altered either the menu of available options or the financial incentives for participation. They simply changed the consequences of not taking the initiative to indicate personal preference. To improve employee decisions, choice architecture is more effective than widely used approaches such as educating individuals or offering monetary incentives. The reason is that these methods depend on individuals acting in their own interest, which they often don’t do. These methods also attempt to change how employees process information and make decisions, something difficult to achieve.

The following triggers can help companies and their leadership harness the enormous potential of choice architecture to improve leadership decision-making.

1. Stimulate the Unconscious: It may seem unimaginable, but it is entirely possible. Whether biases or emotions are pertinent to the unconscious and often wreak havoc, but strategically, they can be harnessed for productive purposes. Leadership can make use of this in various ways:

• Elicit emotions: Strengthen employees’ emotional bond with the company. This should, when possible, start from the hiring process and extend to the organizational culture. For example, creating an inclusion process not only allows new candidates to get a feel for the work environment, talk to some older employees, but also motivates them to think about their strengths and how they could use them in the new job and give them a voice to be heard as well. This approach helps new employees feel they could be themselves at work. The emotional bond created with the organization leads not only to reduced employee turnover but also to better performance, measured by customer satisfaction.

• Leverage Biases: Leaders can also use cognitive biases to their advantage. For example, neuroscience studies show that the negative feeling people have when they experience a loss is two times more intense than the positive feeling they have when they gain the same value (a bias known as loss aversion). They also show that people pay extra attention to clear information and ignore less flashy data (the vivacity bias). In this sense, it is possible to adopt some strategies that help the employee have more clarity about losses and gains. The tactic is not complex; it just needs to be implemented in a way that people don’t perceive it as a threat or pressure (otherwise, other behavioral issues in the environment may arise). One of these tactics is known as the “bench effect.” To motivate those with poor performance, organizations know that there is a negative side to doing nothing to improve. For example, a sales team may have its members evaluated based on a high-quality pipeline where everyone understands that there is a bench of new sales talents ready to act if they notice poor performance from the sellers. The “bench effect” makes it clear that they may lose their position or suffer an impact on their bonus, motivating them to work harder. Studies have shown that salespeople working in environments with a player on the bench, ready to replace a starter, had significantly better performance than those without a substitute. In the long run, at a tangible level, the overall increase in revenue outweighs the costs associated with hiring substitutes; at an intangible level, there is a perceived stability of action among those receiving bonuses as well as continuous improvement in customer attention and approach techniques.

• Simplify the process: It is crucial for the leader to know their work environment very well and be alert to the processes that are part of the activities. Almost always, some of the organizational processes usually involve unnecessary steps that increase time, reduce motivation, or enable the development of cognitive biases. That’s why communication between the team and the leader should be part of the main activities; it is through them that facilitative points in the processes can be explored and these problems like demotivation criticisms can be reduced.

• Engage the Conscious Mind: There are several options that can be used in the workplace to encourage greater deliberation and analysis in the decision-making process at a conscious level:

• Use joint evaluations instead of separate ones: Evaluating decision options simultaneously, rather than sequentially, reduces bias. For example, a manager who is assessing candidates for a position can avoid making biased assessments of their likely future performance by comparing them to each other, rather than evaluating them separately. This is because joint evaluation leads evaluators to focus more on employees’ past performance and less on gender and implicit stereotypes. This applies to other fundamental issues within the organization, not only to be used in joint evaluations in initial hiring decisions. The same idea can be adopted when analyzing employees for job assignments and promotions. It can be helpful in many situations, such as when choosing which products should advance in the development process, evaluating investment options, and defining a strategic direction.

