Page 47 - HBR's 10 Must Reads 20180 - The Definitive Management Ideas of the Year from Harvard Business Review

KAHNEMAN, ROSENFIELD, GANDHI, AND BLASER

Types of noise and bias
Bias and noise are distinct kinds of error. Each comes in different variants and
requires different corrective actions.

Type of bias Examples Corrective actions
General ● Planning fallacy: Forecasts ● Continual monitoring of
The average of outcomes are mostly decisions
judgment is wrong. optimistic ● Guidelines and targets for
● Excessive risk aversion: A the frequency of certain
venture capital firm rejects outcomes (such as loan
too many promising but risky approvals)
investments ● Eliminating incentives that
favor biases
Social ● Frequent denial of credit to ● Monitoring statistics for
Discrimination qualified applicants from different groups
occurs against—or certain ethnic groups ● Blinding of applications
for—certain catego- ● Gender bias in assessments ● Objective and quantifiable
ries of cases. of job performance metrics
● Open channels for complaints
● Guidelines and training
Cognitive ● Excessive effects of first ● Training employees to detect
Decisions are impressions situations in which biases are
strongly influenced ● Effects of anchors (such likely to occur
by irrelevant factors as an opening offer in ● Critiques of important
or insensitive to negotiation) decisions, focused on likely
relevant ones. ● Myopic neglect of future biases
consequences

Type of noise Examples Corrective actions
Variability across ● A hiring officer’s judgments ● Algorithms to replace human
occasions of a file are influenced by her judgment
Decisions vary mood or the quality of the ● Checklists that encourage
when the same case previous applicant a consistent approach to
is presented more decisions
than once to the
same individual.

Variability across ● Some individuals are gener- ● Algorithms to replace human
individuals ally more lenient than others judgment
Professionals in the ● Some individuals are more ● Frequent monitoring of
same role make dif- cautious than others individuals’ decisions
ferent decisions. ● Roundtables at which dif-
ferences are explored and
resolved
● Checklists that encourage
a consistent approach to
decisions

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