Future of Sourcing - Cognitive Bias https://futureofsourcing.com/tags/cognitive-bias en 7 Actions Procurement Leaders Can Take to Improve Diversity and Inclusion https://futureofsourcing.com/7-actions-procurement-leaders-can-take-to-improve-diversity-and-inclusion <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/7%20Actions%20Procurement%20Leaders%20Can%20Take%20to%20Improve%20Diversity%20and%20Inclusion.png"><a href="https://futureofsourcing.com/sites/default/files/articles/7%20Actions%20Procurement%20Leaders%20Can%20Take%20to%20Improve%20Diversity%20and%20Inclusion.png" title="7 Actions Procurement Leaders Can Take to Improve Diversity and Inclusion" class="colorbox" rel="gallery-node-1977-Hi5D5PNW6AI"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/7%20Actions%20Procurement%20Leaders%20Can%20Take%20to%20Improve%20Diversity%20and%20Inclusion.png?itok=0cUQ-xO3" width="624" height="325" alt="7 Actions Procurement Leaders Can Take to Improve Diversity and Inclusion" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>7 Actions Procurement Leaders Can Take to Improve Diversity and Inclusion</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/a-brief-history-of-the-enterprise-approach-to-supplier-diversity">A Brief History of the Enterprise Approach to Supplier Diversity</a></div><div class="field-item odd"><a href="/7-tips-to-shape-the-future-of-supplier-diversity-in-the-enterprise">7 Tips to Shape the Future of Supplier Diversity in the Enterprise</a></div><div class="field-item even"><a href="/how-diverse-suppliers-can-leverage-their-status-with-large-enterprises">How Diverse Suppliers Can Leverage their Status with Large Enterprises</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>So far in this <a href="https://futureofsourcing.com/author/Purvee-Kondal" target="_blank">series on diversity and inclusion</a>, we have explored a historical perspective on supplier diversity in the enterprise, tips to improve it, and how the supplier community can leverage their diversity status. Now we will discuss how procurement leaders can incorporate diversity and inclusion into their team management strategies.</p> <p>2020 is a year that will live in infamy. The wrath of COVID-19 has been felt worldwide, with no population spared, triggering shared experiences of traumatic events not seen since World Wars I and II. This global pandemic started in 2020 as an invisible enemy and continues making its mark in 2021. But this wasn&#39;t the only thing that brought trauma to our doorsteps in the United States and beyond. George Floyd&#39;s death and the racial unrest that followed highlighted the disparities that exist despite the global growth of economies. The need for a meaningful dialogue on diversity and inclusion is well overdue.</p> <p>Added to this are the hate crimes against Asian Americans of all types and ethnicities. These hate crimes demonstrate that not having an open dialogue on racial disparity and biases at our schools, work and communities is no longer an acceptable option.</p> <p>Our actions and the changes we make toward meaningful progress will determine our legacy. We still have an opportunity to shape what history will say about us and our roles if we take meaningful actions.</p> <h2>Starting the Dialogue on Organizational Diversity</h2> <p>Change takes time, but maintaining the status quo is no longer a viable option. Many organizations are beginning to identify and measure diversity and inclusion practices that have historically fallen short.</p> <p>Systematic and conscious biases have been attributed to &ldquo;company culture&rdquo; when it comes to hiring, promotion and retention decisions. I&rsquo;ve personally witnessed this in my career in the Finance and Procurement functions, and I am grateful for <a href="https://www.supplychaindive.com/news/procurement-employees-diversity-DEI-Gartner/596504/" target="_blank">the recent study by Gartner</a> that raises awareness.</p> <p>As an Asian immigrant woman leader, I am sharing experiences that shaped my professional outlook in the United States and may help others explore ways to improve diversity and inclusion.</p> <h2>Prevalent and Normalized Biases in Enterprises</h2> <p>The World Economic Forum did a fantastic lens on the <a href="https://www.weforum.org/agenda/2020/08/cognitive-bias-unconscious-racism-moral-licensing/" target="_blank">cognitive biases</a> that perpetuate racism at work that encompass:</p> <p>1.&nbsp;&nbsp; Moral licensing</p> <p>2.&nbsp;&nbsp; Affinity bias</p> <p>3.&nbsp;&nbsp; Confirmation bias</p> <p>These biases create a conformity mindset or groupthink, predominately portrayed as &quot;the network&quot; or &quot;alignment.&quot; This ends up being the root cause of a lack of diversity and inclusion if the network is associated with providing strong moral licensing, affinity and confirmation biases.</p> <p>This network effect ends up being the catalyst to others experiences. One can have a fantastic experience, while another may not, leading to disparate experiences in the same organization or team. The task at hand is to better understand why and who is responsible for contrasting experiences and how we can shape them to allow everyone to feel included.