• Create opportunities for reflection: Encourage employees to develop habits that allow them to set aside time during the day to reflect on their actions. This may seem costly, but it is an effective way to engage the conscious mind. Within various studies on the subject, I can cite one in which three groups of employees received the same technical training, except for two key differences. Workers in one group spent the last 15 minutes of certain days reflecting (in writing) on what they had learned. Employees in another group did the same and then spent an additional five minutes explaining their notes to an intern colleague. Meanwhile, those in the control group continued working until the end of the day. In a test conducted after the training program, employees in the first two groups performed on average 30% better than those in the control group, despite spending less time working. It was found that reflection has a similarly beneficial impact on employee performance at work, primarily for two important reasons: one is to give them the opportunity to improve their own actions, and the other is to stimulate continuous learning that this technique offers to employees.

• Use planning prompts: Often, people decide to act in a certain way but forget or are unable to follow through on their proposals. Simple prompts can help employees solidify decisions. One of the most effective techniques is to keep a journal of the actions they intend to take, which can be used to improve team performance. Many team efforts, particularly those where goals are not met, end with the promise to “do better next time.” Unfortunately, these vague promises do not help prevent teams from making the same mistakes again. A leader can help teams follow through on their resolutions by instructing members to create clear plans to achieve their goals, plans that detail the “when” and “how.”

• Inspire systemic thinking: Generally, we approach problems by asking ourselves, “What should I do?” But this question can be replaced with “What can I do?” The simple change in perspective expands the possibility of exploring systemic thinking, which in turn helps to see alternatives to the choice we are facing, thus reducing bias in problem evaluation and final decision-making. Here is a major problem I encounter with many clients. Usually, companies fail to broaden their perspectives by giving employees the chance to showcase their skills by presenting proposals that are outside the framework. Most impose terms that should or should not follow a certain course of action. This type of framing usually leads decision-makers to consider only one option: the course of action being discussed. A simple change in terminology—using the verb “can” instead of “should”—helps to think beyond black and white and consider shades of gray. This also allows us to consider solutions to ethical dilemmas that go beyond choosing one option over another.

• Increase accountability: There is a basic principle of human ethical behavior: the greater the freedom, the greater the responsibility. Making employees accountable for their judgments and actions increases the likelihood that they will be more vigilant in eliminating biases from their decision-making process.

• Encourage consideration of divergent evidence: When we believe that a certain course of action is correct, our tendency is to interpret any available information as supporting that belief. Always remember that consciousness also fundamentally justifies our actions. This is known as confirmation bias. Additionally, when we invest resources in a course of action, we tend to justify these investments by continuing down that path, even when new information indicates that it is ill-advised—a phenomenon known as the escalation of commitment. Together, these biases lead decision-makers to disregard contrary evidence and ignore the possibility of better options. Leaders cannot, as they should, solve this problem by actively encouraging counterfactual thinking (asking “how things could have happened if we had followed a different course of action?”) and ensuring that employees take into account evidence to the contrary.

In situations where a group is tasked with deciding, the leader can assign a member to ask tough questions and seek evidence revealing flaws in the planned course of action. It’s always helpful to have a challenging character on the team. Alternatively, the leader can ask department heads to take turns in their roles to gain a new perspective. People in charge of an area for a long time tend to irrationally escalate their commitment to the established way of doing things (autopilot). Newcomers are more likely to perceive evidence that a different course of action would be wiser, as the well-known saying goes, “thinking outside the box.” Additionally, the knowledge that rotation will bring new eyes to examine past decisions encourages people to make more disciplined choices.

• Use notes: Reminders are an effective way to activate our consciousness, helping us to avoid biases derived from overconfidence or being hostage to intuitions. Notes as reminders also serve to highlight our goals (for example, finishing a presentation on time), thereby increasing our motivation to achieve them.

• Circumvent both systems: The third approach that organizations can use to avoid biases and lack of motivation is to create processes that automatically set aside issues that are already anchored.

• Set the standard: Changing the standard processes — automatically enrolling employees in a strategic training, for example — can have a strong impact on final outcomes, especially when decisions are complex or difficult. Studying some cases on this subject, for example, I found that at Motorola, employees who have previously worked on a product team cannot participate in another team working on a similar product. This rule is set as a standard and allows new teams to form their own opinions without being affected by others.

