Reframing Biases
Business investors have continued to make mistakes in terms of the financial decisions they make from biased points of view. This implies that decision makers often fail to consider elements, such as understanding how decision errors occur, the influence behavioral issue has on decisions and the need to take into account the causes of financial setbacks (Ling, 2011). The decision makers at times neglect the need to design ways to mitigate the impact of biases and the importance of testing solutions to come up with an amicable decision. We need to analyze critically factors that affect organizations rather than rely on emotional aspects and decisions from experience.
To promote meaningful decisions, there is an obvious need to realize the fact that emotions cloud our judgment with the end results being poor decision making. Rather than acting on biases, managers and investors need to consider all the possible reasons that could decrease firm’s profitability, which often lead to a negative Net Present Value. This implies looking into areas, such as the behavior of the staff to check whether they are motivated to work extra hard for the benefit of the company. We as business stakeholders ought to reject the influence of mental shortcuts from biases so as to ease the load of decision making.
Shortcuts in decision-making are possible reasons why managers have continued to make systematic errors based on cognitive biases. Investors, therefore, need to avoid the temptation of relying on easily available knowledge to enhance the ability to make rational decisions (Ling, 2011). There are benefits attached to the decision by managers to record, summarize, analyze and report results of financial events in a way that promote effective decision-making rather than relying on previous familiar cases. Investors are therefore likely to escape the effects of narrow framing thereby considering the context of the total portfolio before making decisions.
References
Ling, H. (2011). The Big Idea: Before You Make That Big Decision. . . CFA Digest, 41(3), 12-13. Web. 08 Oct 2015