The Consistency Trap: How to make better decisions

Practice makes perfect, or so the saying goes. However, that is not necessarily true when it comes to making complex decisions with unpredictable outcomes.

Behavioural science has revealed many patterns that guide human decision-making. This includes common biases and 'mental shortcuts' that can lead to poor choices.

Understanding these patterns can be highly valuable for business leaders. It can help them to identify those patterns in the decisions they make on a daily basis and make better choices as a result.

Business owners and managers typically have to make a wide range of choices. Many of these involve a certain level of uncertainty.

These include important decisions that might result in significant financial gains or losses for their business.

Understanding how these unpredictable outcomes affect the decisions we make can help leaders to recognise and avoid potential bias.

Many managers assume that the more risky and important decisions they make, the better they get at making them.

Empirical evidence, however, suggests that this is not necessarily the case.

Groundhog day for decision-makers

We found that when people repeatedly make decisions in similar scenarios, they tend to be guided by consistency rather than rationale.

This creates a significant risk for business as it could prevent managers from weighing all the available options.

Instead it could lead them to prefer certain options, simply because they closely resemble the choices they have made in the past.

We asked a group of participants to repeatedly choose between two options.

One of these options was risky, as it entailed either a sizeable financial gain or a financial loss.

The other was safe, as participants were certain to receive a smaller pay-out.

We asked participants to complete the test again one week later. This allowed us to examine their choices over time, unveiling patterns in their decision-making.  

The key objective was to determine whether people make consistent choices, improve over time, or pick things randomly.

Interestingly, we found that participants who were asked to make choices in risky scenarios time and time again became increasingly consistent.

Do decision-makers favour repetition over reason?

Our findings suggest that when people start choosing a risky option over a safe one, they typically make risky choices in the future.

Similarly, if they choose the safe option, they will be more likely to select safer options in the future.

This trend was apparent in the behaviour of participants in our study.

Most participants did not follow a rational approach of considering the outcome of previous trials and balancing their risk. Instead, they remained consistent with the choices they had made before. 

Previous studies had found that the order in which choices are presented to people affect the decisions they make.

If participants select a few risky options in a row, they are likely to reverse their strategy to balance the risk by picking a few safer choices.

Surprisingly, we did not observe this balancing behaviour at all.

Instead, our findings suggest that in risk-associated situations that they already encountered in the past, people tend to make the exact same choices they made before. 

Implications of the consistency trap for business decisions

Our results could have valuable implications for business leaders making decisions with uncertain outcomes.

Many people assume that the more choices they make, the better they become at making choices in similar situations. Typically, this is not the case.

The tendency to consistently make the same choices might prevent managers from adequately assessing the available information and calculating the risks when faced with similar decisions to those they have made previously.

This can hinder their growth, preventing them from learning from situations and truly improving their ability to make difficult decisions.

Rather than becoming better at making specific types of decisions, managers are far more likely to become increasingly consistent.

This means making exactly the same choices they made previously, especially if those decisions happened to have a positive outcome.

They might select the same vendor or manufacturing partner to fabricate their products without weighing other options.

Alternatively, they might follow the same procedures for prolonged periods of time, employ the same systems, and renew the same contracts without considering different approaches.

How to avoid the consistency trap

In many cases, managers can feel that they evaluated these options carefully, when in fact they simply selected the same options as before.

Becoming aware of this tendency could help them to re-evaluate the unique risks and conditions of each new situation they face.   

So, how can one avoid falling into this consistency trap?

A useful strategy to avoid inadvertently making the same decisions as before is to step out of the situation you are in.

Try to adopt an ‘outside’ view, rather than an ‘inside’ view.

This involves re-evaluating what thought processes led to a specific choice from an external viewpoint, to exit the ‘tunnel vision’ that people commonly adopt when making decisions.

For instance, managers could ask themselves, “If I was someone else and I was evaluating how I made this decision, what would I think? Would I think that I carefully considered options and deliberated or does my decision seem more like a knee-jerk reaction?”

Using behavioural science to make more rational decisions

By pulling back from a situation and observing it from the outside, people can re-orient themselves and take the time to reflect on the thought processes behind their actions. This can help them to recognise the cognitive biases involved, rather than just going through the motions.

Business leaders can use this to make better informed decisions by evaluating the risks and potential benefits of each option, whatever their previous choices.

Overall, behavioural science studies suggest that people tend to be overconfident in their ability to make decisions.

Taking the time to step back and re-assess situations, irrespective of whether you have encountered them before, is a highly useful practice to improve the decision-making process.

Further reading:

Is bias causing business leaders to make mistakes?

How to prevent profits from tainting behavioural nudges

Can power naps boost your productivity?

Have big corporations nudged us in the wrong direction?

Dr Tim Mullett is Associate Professor of Behavioural Science at Warwick Business School. He teaches Behavioural Economics on the BSc Management, BSc International Management, and Business Statistics on the MSc Business Analytics.

Learn more about decision-making on the four-day Executive Education course Behavioural Science in Consumers and Markets at WBS London at The Shard.

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