THE HIDDEN WORLD OF SHORTCUTS

Our brains’ shortcuts and their covert role in boardroom decision-making and cohesion

Our brains have many covert methods to deal with information overload, especially when making decisions involving large amounts of complex data. One stand-out method is called heuristics. These are practical strategies for solving problems quickly by using mental shortcuts to reach decisions that are not perfect, but are good enough to get the job done.


Heuristics are an evolutionary adaptation that allow rapid information processing, particularly under stressful or uncertain conditions. Current theories suggest heuristics operate to help us more easily digest complex information, and reduce the cognitive effort required in decision-making. Yet these shortcuts have both benefits and costs.


This is the first of two articles diving deeper into these topics. This article explores the key role of heuristics in boardroom decision-making and cohesion. In our second article, we explore in more depth the associated benefits and costs of these heuristics, and discuss new ways of working that will help improve the quality of boardroom outcomes.


Fundamental relevance for the boardroom

In recent years, significant progress has been made in our understanding of how decisions are made, consciously and unconsciously. While some disciplines have been quick to embrace and begin to apply this knowhow – in particular the fields of AI and machine learning – boards have been relatively slow to recognise the full implications for their own ecosystems. However, this knowhow presents an unprecedented opportunity to herald entirely new ways of working that support consistently high-quality decision-making, and the kind of high-performance dynamics that underpin the most effective supervision.


In 2019, McKinsey carried out a global survey through which managers reported “growing levels of frustration with broken decision-making processes, with the slow pace of decision-making deliberations, and with the uneven quality of decision-making outcomes.” Accelerating complexity, uncertainty and pace of change no doubt play major parts. The boardroom is not isolated from this developing phenomenon. Sitting at the apex, not only do boards depend on the quality of these decisions passed through from the executive, but their own processes risk overlooking or even exacerbating margins of error.


Neuroscience and psychological insights are two routes to help us understand at a deeper level the mechanisms that lie hidden beneath our decision-making processes. This deeper understanding then allows us to evolve more effective solutions to counter the escalating forces of complexity, uncertainty and change.


A choice of strategies

We will be familiar with the figurative terms left brain and right brain, and their respective associations with logical versus innovative decision-making. Our rational brain helps us make simple decisions quickly based on our experiences. It is characterised by fewer, more engrained and rigid neural connections, and they manifest in fast but highly-conditioned thought processes. These connections are our brain’s neural super-highways.


In contrast, our creative brain is better equipped to engage with complexity because it is served by shorter, denser and more adaptive neural connections. Our rational brain is exploitative in nature and our creative brain is explorational. The first is arithmetic in its capability and the other is geometric. In electronics parlance, contrast the functionally of a simple circuit board versus the powerful capabilities of the integrated micro circuits found in silicon chips.


Yet, being an evolutionary adaptation that is as much unconscious as conscious, there should be no sense of blame or self-criticism when we employ heuristics. This is particularly true given the chemical traps our brains set for us when we do so, which we discuss later in this article.


There are alternative strategies to heuristics for making decisions, however. And, by using the lens of our brain’s architecture, we can recognise the strengths and weaknesses of heuristics in context, and are better able to steer our approach so that we apply the right decision strategy to the right circumstances more often.


The reliability of heuristics in boardroom decision-making

Logical heuristics are used all the time by leaders throughout the business structure. They are based on approximations – reinterpreting our prior experiences to solve current problems. Studies show our brains are particularly adept at making fairly accurate approximations under the right circumstances. This is also true in the boardroom, which is why the breadth and relevance of directors’ experience is so important when considering a new board appointment.


Heuristics are particularly likely to be activated under time pressure or stressful moments. In many situations they serve us well, especially where the factors relevant to the decision are familiar and visible. When they are not, reliance on these heuristics can provide a false sense of security.

“We find an answer that we are happy with, and we make an acceptable but imperfect decision.”

A study by Oxford University in 2017 found that, when a decision needs to be made in a hurry, two things happen. First, we employ heuristics. We find an answer that we are happy with, and we make an acceptable but imperfect decision. More specifically, the greater the pressure to make a decision, the lower the information threshold we require in order to make that decision. In other words, we take a punt. Second, our brains flood our bodies with feel-good chemicals for having made that decision so quickly.


Pause to reflect on that for a moment. Our brains are wired to give us a feel-good rush for making imperfect decisions quickly.


