CIA (e)Bulletin/(e)Bulletin de l'ICA
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May 2018
 
 

Decision Bias and Diversity

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By Sharon Giffen, FCIA
CIA President

Biases. We all have them.

And, in fact, bias is extremely beneficial in our day-to-day lives, to allow us to make rapid decisions without having to examine every question from every angle. Should I cross the street here or at the lights? What should I order for dinner? Is that dog friendly or about to attack?

However, in decision-making for the longer term, our biases can get in the way and lead us to suboptimal outcomes. I believe that simply by understanding that bias exists in business decision-making, we have taken the first step to mitigating its impact on us. Importantly, we can and will benefit if we take the next steps to reduce its impact. One way of doing that is to engage a diverse population in critical decisions.

What is Decision Bias?

Decision bias or cognitive bias occurs when our accumulated experiences cause us to draw irrational conclusions. There are several forms of biases, and many articles available in the public domain that describe them. I will not attempt to define the various forms here. For myself, I know I have a strong “clustering” bias—I see patterns in random events and must remind myself regularly not to draw conclusions on that basis.

From my past work experience, I am aware of the three biases in decision-making:

  • Confirmation bias—the tendency to listen only to the information that confirms our preconceived idea and to discard the facts that would refute it;
  • Blind spots—the failure to realize that we have biases; and
  • The trap of groupthink or the “bandwagon” bias.

How Can We Reduce the Impact of Our Biases?

There is a presentation from the USC Marshall School of Business, from which I have drawn these measures:

  1. Develop a process or series of steps to ensure that bias does not make you skip over critical questions, and to ensure that all facts are drawn out in that process. Start with a clean slate, ensuring that you fully consider all relevant facts.
  2. Seek out multiple perspectives—work hard to get a diverse set of views on a question.
  3. Challenge the facts and the conclusions. When appropriate, assign someone the role of devil’s advocate—someone who will argue the opposite side.

Clearly, one cannot use such a process for every small decision in life, but these are good steps for major decisions—in your personal, business, and professional life.

Diversity in the CIA

How does this impact the CIA? As we all know, the elected Board makes many decisions on behalf of the membership. As a Board, we are subject to all the same influences on decision-making as any corporate board. We benefit greatly from having diversity at the table. We achieve the best possible representation by having the maximum participation in the vote.

I am sure you see where I am going with this—please cast your ballot. Candidates have provided a position statement as well as responses to questions posed to them. (Please login to the website to read them.) Who do you think most closely aligns with your views? Who will represent the diverse needs of the profession well for the next three years?

Voting opens May 2 at noon. Please take the minute required to vote!

Sharon Giffen, FCIA, is President of the Canadian Institute of Actuaries.

 

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