</p> <h2>Our Responsibility for Diversity and Inclusion</h2> <p>Regardless of our experience levels or titles, each of us has a role in making our work environment better and making decisions with diversity and inclusion in mind. People managers and teams help shape and define our collective experiences. Suppose those are shaped by someone who lacks self-awareness on diversity and inclusion or interacts with their teams from a place of fear or biases? In that case, unfortunately, those experiences will forever haunt their team members until better experiences come along to replace them.</p> <p>Our responsibility is to be a better team member, lead by example, be willing to self-reflect, become aware, and create a safe environment for a dialogue on challenging issues like diversity and inclusion. We have to champion processes and be willing to provide or accept the tools necessary to engage in a dialogue that otherwise is too easily swept under the rug.</p> <h2>Seven Actions to Improve Diversity and Inclusion</h2> <p>It&rsquo;s clear that leadership on Diversity and Inclusion initiatives have fallen short. So, what can we do to change this? There are seven key fundamentals actions to improve diversity and inclusion that I have observed. I hope this helps others to make a shift.</p> <p>1.&nbsp;&nbsp; <strong>Create a Safe Environment - </strong>Draw quiet team members into the discussion and recognize that just because someone is quiet doesn&#39;t mean they don&#39;t have anything to contribute. From leading by example to not penalizing people for their differences, we can help create a safer environment for our teams.</p> <p>2.&nbsp;&nbsp; <strong>Praise Publicly &ndash; </strong>Public recognition of the contributions that our teams make, regardless of ranks or titles, is an essential element to allow people to feel appreciated for their hard work. Actions always speak louder than words, so create simple programs by working with your HR teams to recognize anyone in the organization that may have contributed to your success, even in a small way. These small tokens go a long way to create a positive balance towards team culture.</p> <p>3.&nbsp;&nbsp; <strong>Coach Privately - </strong>If you publicly praise your team members&#39; contributions, you will be granted the privilege to coach individuals privately. Too often, leaders jump to coaching in the guise of mentoring without having acknowledged contributions or thanking team members. Such tactics do not work, so it&#39;s essential to recognize that a debit balance of praise is needed before a withdrawal of coaching can be made.</p> <p>4.&nbsp;&nbsp; <strong>Sponsorship and Not Mentorship is the Key - </strong>Many leaders jump on the bandwagon to mentor diverse and underrepresented team members. But more often than not, they need sponsorship and tools to learn and grow. So, support your diverse and underrepresented team members by sponsoring them, praising their contributions and getting to know them so that we may earn the privilege to coach them.</p> <p>5.&nbsp;&nbsp; <strong>Embrace Transparent and Data-Driven Decision-Making - </strong>Reset the organizational mindset by creating transparent and quantitative criteria for hiring, retention and promotion decisions based on skills, performance and meritocracy that are consistently applied across the organization. When decisions are not transparent and lack consistency, it creates distrust that leads to an unhealthy organizational culture.</p> <p>6.&nbsp;&nbsp; <strong>Create More Than One Seat at the Table - </strong>Recognize that diversity and inclusion isn&#39;t about hiring that &ldquo;one&rdquo; seat to check the box, but instead creates an environment that reflects the communities in which we live and work. Regardless of levels, we need to start having a conversation around having qualified individuals who deserve the seat, regardless of their race, gender, religion or other previously defined parameters. It shouldn&#39;t be limited to just that one token seat, so let&#39;s increase the number of seats at the table to reflect diversity and inclusion.</p> <p>7.&nbsp;&nbsp; <strong>Invest in Training, Learning and Development - </strong>Aptly captured in a recent Global Procurement Excellence survey from McKinsey &amp; Company, most Procurement organizations have <a href="https://www.sdcexec.com/sourcing-procurement/press-release/21138157/mckinsey-company-do-you-know-what-your-procurement-function-canand-cantdo" target="_blank">historically lacked budgets and support</a>. As to why that is, I would invite you to read my previous article on this topic on making &quot;<a href="https://futureofsourcing.com/the-case-for-changing-the-chief-procurement-officer-role" target="_blank">The case for changing the Chief Procurement Officer role</a>.&quot; We must insist on having adequate budgets to train our associates for the tools they need to succeed in their jobs and diversity and inclusion to grow stronger as a team.</p> <p>The tide is finally turning on diversity and inclusion in procurement, and I remain optimistic that the future will be better. With awareness finally starting to build around the need to evolve the procurement and our interactions with suppliers, we have an incredible opportunity to improve diversity and inclusion in our organizations, functions, teams and among suppliers.