Psychological Barriers to Effective Decision-Making Term Paper

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The recency effect: most manager at times have an overreliance on the most readily available information to make decisions, it commonly occurs when carrying out annual performance evaluations of employees where recent performance of the employees plays a major role than accomplishments that have taken place in the earlier periods of review, this has an adverse effect has it may lead to the deviation of the set desired goals. (John k.bochardt 2010)

Anchoring bias: in most cases the price tags on products often if not always affect the purchasing negations between consumers and retailers, and most of the time consumer's end up paying higher prices for the product than necessary. This notion that sometimes leads us to allow initial reference point to distort our estimates is what professor Roberto refers to anchoring bias.

From a marketing point-of-view anchoring bias can come about when negotiating the renewal of a contract with either an advertising company or negotiating a new contract.anchouring bias occurs through the use of previous contractual terms as the reference point when negotiating for a new contract. By unconsciously using anchoring bias the marketer may contract and pay for services which are not profitable for the company

Illusory correlations: "illusory correlation refers to the fact that we sometimes jump to conclusion about the relationship between two variables when no relationships exist." Professor Roberto observes. For instant when managers hire potential workers placing too much weight on the candidates verbal presentation skills believing that there is a strong correlation of these skills with the ones require to perfume the job effectively, thus this illusory correlation may eventually lead to hiring non-performers who present themselves in an excellent manner verbally.

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The question now emerges of how we can overcome these barriers in making decisions, the most important thing is to accept and realize that our biases are natural and may have influence in our decision regardless of our efforts to fight back, thus it's important to get constant and rapid feedback on the effectiveness of the decisions we make to avoid repletion of mistakes thus enabling us to take care of our poor decisions way before they become costly.

Organizations therefore should develop a systematic process which has to be employed in decision making process. First the problem or decision to be made must be framed this means that we should develop mental models which can be used to explain the way we understand the situation at hand, this involves making assumptions which can be affected by our biases (John k Borchad 2010).

Secondly which should be able to gather relevant information which will enable us make informed conclusions that will determine the decisions we make, then lastly we should always be ready to learn from our past experiences in that errors made in the past cannot be repeated......

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"Psychological Barriers To Effective Decision-Making" (2012, August 06) Retrieved May 28, 2025, from
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