• Incorporate automatic adjustments: Another effective way to combat cognitive biases is to incorporate adjustments that compensate for poor interventions. Microsoft managers, for example, found that programmers significantly underestimate the time it will take to complete tasks — a common cognitive bias known as planning fallacy. Microsoft’s solution: adding a time buffer to projects. Managers review histories of delays in similar projects and set the margins without directly alerting their employees. For example, deadlines for updating applications like Excel and Word are given an extra 30% of time compared to the initial estimate. For more complex projects, such as operating systems, the margin is 50%.

• HOW TO CHOOSE THE RIGHT LEVERAGE

We recommend that, first, companies consider the option of better understanding behavioral and social psychology so that the desired outcome is implemented automatically, for this, having a good professional as a consultant can be very helpful. Since this strategy does not require any effort from decision-makers, it is the most powerful way to influence outcomes. However, for many reasons, this approach may not be feasible or desirable. It may be impossible or prohibitive in terms of cost to hire resources for this particular process. Affected employees may resent not having a voice in the choice. As an alternative, create an internal group to discuss and improve this knowledge. Allow this group to have access to information, training, specialization, and build a team dedicated to better understanding its employees, the organizational climate, culture, interpersonal relationships, and having the power to take action for continuous behavioral improvement.

• TEST THE SOLUTION

The final step is to rigorously test the proposed solutions to determine if they will meet their goals. It is necessary to create parameters that are measurable and analyzable. Without forgetting that working on human behavior takes time. There are no miracles that can solve behavioral issues. Time, techniques, experimentation, and testing. Testing can help managers avoid costly mistakes and provide insights that lead to even better solutions. Include three key points in the tests:

1. Identify the desired outcome. The outcome should be specific and measurable.
   1. Identify possible solutions and focus on one of them. If you change many things at once, it will be difficult to determine which part of a complex change produced the desired effect. To avoid this problem, implement an “active choice” program without simultaneously implementing other changes.
   1. Make the change in some areas of the organization (the “treatment group”) and not in others (the “control group”). If possible, randomly divide individuals, teams, and other entities between the two groups. Randomization helps ensure that any difference between the two groups can be attributed to the change. When simple randomization is not feasible due to logistical, ethical, cost, or sample size issues, more sophisticated analytical techniques can be used.

INSIDIOUS BIASES  and insufficient motivation are often the main factors behind significant organizational problems. But it is extremely difficult to change the way people’s brains are wired. Instead, change the environment in which people make decisions. With some simple adjustments, everyone at all levels in the organization can achieve powerful benefits for their employees and, consequently, achieve results.

Inspired By The HBS Executive Education Program, Conducted By:

• John Beshears: Assistant Professor at Harvard Business School and affiliate of the Harvard Kennedy School of Government’s Behavioral Insights Group.

• Francesca Gino: Professor at HBS, affiliated with the Behavioral Insights Group, and author of “Risky Business! – Decision Making: How Not to Stray from the Planned Route and Accelerate” (Editora Da Boa Prosa, 2014).

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Hello, I’m Marcello de Souza! I started my career in 1997 as a leader and manager in a large company in the IT and Telecommunications market. Since then, I have participated in important projects of structuring, implementation, and optimization of telecommunications networks in Brazil. Restless and passionate about behavioral and social psychology. In 2008, I decided to delve into the universe of the human mind.

Since then, I have become a professional passionate about deciphering the secrets of human behavior and catalyzing positive changes in individuals and organizations. Doctor in Social Psychology, with over 25 years of experience in Cognitive Behavioral and Human Organizational Development. With a wide-ranging career, I highlight my role as:

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My solid academic background includes four postgraduates and a doctorate in Social Psychology, along with international certifications in Management, Leadership, and Cognitive Behavioral Development. My contributions in the field are widely recognized in hundreds of classes, training sessions, conferences, and published articles.

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