Decision Making: Dealing with Biases and Ambiguity

One of the most fascinating areas in management and organizational behavior is how decisions are taken in companies and firms. One of the reasons for this interest is that, being a central process that defines how efective an organization can be, it is puzzling to observe how much difficulties and failures organizations face in this matter.

Lawyers like to think of themselves as rational people, and they normally are … when they practice law. It is surpricing to see how much rationality can be spared when lawyers deal with management and organizational matters This could be a subject for a whole book in itself, but I will focus on two aspects, which are ambiguity and biases in decision-making processes, and how they interact with each other.

Issues like knowledge, quality and value tend to be opaque in professional service firms, meaning that what professionals do is difficult to evaluate with absolute certainty, both by clients and among the professionals themselves. This is because the output of professional work is applied knowledge to specific cases that change from one case to another. This difficulty to evaluate creates ambiguity, which is not confusion or lack of clarity, but rather that the same reality could be subject to more than one plausible explanation. That means that things are not necessarily good or bad, or right or wrong, but could actually be subject to more than one acceptable opinion or solution. This is specially true with management decisions, where the right way to go is many times unclear or debatable (managing partners know what I am taking about).

Biases affecting decision making, on the other hand, is a hot topic in management thinking (I recommend the May 2015 Issue of the Harvard Business Review “Making Better Decisions”, and the book “Thinking, Fast and Slow” by Daniel Kahneman) because research is offering intriguing explanations of why we fail so much to make the right decisions. Let me mention some of the biases that I found more often in law firms and lawyers:

• Excessive optimism and confirmation bias: we tend to look for evidence that confirms our intuitive inclinations and then allocate too much optimism on the potential outcome.
• Status quo bias: we prefer to keep things unchanged and look for arguments to support that.
• Present bias: we value inmediate rewards very highly and undervalue long-term gains.
• Loss aversion bias: we feel losses more acutely than gains of the same amount, which makes us more risk averse
• Egocentrism bias: we focus too narrowly on our own perspective and asume that our view should be clear to everyone
• Right or wrong bias: this is particular to lawyers and their sense of justice, in which many times they tend to find a moral stance in their opinions or positions that makes them hard to change later, even if it makes sense to do it. If I am right and you are wrong it is more difficult to change my mind and find a common solution, and I will use all of my professional skills to support my position.

The above are only some biases that we normally have when face with decisions, but they give you a sense of how complex the system is and how prone we are to commit unwanted mistakes based on an assumed –and hardly existing- rationality. This becomes more complex when you are dealing with ambiguous matters, that is, decisions that could have more than one possible solution. And then you can add more sauce to the pie, when you consider the essential controvertial nature of lawyers. So image a world where you have a large number of biases –product of the way our brain selects and decides-, which are applied many times to ambiguous matters, by individuals that have a controvertial and skeptical trait. To make it even more complicated, lawyers in Latin America do not have any academic backround in management matters, so they do not know very well what they are dealing with. Any organizational expert would probably define that as the “decision-making perfect storm”.

All of the above can probably explain why lawyers get into so much trouble and usually find themselves bogg down in a variety of management and organizational issues. Needless to say, matters that have a higher political impact (like those that define power and economics in the firm) suffer the most, probably because they carry a higher level of ambiguity –several solutions could be right- and lawyers are more keen to apply intensely their biases.

Is there any way to get out of this jungle of hazards? Not easy, but let me suggest a few ideas:

• Don´t jump into conclusions and be ready to change your mind. You shouldn´t trust too much your instincts at first sight.
• Look for evidence and information that could help you take an informative decision. Make sure you have all relevant information when you need to take important decisions.
• Be open to other opinions and be ready to compromise. That will not only improve que quality of the discussion, but will also improve your partnership relationaship and trust.
• Above all, do not forget that the law firm is a business that you share with other lawyers. Decisions are not a playing ground to find who is the smarter or more powerful individual, but the arena where the firm decides –every day- its failure or success. Only if its members understand that it is a business shared –for doom or for glory-, in which the well-being of the whole is the way to achieve individual success, will lawyers be able to articulate efficient dynamics in the complex world of decision making.

This and other relevant and interesting subjects will be analyzed and discussed in the forthcoming IBA Conference in Sao Paulo “Law Firms as Businesses: Option or Necessity?”. If you want more information about the conference, please visit the following link conference brochure .