Decision Hygiene (DH) – How to Tackle Noise in your organization
Many people understand the way in which biases can creep into decision-making. Biases are errors in judgments, which follow in a specific direction. Most people are much less aware of how noise can affect their choice making. Noise refers to an unwanted variability in judgments. Here, unwanted is an important criterion. Take as an example a doctor’s diagnosis. If two doctors give two different diagnoses, then one of them is supposed to be wrong. In such a case, noise means the two different directions or unwanted variabilities. There can also be noise within an individual. For instance when presented with the same problem twice, but giving two different answers.
People do underestimate noise levels. This is one of the research results described in Daniel Kahneman’s new book “Noise” (New York, 2021). “The research shows that when we evaluate someone’s performance, only about one-quarter of the rating is related to actual performance. The other three-quarters are related to noise” (Olivier Sibony, co-author of “Noise”, in McKinsey & Company, “Sounding the alarm on system noise”, May 2021). So wherever there is judgement, there is noise, and often much more than expected.
If we want to know more about noise in our organization, a noise-audit is a helpful and structured way to proceed and aiming at reducing noise. DIALOGOS / THE SCHOOL OF THINKING provides its customers with noise audits, measuring the different responses of people to the same problem detected in the organization. The degree of variability in judgment between people is always much greater than they would expect.
Noise reduction is a matter of decision hygiene (DH). DH is a set of procedures for reducing noise. More examples of DE are: aggregating multiple independent judgments, or doing relative judgments, or applying algorithms instead of or additionally to human judgment. Kahneman points out that reducing noise also leads to reduction of bias. One of the origins of bias is that people tend to jump into conclusions early, based on very little information. They find information that confirms their existing opinions, and they look for information in a selective way. DH procedures break such patterns and prompt people in the organization to view a problem with a minimal of intuition. Through following DH procedures one has less room for biases in the independent judgment.
Key words: bias, noise, noise-audit, decision hygiene (DE) procedures.