Data bias in finance – Part 2: Tactics to de-bias your finance team

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In part one of this series, we covered what data bias is and some tactics to mitigate its impact on decision-making in finance. We will now explore some tactics to de-bias your Finance team.

“That’s the way we’ve always done it.” “We’ve already tested something like that.” “There’s no budget for this risky stuff.”

If you’re hearing these phrases, you could be seeing cognitive biases at play within your team.

The ‘curse of knowledge’ refers to the unconscious biases of how we apply prior knowledge, particularly in decision-making. The more success you have in applying prior knowledge in a particular way, the harder it is to assess alternatives. As most decision-making is impacted by unconscious bias, the ‘curse of knowledge’ can severely limit innovative thinking where decisions are made.

Bias and your finance function

Where strategic decisions are concerned, we often fall into the same bias traps:

  • Loss aversion: Losses are felt more acutely than gains of the same amount, making us more risk averse.
  • Sunk-cost fallacy: When assessing future courses of action, we take into account historical costs.
  • Escalation of commitment: We invest additional resources in underperforming or failing initiatives because of money and time already invested.

When under time-pressure, which is often for most finance teams, negative emotions, individual motivations, and other stressors can amplify the effects of bias in decision-making.

De-bias your team

Use premortems

Using premortems can help you get ahead of possible problems or challenges that your team might not have thought of. Imagine potential future failures when assessing projects or options, and then map out the causes. This technique encourages teams to think more broadly. A solid CPM solution with driver-based financial models will help you with what-if and scenario-based analysis.

Holding individuals accountable for their judgements increases the likelihood that they will reduce bias from decision-making. Rotate responsibilities within your team so that team members get a fresh perspective. Furthermore, the knowledge that decisions will be scrutinised by rotating staff encourages people to make more disciplined choices and have justification for decisions they make.

Increase accountability 

Holding individuals accountable for their judgements increases the likelihood that they will reduce bias from decision-making. Rotate responsibilities within your team so that team members get a fresh perspective. Furthermore, the knowledge that decisions will be scrutinised by rotating staff encourages people to make more disciplined choices and have justification for decisions they make. 

Democratise your data

Breaking down silos and granting people access to interpret data reduces bias and helps foster a culture of data-driven decision making within your team.

Tip: 10 ways to make your team more data driven

Challenge assumptions

Testing assumptions gives you a better understanding of the factors contributing to failure or success of similar decisions. When presented with conflicting information, working with a team (and software) that know your data provides you with helpful insights and feedback.

It is so important to ask the right questions, and have the right software to help you find the answers, rather than ‘fix’ the data to align with preconceived ideas.

Verify your data

Tracking the right metrics and verifying your data ensures that you have information that your team can trust. This trust empowers teams to consider different data points when decision-making, especially under conditions of uncertainty and incomplete information.

To ensure that you’re making sound decisions based on ironclad data, work with a specialised team of consultants, like Philippa, Kane, and Tim from CALUMO, to create a decision-making process that will confront different biases and limit their impact.

To learn more, get in touch with us on +61 2 8985 7777 (AUS), +1 214 387 6030 (USA) or info@calumo.com.


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