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/diversity-and-inclusion" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Diversity and Inclusion</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/covid-19" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">COVID-19</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/cognitive-bias" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cognitive Bias</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="7 Actions Procurement Leaders Can Take to Improve Diversity and Inclusion - Future of Sourcing" addthis:url="https://futureofsourcing.com/7-actions-procurement-leaders-can-take-to-improve-diversity-and-inclusion"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 27 Apr 2021 02:00:00 +0000 Purvee Kondal 1977 at https://futureofsourcing.com https://futureofsourcing.com/7-actions-procurement-leaders-can-take-to-improve-diversity-and-inclusion#comments Kahneman, Tversky and cognitive biases https://futureofsourcing.com/kahneman-tversky-and-cognitive-biases <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/FOS%20Digital_Kate%20Vitasek_Slider%20Graphic%20%281%29%20%281%29_86.png"><a href="https://futureofsourcing.com/sites/default/files/articles/FOS%20Digital_Kate%20Vitasek_Slider%20Graphic%20%281%29%20%281%29_86.png" title="Kahneman, Tversky and cognitive biases" class="colorbox" rel="gallery-node-1113-Hi5D5PNW6AI"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/FOS%20Digital_Kate%20Vitasek_Slider%20Graphic%20%281%29%20%281%29_86.png?itok=NLHCOzVa" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Nobel laureate&nbsp;<a href="http://www.princeton.edu/~kahneman/" target="_blank">Daniel Kahneman</a>, professor emeritus of Psychology at Princeton University, famed for his psychological research into economic science and behavioral economics, laid the foundation for the field of research known as cognitive biases.</p> <p>His work has been popularised recently in a TED talk, &ldquo;<a href="http://www.ted.com/talks/daniel_kahneman_the_riddle_of_experience_vs_memory.html?quote=655.html?quote=655" target="_blank">The riddle of experience vs. memory</a>&rdquo;. Kahneman and his colleague Amos Tversky (who died in 1996) challenged traditional economic theory that dates to Adam Smith: that people make rational choices based on their self-interest. Their research showed that people frequently fail to fully analyse situations where they must make complex judgments. Instead, people and organisations often make decisions using rules of thumb rather than rational analysis, and they base those decisions on factors economists traditionally don&rsquo;t consider, such as fairness, past events and aversion to loss.</p> <p>As I dug deeper into Kahneman&rsquo;s work, I was struck by just how many cognitive biases there are!&nbsp;<a href="http://en.wikipedia.org/wiki/List_of_cognitive_biases" target="_blank">The list</a>&nbsp;is literally from A-to-Z: from the &ldquo;ambiguity effect&rdquo; to &ldquo;zero risk bias.&rdquo; These &ldquo;cognitive traps&rdquo; make it virtually impossible to think clearly in our personal &ndash; and business &ndash; lives.</p> <p>Kahneman and Tversky found that people&rsquo;s decisions can be swayed by how a given situation is framed. For example, they asked people to hypothetically decide what procedure to take to cure a disease, and most preferred a procedure that saved 80 per cent of people to one that killed 20 per cent.</p> <p>While their examples are numerous and widespread, it is the business examples that interest me the most. In&nbsp;<a href="http://www.mckinsey.com/insights" target="_blank">a 2008 video interview with McKinsey</a>&nbsp;Kahneman asked, &ldquo;Are the talents of the people that surround the decision-making utilised effectively? In many cases the answer is no.&rdquo; That&rsquo;s because there is an &ldquo;enormous amount of resistance to improving the quality of the decision-making process &ndash; people feel threatened.&rdquo;</p> <p>That resonates with me. I can definitely testify that all too often businesses get stuck in a rut because they fear change &ndash; and their decisions are based on their own cognitive biases. In short, they are afraid to move forward because&nbsp;<a href="http://www.vestedway.com/" target="_blank">Vested</a>&nbsp;is different &ndash; and cling to why they need to continue doing things the same old same way they have always done them.</p> <p>Vested&rsquo;s 10 Ailments that can plague business and outsource deals come to mind. There&rsquo;s the Junkyard Dog Factor, where after a decision to outsource is made, employees hunker down and stake territorial claims to processes that &ldquo;absolutely must&rdquo; stay in house. The Zero-Sum Game occurs when companies believe that if something is good for the service provider, then it is automatically bad for them. Measurement Minutiae is another, where companies get bogged in a sea of metrics &ndash; they must measure everything that move! &ndash; most of which are not used in a meaningful way.</p> <p>The idea of cognitive biases in business also resonates with Jim Taylor, an adjunct professor at the University of San Francisco. Taylor picked up on Kahneman&rsquo;s and Tversky&rsquo;s themes last year in a&nbsp;<em>Psychology Today</em>&nbsp;article, &lsquo;<a href="http://www.psychologytoday.com/blog/the-power-prime/201305/cognitive-biases-are-bad-business" target="_blank">Cognitive Biases are Bad for Business</a>&lsquo;.