The desire for an internal experience that says ‘good job’ is hugely appealing. It is no wonder that we frequently fall into the same trap our brain sets for us, resulting in riskier decisions. As we explained before, there is no blame in this, being an evolutionary adaptation. Yet, with heuristics likely to be a primary driver of many if not most decisions, the cost lies in the varying quality of those decisions longer-term. Particularly for decisions with longer-term impacts, we often employ heuristics to find a line of best-fit through a myriad of competing factors. This strategy balances the future potential upsides with the potential downsides, as we perceive them. Because heuristics necessarily involves error borne from uncertainty, the degree of our uncertainty tends to steer us towards overly cautious decisions.

“…the intention must always be to give ourselves every chance to make the best possible decisions given all the circumstances.”

Company secretaries will be familiar with the kind of situation one author recounts. The incident involved an important committee meeting, where eight significant decisions were made in about 20 minutes. The meeting had started particularly late and everyone was in more of a hurry than usual. The degree of euphoria for finishing on time at the close of meeting was palpable, but that group had little appreciation as to how good or bad those decisions would prove ultimately.


Of course, the quality of decisions can only be properly assessed after all the outcomes have crystallised. But surely the intention must always be to give ourselves every chance to make the best possible decisions given all the circumstances.


In summary, heuristics are positive strategies for fast decision-making, but the trade-off is always in the quality of the longer-term outcomes, particularly where circumstances involve higher levels of complexity and time constraints.


The role of heuristics in driving social cohesion in the boardroom

Social cohesion refers to the extent of connectedness and solidarity among groups of people. Here too, our brain makes many shortcuts. There is an entire brain network dedicated to making inferences about others’ thoughts, desires and beliefs. These calculations are always based on imperfect data, but they are necessary for smooth social interactions.


We make assumptions all the time when we first meet someone new. Our brain is rapidly cross-checking their clothes, their manners, their speech to our expected or desired norm. We then decide if this person is a good fit. We try to balance this with the consideration of objective data (education, experience, personality testing etc) but, in the selection of new board appointments as with any other role, the decision often comes down to an intangible sense of best fit based on gut feelings. The closer the person is to our norm, the more comfortable and safer we feel about our decision.


These social heuristics are great for creating a sense of tribe. They help us determine who can work together, think together, communicate well, and drive forward a common purpose. In the intellectually and socially demanding boardroom, we know that social cohesion is essential for great decision-making, Yet the very resonance that binds a group can also be problematic. It can exclude cognitive diversity and other forms of difference, which can be experienced by the brain as a potential destabilising threat to our familiar culture. In consequence, we can unintentionally find ourselves with deeply entrenched boardroom behaviours based on tradition.


‘Tried and tested’ is a familiar and oft-cited phrase. In his book Reading Black, Reading Feminist, Henry Gate observed that, because tradition has served as a powerful heuristic term, we are always in danger of reifying it. But there are good reasons for doing so. Without heuristics, many daily decisions would become intolerable if not impossible.


It is only with time, repeated encounters, performance under stress and a sense of trust that we can really determine the strength of group cohesion. Pausing to tend to the conditions that create great social cohesion becomes even more important where we value cognitive diversity, innovation and responsiveness to challenging business environments.


Seminal work in the field of psychology warns us to be less confident in our logical brain reasoning. This is especially true in social settings such as the boardroom, where we are strongly influenced by our own emotions and those of particularly dominant members of the group (known as emotional contagion). These then require their own set of strategies to counter the potential for anomalous decisions. We will discuss these in our next article.


Starting a new journey

The future board needs to take account of the covert logical and social heuristics that are at play in both positive and negative ways.


Under conditions of stress, the effects of heuristics are amplified, because the associated thinking processes are influenced to an even greater extent by emotions. While Covid-19 and Brexit have placed unprecedented stress on boards, these are not the only global challenges they are contending with.


Addressing these aspects of cognitive and social psychology in a time of challenge is not easy. But, in this moment also comes opportunity - the chance to open-up boardrooms to more diverse thinking and innovation, and the benefits these bring.


As we are all on this journey together, we welcome feedback from readers about any aspects of these topics that they find interesting.

In our next article, we explore the benefits and costs of heuristics, and discuss new ways of working which help improve the quality of decisions and deepen board cohesion.


www.demyst.co.uk


Originally published in the November 2020 issue of Governance and Compliance magazine, www.govcompmag.com.


Neil Tsappis LLM FCG FRSA and Dr Tamara Russell MSc PhD DClinPsy FRSA are directors of demyst board sciences




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