Neuroscience And The Nonprofit Manager
September 26, 2015 The NonProfit Times
Leaders who struggle with risk management might be able to attribute their difficulties to their own brains working against them. Diana Del Bel Belluz, founder and president of Risk Wise Inc., in Toronto, explained to attendees of the 2015 Risk Summit that the brain is capable of undermining success in risk management by overestimating or underestimating rewards, overestimating one’s ability to control risk, misaligning risk-reward tradeoff and allowing for self interest to take over organizational interests.
During a workshop, “Don’t Bother Me, I Can’t Cope: Using Neuroscience To Enhance Risk Management,” at the 2015 Risk Summit, Diana Del Bel Belluz, founder and president of Risk Wise Inc., in Toronto, explained to attendees that the human brain works in two systems. System 1 is the fast-acting portion, capable of efficiently making routine decisions and recognizing patterns, but succumbs to biases and has little understanding of logic or facts. System 2, the slow-acting portion, is better for deliberate thinking, considering complex situations and fact checking, Belluz said, but is easily worn out and depleted.
Regardless of which system of the brain tends to inform organizational decisions, Belluz offered up some tips on how to counteract common biases and habits that impede effective decisions and how to have both sides work for you.
“What you see is all there is” is the practice of basing decisions on information that is readily available. Belluz recommended seeking out data beyond what one can recall as well as exploring potential future shifts to help make more informed decisions.
Confirmation bias, the tendency to favor information that validates what is already believed. Ask “What would it require for this to be true?” or “What would require this option to be the best approach?” Play devil’s advocate by arguing for other points, Belluz said, which forces you to look at problems from other angles.
Decision fatigue can mount the longer a problem is focused on. Critical decisions should be made during the beginning of meetings when minds are the freshest, Belluz said. Giving team members the opportunity to think things over prior to a meeting also helps prevent too much strenuous thinking in a short time.
Some managers suffer from over confidence or optimism that every situation can be successfully taken on. Pump the brakes and let System 2 take over for a bit, Belluz said. Prepare to be wrong.
Similarly, some managers might overestimate the ability to control risks. Belluz recommends developing and testing risk response plans including drills, tabletop exercises and role-playing. Understand if members of the organization are knowledgeable about their responsibilities in select scenarios.
Managers can avoid making errors based on short-term emotions by creating distance in time or space, quite literally sleeping on decisions, Belluz said. The 10-10-10 approach, which requires organizations to think about the impact of decisions 10 minutes, 10 months and 10 years into the future, helps unstick the brain from the short term, Belluz said.
Avoid overlooking the human factor in developing risk management programs, Belluz said. Typically, 90 percent of effort is dedicated to the creation of the program and rounding out an accountability and assessment framework while 10 percent is earmarked for education, coaching and listening, Belluz said. The emphasis should be reversed, she said.
In developing decisions, sometimes the first piece of information or suggestion offered up is relied on too heavily, creating an anchor bias, Belluz said. Allowing for a silent brainstorming session prior to discussion and subsequently evaluating the thoughts of the group is a means of avoiding being pulled under, according to Belluz.