The Psychological Bias

I was recently giving some training on Communication Skills and was explaining how many times we communicate through our psychological bias, which can act as a natural barrier to effective communication.

The link between our beliefs and our biases and how these effect the way we communicate has long been studied, with the leader of such studies being McGregor in the late 1950s and early 1960s and his infamous Theory X and Theory Y.

The Covid-19 pandemic has required leaders to make decisions under considerable pressure. Many CEOs have been acting as the “chief crisis officer” as they work to ensure their firm’s survival and to manage the physical, mental and social well-being of their employees.Because there is no road map for a crisis like Covid-19, CEOs have had to manage largely by relying on their existing skills and personality traits. That meant that many went back to communicating and deciding right through their biases and beliefs.

Most research on this aspect, during the worst of the COVID-19 pandemic, is showing the following biases and beliefs that affected the way business leaders communicated and took their decisions:-

  1. Optimists vs Pessimists: The optimists were mainly founders and business owners. Founders’ strong ties to their personal networks kept them confident that they could maintain and leverage business opportunities during the downturn. Each trait has managerial implications. Optimistic CEOs tend to develop positive psychological states, such as confidence, hope and resilience, in themselves and their teams. But positivity can be counterproductive if leaders neglect the severity of a crisis and lose touch with the concerns of employees, clients, or business partners. For their part, overly pessimistic CEOs run the risk of creating a climate of fear and anxiety, which can lead to employee disengagement. Leaders need to be realistic about the challenges facing their firm while also motivating employees to meet them. As a check against your natural bias — whether you’re an optimist or a pessimist — it is recommended to adopt an open, approachable leadership style based on listening. That will help you obtain feedback on whether your style conveys the right message for your team. In fact this recommendation is in line with the general advice of how to overcome the Psychological Bias which can act as a barrier to communication – be the last to speak i.e. listen
  1. Costs versus people: Crises prompt firms to cut costs and tighten controls. The logic is simple: when markets and future revenues are difficult to predict, cost cutting is a road to safety. However such measures also have their downside. They surely have a direct impact on employee well-being, motivation, job satisfaction and job security.Ultimately, CEOs cannot afford to focus on either costs or people at the expense of the other. Both negative operating returns and demotivated employees could cause your firm to fail. Instead of asking, “How can we decrease costs?” try asking, “How can we continue to compete?” By doing so, you can avoid a vicious cycle with negative consequences for productivity, creativity, and innovation. In a nutshell can you reduce labour costs without compromising your ability to compete?
  1. Short-term versus long-term thinking: Knee-jerk reactions are a major risk during a crisis. CEOs who are overly focused on the short-term may take actions that could harm future business. Those who are overly focused on the long term may fail to address short-term business needs essential for survival. CEOs with a short-term bias need to be mindful of their activities’ potential long-term impact on the firm’s competences, brand and stakeholders. CEOs with a tendency toward long-term thinking risk under estimating the pandemic’s impact on profitability or cash flows. Having a counterpart who can function as a voice of reason can help those leaders avoid unrealistic goals and maintain short-term accountability.

During a crisis, leaders need to stay objective and rational. That’s often easier said than done, especially when you’re making important decisions with limited time and resources. Knowing which decision-making biases you bring to the table — and how to combat them — will help you better manage future crises. If it is important to avoid communicating and deciding through your biases and beliefs during normal times, this is even more so during a crisis the world has never seen like before.

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John de Giorgio

John is the founder of Shireburn Software, a software products company based in Malta and a number of other businesses. Entrepreneurial in nature, he looks at a business process and identifies ways in which process improvement and technology can be married in a practical way to provide value. He is passionate about helping communities and individuals through his work with Rotary International. He is a keen sailor and loves travelling, food and wine.