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Why You Make Bad Decisions

Ever wonder how to weigh price against quality when selecting a supplier? Here's a Harvard professor's advice about how to think it through.
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When you make a poor choice, is it an isolated occurrence? Chances are, it isn't. And there are probably overarching reasons--even patterns, or frameworks--that explain the various poor choices you make.

Harvard Business School professor Francesca Gino (@francescagino), author of Sidetracked: Why Our Decisions Get Derailed and How We Can Stick to the Plan, explains some of these patterns to Inc. For example, one common pitfall is failing to evaluate the context of a given performance, whether you're judging employees or outsiders (such as suppliers, job candidates, partners).

"We tend to discount information about the situation the person is in and focus just on the individual," Gino tells editor at large Leigh Buchanan (@LeighEBuchanan).

We also show a cognitive bias toward people who exude confidence. There's nothing wrong with confidence, per se; what's wrong is swaying decisions too strongly in favor of those who ooze it. Why? Confidence can be a practiced facade or based on past achievements reached amid unchallenging circumstances. That's why evaluating context is so important.

When it comes to vetting suppliers, Gino advises:

1. Avoid conflating price with quality.

"Gino tells the story of consulting on a market research project for a large organization," Buchanan writes. "Asked to find a vendor who could put together panels of potential customers, she came back with two quotes. One was from a company that would supply all the people needed for the research for $5,000. Another was from a company that would supply far more people for far more money. 'The management wanted to go with the higher priced one on the bias that if they are collecting all that information, it must be helpful,' says Gino. 'That's not necessarily the truth.'"

2. Avoid focusing on inputs rather than outcomes.

"If we believe a company is putting in lots of effort, we assume it must be doing a good job. Under that logic, a long time spent on product development is testament to a product's quality. 'I know of a bicycle company that would actually delay the shipment because they wanted to give customers the sense that they were putting a lot more work into the manufacturing,' says Gino."

#baddecisions

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Last updated: Apr 30, 2013

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The Build Network staff curates provocative, actionable leadership advice for executive teams running sustained-growth companies.




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