Is bias in the boardroom always a bad thing?

The dark side: The nine biases that can be detrimental to directors

Overconfidence bias: The tendency to overestimate our knowledge or capabilities in a certain area.

Sunk cost fallacy: The phenomenon whereby a director is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when its abandonment would be more beneficial.

Anchoring bias: A cognitive bias that involves relying heavily on the first piece of information encountered when making decisions, known as the ‘anchor’.

Loss aversion bias: Where the pain from a loss is felt more intensely than the pleasure from an equivalent gain, leading individuals to take risks to avoid losses rather than make gains.

Status quo bias: A preference to keep things as they are, which often results in a resistance to change.

Recency bias: This often leads directors to overemphasize recent events or information when making decisions, believing that recent experiences are more representative of the future than older, historical events, wins, or information.

Herding bias: A director’s and often, investors’ tendency to follow and copy what others are doing.

Authority bias: A bias that refers to a director’s tendency to take the opinions and judgments from authority figures more seriously. In an age of AI, we see directors giving authority bias to generative AI tools like ChatGPT due to its use of an authoritative tone when relaying information, regardless of its accuracy.

Confirmation bias: The tendency to search for, interpret, and favor information that supports a person’s beliefs or values, often resulting in groupthink. This can be in favor of a chair, a fellow director, or personal biases.

Building an awareness of self

It is ‘confirmation bias’ that I dissect in this article. But rather than refer to agreement with a chair or fellow directors, in this context, it relates to the human instinct to try and corroborate our own hypothesis, searching only for evidence that supports our theory. What we should be doing, however, is searching for information that disconfirms it.

Picture this: a new CEO candidate is being shortlisted, and your gut is telling you no. You’re not sure why, maybe it is a repeated phrase on their CV, the way they speak about a recent business transformation, a physical prejudice, or an environmental factor around you. Maybe it was your journey into work clouding decision-making and ultimately, making optimism for new ideas, strategies, or people seem unlikely for the day. Maybe they remind you of a former colleague, one that you simply wouldn’t work with again. Now think about your next steps. You cannot yet voice your concerns because you do not have a legitimate reason to dismiss the candidate, so you look for evidence. But rather than searching for red flags, horror stories in the lines of this candidate’s CV, or unreliable references, what you should be looking for is reasons why you are wrong.

You must probe and investigate your bias to discover why you feel the way you do and try to find evidence that refutes it. This requires self-exploration – analyzing your own decision-making style and the steps taken to reach it. You must go against the grain of your own pre-judgment and, in the instance of a red flag candidate, search for stories in their previous business transformations that provide evidence that your bias is unfounded, rather than instances that support it. For investments in industries or regions you deem to be unstable, you could look for precedents and returns, for acquisitions, good press, as well as bad, that shed a different light on these industries and regions.

If you find this evidence, you must separate your former opinion from fact and have the emotional intelligence, maturity, and moral judgment to accept the decision. If you do not, however, find anything that disproves your bias, it could be a startling example of heuristics and how bias can be one of the most valuable intuitions in board members.

In the boardroom

So how does one practice this ‘hyper awareness’ in the boardroom?

Often, directors are expected to contribute to hugely important decision-making in an instant. This does not always allow time for pausing and fact-finding to confirm or disconfirm a bias. Directors must therefore be constantly aware of what is going on inside.

You must learn to understand your emotions and feelings in big moments, how they change, and what factors contribute to that change. In mindfulness practices, a simple body scan helps you observe how your physiological and psychological being in the moment is, and how it might cloud your view. You must learn how to identify triggers and how external factors around you may affect you. In strategy, external analysis is very important. In new situations on the board take notice of the situation and others’ behavior, what possible challenges and opportunities there may be for you. If you think you have no time for this, make

You can also reframe your thoughts into positive actions. Share that you have doubts about a candidate that you cannot yet substantiate, and suggest to your fellow board members that you run one last background check on an individual or do further due diligence, just to be on the safe side. Often, this conversation alone can lead to realizing that you are not alone with the concern, but only you had the courage to voice what could not be said clearly. You also need to understand and consider the dynamics of the board and its directors, reading the body language and interactions between members, and considering the interrelationships that already exist, which can help predict how one or several members might vote.

Giving gut feelings credit

Ultimately, directors must master an awareness of self, context, feelings, and hunches – giving those awkward gut feelings attention but not confirmation without first finding the data to refute it. Different from bias, heuristics are simple rules or rules of thumb that guide us to find satisficing responses quickly. Gained through experience with specific activities, such as hiring CEOs, over a long time, these simple rules are not misleading biases but paths to better decisions. When directors do not know whether they favor an option because they are biased or have intelligent intuition, it is their duty to investigate and test by searching for disconfirmation to debias their decision-making.

I interviewed Gerd Gigerenzer, author of How to Stay Smart in a Smart World and The Intelligence of Intuition. He is one of the leading scholars of heuristics and intuition, and argues that under the label of bias, we risk losing the positive insights accumulated through experience. He said: “There is an unfortunate association between heuristics and bias, but no association exists. Every heuristic can be excellent in some environments and bad in others. That is the real question. The study of what environment a business, I, or a manager rely on what heuristics, that is, a study of ecological rationality. That means rationality is not defined by the axioms of consistency; you don’t get very far with that in a world of uncertainty. But rationality is the success of a certain heuristic in a defined environment.”

Bias cannot be avoided, but it can be mitigated, and better still, utilized as an immensely powerful self-realization tool at the board level and beyond. It requires a boardroom culture that enables rich discussion, conflict, and time for reflection. It also depends on a director’s commitment to practicing the art, going beyond ‘seeing and reading the air’ in a boardroom and instead taking the time to identify their biases and probe them.