</p> <p>He said their work shows that &ldquo;humans make decisions and act in ways that are anything but rational.&rdquo; Cognitive biases can be broadly placed in two categories, he continued:</p> <ul style="list-style-type:square;"> <li>Information biases that include the use of heuristics, or information-processing shortcuts, can &ldquo;produce fast and efficient, though not necessarily accurate, decisions.&rdquo;</li> <li>Ego biases include emotional motivations, such as fear, anger, or worry, and social influences such as peer pressure, the desire for acceptance, and doubt that other people can be wrong.</li> </ul> <p>When cognitive biases influence individuals, real problems can arise. But when cognitive biases impact a business, then the problems can be exponentially worse. Just think of the Edsel and the&nbsp;<a href="http://www.wired.com/gadgetlab/2010/06/four-reasons-why-microsofts-kin-phone-failed/" target="_blank">Microsoft Kin</a>.</p> <p>Taylor identified 12 cognitive biases that appear to be most harmful to business decision-making. (He noted that some of these cognitive biases were developed and empirically validated by Kahneman and Tversky.) Taylor&rsquo;s 12 biases include:</p> <ul style="list-style-type:square;"> <li>Knee-jerk bias: fast and intuitive decisions when slow and deliberate decisions are necessary.</li> <li>Occam&rsquo;s razor bias: assume the most obvious decision is the best decision.</li> <li>Silo effect: use too narrow an approach in making a decision.</li> <li>Confirmation bias: focus on information that affirms beliefs and assumptions.</li> <li>Inertia bias: think, feel, and act in ways that are familiar, comfortable, predictable, and controllable.</li> <li>Myopia bias: see and interpret the world through the narrow lens of your own experiences, baggage, beliefs, and assumptions.</li> </ul> <p>Ego biases include:</p> <ul style="list-style-type:square;"> <li>Shock-and-awe bias: belief that intellectual firepower alone is enough to make complex decisions.</li> <li>Overconfidence effect: excessive confidence in beliefs, knowledge, and abilities.</li> <li>Optimism bias: overly optimistic, overestimating favorable outcomes and underestimating unfavorable outcomes.</li> <li>Homecoming queen/king bias: act in ways that will increase acceptance, liking, and popularity.</li> <li>Force field bias: think, feel, and act in ways that reduce a perceived threat, anxiety, or fear.</li> <li>Planning fallacy: underestimate the time and costs needed to complete a task.</li> </ul> <p>Taylor sums up his article matter-of-factly. &ldquo;Clearly, cognitive biases are bad for business&hellip;(they) are most problematic because they cause business people to make bad decisions.&rdquo;</p> <p>Outsourcing decisions in today&rsquo;s volatile global economic climate are highly complex and uncertain, especially where one side or the other acts with self-interest, inflexibility and/or incomplete knowledge of the enterprise or problems. Irrational or at least ineffective behaviour &ndash; and outcomes &ndash; is almost guaranteed in those instances.</p> <p>So what can you do about cognitive biases that inflect your organisation? How often have you sat in meetings where some, or all, of those biases were on display?&nbsp; Taylor says there are ways to fight through the bias thicket.&nbsp; His tips include:</p> <ul style="list-style-type:square;"> <li>Be aware that cognitive biases exist; use your understanding of them to ask the right questions.</li> <li>Collaboration: the best way to recognise and mitigate cognitive biases.</li> <li>Turn on the cognitive bias radar.</li> <li>Establish a trusting, disciplined and consistent framework and process for making decisions.</li> </ul> <p>I agree with Taylor&rsquo;s tips. As I like to teach &ndash; don&rsquo;t be afraid to point out the elephants in the room! In fact, you might enjoy&nbsp;<a href="http://www.informationweek.com/strategic-cio/team-building-and-staffing/5-ways-to-turbocharge-innovation-/d/d-id/1112920" target="_blank">this opinion piece</a>&nbsp;I recently wrote for&nbsp;<em>Information Week</em>&nbsp;on this topic.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/behavioural-economics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Behavioural Economics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cognitive-bias" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cognitive Bias</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/psychology" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Psychology</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/vested-outsourcingd" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Vested Outsourcingd</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Kahneman, Tversky and cognitive biases - Future of Sourcing" addthis:url="https://futureofsourcing.com/kahneman-tversky-and-cognitive-biases"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Thu, 06 Feb 2014 10:41:40 +0000 Kate Vitasek 1113 at https://futureofsourcing.com https://futureofsourcing.com/kahneman-tversky-and-cognitive-biases#comments