Overcoming Biases in Decision-Making: The False Consensus Effect, Hindsight bias, and the Dunning-Kruger Effect
Each week I will be digging into the intersection of Behavioral economics and change management. Today, we are looking at three more biases; The False Consensus Effect, the Hindsight bias, and the Dunning-Kruger Effect. These phenomena affect change management efforts in working with companies undergoing technical changes.
Hindsight bias is the tendency to overestimate the predictability of an event after it has occurred. This can lead individuals to believe that they knew the outcome of an event all along, even if they did not have any information or evidence to support this belief at the time. In the context of technological change, hindsight bias can lead individuals to resist change, believing that they already know how the change will turn out. This can hinder the success of change management efforts and prevent organizations from achieving their desired outcomes.
The Dunning-Kruger effect is when individuals with low ability in a specific task or area overestimate their ability and underestimate the task's difficulty. This can lead to overconfidence and poor decision-making. In the context of technological change, individuals who overestimate their ability to handle new technology may need to prepare for the challenges that come with it, leading to poor performance and a lack of progress toward achieving the desired change. This significantly impacts the scope and timing when we are working on changes.
The false consensus effect is the tendency for individuals to overestimate the extent to which others agree with them. This can lead to a lack of support for change, as individuals may believe that their colleagues or superiors agree with them when they are not. In the context of technological change, the false consensus effect can hinder change management efforts by causing individuals to underestimate the need for change or the level of support required to implement it successfully. We see this in meetings when someone says, "they don't need..." or "everyone in X department is the same...". In many cases, the person speaking hasn't talked to or met with the person or group they call "THEY."
Hindsight bias, the Dunning-Kruger effect, and the false consensus effect have a few things in common:
They can hinder change management efforts: All three biases can hinder change management efforts by causing individuals to resist change, underestimate the difficulty of a task or project, or lack support for the change effort.
They can lead to poor decision-making: All three biases can lead individuals to make poor decisions based on their own faulty assumptions or beliefs rather than relying on data and evidence.
They can be overcome with self-reflection and seeking feedback: All three biases can be overcome by encouraging self-reflection and introspection and by seeking feedback from others. This can help individuals better understand their biases and how they may be impacting their decision-making.
These biases can hinder change management efforts by causing individuals to make poor decisions, resist change, and fail to adapt to new processes. Behavioral economics significantly influences decision-making and can dramatically impact change management efforts during technological change. Teams can better manage technological change and achieve their desired outcomes by understanding and addressing biases such as hindsight bias, the Dunning-Kruger effect, and the false consensus effect. Leaders must encourage self-reflection and seek feedback to overcome these biases and make informed decisions during the change process. For all these biases, and there are many, many more to come, Michael Jackson best sums up my approach; "I'm starting with the man in the mirror."
In working on this, I am reminded of the book "How We Know What Isn't So: The Fallibility of Human Reason in Everyday Life" by Thomas Gilovich
and But What If We're Wrong?: Thinking About the Present As If It Were the Past, by Chuck Klosterman
