My Three Insights on Decision-Making in Teams

Always young enough to continue learning.

Last year, I resumed my studies in organizational psychology at the Open University.

The course ‘Introduction to Organizational and Work Psychology’ (PB0322) gave me a theoretical check of the dynamics we often encounter with management teams. Today, I want to share three valuable insights about decision-making and group processes for those teams.

Insight 1: Framing Bias

Humans tend to be risk-averse when potential gains are emphasized, but risk-seeking when potential harms are emphasized. That’s what I have learned from Hodgkinson e.a.

So, negative framing leads people to prefer decisions with a low probability of high gain and a high probability of no gain over decisions with a high probability of moderate gain and a low probability of no gain.

An important implication for management teams is that how problems are presented (or framed) significantly affects the potential outcomes of the discussion. Careful thought processes can counter the more instinctive biases of our reasoning.

Insight 2: Group Polarization

In a five-year study, Bettenhausen found that if the initial inclination of most group members is to make a moderately risky decision, the final group decision will tend to be riskier. Group members’ slightly more cautious preferences lead to even more cautious choices.

A meta-analysis conducted by Isenberg found two explanations for these tendencies. We want to present ourselves in a socially acceptable manner, so we try to conform to the other group (social comparison). Information consistent with the majority view will tend to dominate the group discussion, which has a strong persuasive effect. The latter tendency seems to have a more substantial impact than social comparison.

Insight 3: Too Much Cohesion

In a theoretical analysis of the behavior of company management, Forbes & Milliken found that a sense of cohesion among board members is beneficial to a certain extent. Still, too much cohesion is at the expense of decision-making. Disagreement (cognitive conflict) about solutions to problems will increase the effectiveness of management at the expense of cohesion.

What is our experience at Otolith Consulting?

We have observed many discussions within management teams in the past ten years. It is striking how easily a framing bias influences the outcome of strategic and operational discussions. On top of that, the dynamics of group polarisation often exacerbate the effects of the framing bias. So, how a strategic choice is presented to the team influences the dynamics of the discussion and, subsequently, the potential outcome.

When we facilitate a strategy session, we also observe polarisation tendencies. A team’s ability to recognize and deal with the dynamics of group polarisation often depends on the team and the team leader’s maturity level. In our experience, breakthroughs are often achieved during separate 1:1 coaching sessions.

A cohesive leadership team often achieves the best results, and many team development programs are focused on building a cohesive team. However, many teams struggle to balance a cognitive conflict about the effectiveness of a decision and their social desire to experience team cohesiveness. Balancing effectiveness and team cohesion is an active and ongoing process.

What dynamics do you recognize in your management team? What actions do you take to overcome the tendencies of group polarisation and framing bias?

Literature

• Bettenhausen, K.L. (1991). ‘Five years of group research: What we have learned and what needs to be addressed’, Journal of Management, 17, 345-81.) https://doi.org/10.1177/014920639101700205
• Forbes, D.P. and Milliken, F.J. (1999) Cognition and Corporate Governance: Understanding Boards of Directors as Strategic Decision-Making Groups. Academy of Management Review, 24, 489-505.
  https://doi.org/10.5465/amr.1999.2202133
• Hodgkinson, G.P., Bown, N. & Maule, A.J., Glaister, K.W. & Pearman, A.D.  (1999). Breaking the frame: an analysis of strategic cognition and decision making under uncertainty. Strategic Management Journal,  20(10), pages 977-985, October. https://doi.org/10.1002/(SICI)1097-0266(199910)20:10<977::AID-SMJ58>3.0.CO;2-X
• Isenberg, D.J. (1986) Group Polarization: A Critical Review and Meta-Analysis. Journal of Personality and Social Psychology, 50, 1141-1151. http://dx.doi.org/10.1037/0022-3514.50.6.1141

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