Implicit bias, also known as unconscious bias, can have a significant impact on decisions in all areas of life, especially in the workplace, and especially in times of crises.
Organizational leaders have a responsibility to remain objective when making important decisions. However, when a crisis hits, it hits fast and unexpectedly. When forced to make a decision without all the facts, it’s not uncommon to want to take action quickly and rely on your gut instincts, even if inaction is your next best move.
To explore decision-making biases and their impact during the pandemic, Harvard Business Review surveyed CEOs of more than 500 Chinese firms during February and March of 2020. With China’s response to COVID-19 being weeks ahead of the rest of the world, researchers knew that there was much to learn about how implicit biases affect behaviour and decisions made during periods of high-stress and high-uncertainty.
The survey took three main areas into consideration:
- CEO background and firm characteristics
- How CEOs responded to COVID-19’s spread
- Their expectations for the post-pandemic future
The research resulted in the following three opposing biases.
1. Optimistic Bias Versus Pessimistic Bias
Amongst respondents, optimists and pessimists were nearly represented equally.
- Optimists (52%), mainly founders and business owners, were confident that their organization could maintain and leverage business opportunities despite the downturn.
- Pessimists (48%), mostly in B2C markets, were deeply concerned about their business suffering financially due to consumer sentiment and economic uncertainty.
- Optimists tend to develop positive psychological states, free from unnecessary stress and worry. They can be motivating and uplifting in the workplace, helping to boost morale as the likelihood of success is encouraged. However, positivity can also lead to poor decision-making if risks are ignored, which can be counterproductive.
- Pessimists run the risk of creating an environment of fear and anxiety within the workplace. In seeing the cup half empty, pessimists bring a dark cloud energy, which can make people uncomfortable, less focused and less productive as they wait for things to go wrong.
2. Costs Bias Versus People Bias
Female and generalist CEOs with transferable skills and competencies were more aware of the pandemic’s deteriorating effects on employment conditions and engagement, while firms were more likely to cut costs to avoid losses.
- Leaders who are cost-aware will tighten the budget and limit spending to manage cash flow during uncertain times. And while the financial health of an organization is important, restructuring and laying off employees when emotions are already high can increase stress amongst remaining staff and damage organizational culture.
- Managers who are people-aware are more likely to actively address employee dissatisfaction and disengagement. Even if changes are deemed necessary, by listening to your employee needs and concerns and prioritizing open and frequent communication, you’re more likely to retain talent through tough times.
- Ultimately, CEOs cannot focus on costs or people at the expense of the other. Rather than asking, “How can we cut costs?” Consider asking, “How can we beat out our competitors?”
3. Short-Term Bias Versus Long-Term Bias
Making decisions on impulse can be disastrous during a crisis. It’s important to slow down, think clearly and weigh the risks before acting. Most of the CEOs surveyed showed a bias toward long-term thinking, particularly in B2B markets.
- Thinking in the short-term can cause actions that hurt future business. With every decision you make, it’s important to be mindful of the immediate needs, but also the potential long-term impact on your organization’s competencies, brand and stakeholders.
- Being overly focused on the long-term may cause oversights that result in and failure to address short-term business needs that are essential for survival. However, by looking ahead, leaders can shift away from a reactionary approach to decision-making to a proactive approach that allows for careful planning and consideration into what may come next and how to get ahead of it.
During a crisis, it’s important to be aware of how decision-making biases cloud your judgement, to ensure that you remain objective and rational. Cenera’s coaches can provide a confidential and supportive sounding board to help leaders uncover their blind spots as they navigate any crisis or challenge.
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