Five lessons on decision-making from the Labor leadership spill

Last week's Labor leadership change has thrown light on some of the key behavioural biases at play in decision-making.

The tumultuous week has demonstrated that forces beyond stats and rationality impact our lives and that even the smartest amongst us are still prone to emotional and largely unconscious behavioural influences.

Congruence – we are fuelled and fooled by our need to make sense of our own behaviour

We are motivated by internal consistency (congruence) and will modify our interpretation of our behaviour or values to maintain this. For example, Lance Armstrong didn't (still doesn't?) consider himself a cheat because his deviations from the rules built incrementally, allowing him to justify his actions to himself as either "everyone does it" or he was just "levelling the playing field" after his health issues.

Our federal pollies have been working overtime on explaining to themselves the reason for their actions. Poll data has been cited as reason enough, but I haven't heard many cite job security as their motivation.

Revenge – we want to be treated justly

Sadly, revenge is in us all – it explains tailgating on our roads. Behavioural studies have shown that when we feel we have been unfairly treated (e.g. our collaborator has not split the reward with us equally) we will take action to ensure neither of us is rewarded. I'll leave it to you to surmise who was looking for revenge in the leadership spill.

Liking and the halo effect – reasoning follows emotion

Robert Cialdini is a leading behavioural researcher and bestselling author who identified 'liking' as a key element of influence. In essence, we are more likely to do business with (or vote for) people we like. Listening to talkback radio following the leadership change, I was struck by how many times callers said they either "liked" or "did not like" one political leader or another.

The slippery slope is that once you like someone you will seek confirmatory evidence of your affection and find it hard to budge from that assessment because it undermines your sense of being a good judge of character. Known as the halo-effect, if you see some positive traits in someone you will likely find many other redeeming features.

The reverse hold true as well. Early questions about Gillard's integrity snowballed as examples of mistakes made reinforced negative perceptions where positive actions taken were largely dismissed.

Remembering vs experiencing – our experiences are actually memories

Our brains work largely in the abstract, so we think in concepts rather than absolutes. As Phil Barden notes in his book Decoded, storing exact information about every make and model of car we see would simply not be possible, so instead our mind stores concepts about cars (shape, purpose, how it moves) that then get connected together when the need arises. That explains why when you come across a radically new concept (e.g. using a smartphone for the first time) it takes a while to understand what it is.

In terms of the leadership spill, the Australian population has a memory of Kevin Rudd and is relying on this rather than the experience of living through his reign. This leaves us exposed to Hindsight Bias where everything seems so much simpler in retrospect – it's because the nuance and detail of the experience at the time is lost and replaced by our memory of how we felt about it.

This is what makes post-performance reviews (like annual staff performance reviews) so dicey – thinking back and explaining performance of six months ago will not do justice to the reality that was faced at the time of deadline pressure, competing demands and minutiae of day-to-day life. All you have to go on is a memory.

Lessons for business

Forget rationality. We don't make 'rational' decisions; we make emotionally based self-serving, short-circuited ones that we post-rationalise. To win and retain business you are best to devise your go-to market initiatives on two levels – first, how will people be influenced emotionally and, second, how will I help people rationalise their emotional decision?

Bri Williams

Bri Williams runs People Patterns Pty Ltd, a consultancy specialising in the application of behavioural economics to everyday business issues.

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