Not all outcomes are created equal
As human beings our thinking is subject to a host of biases. When it comes to the ethical dimension in decision-making, an important one is the Outcome Bias. It means that we judge the quality of a decision by its eventual outcome. It’s the outcome we arrive at that counts, not the intention we set out with or the ways and means by which we arrived there.
Why is outcome bias dangerous?
Have you ever heard phrases uttered in business like “Sell whatever you can sell!”, “Make the numbers, no matter how, “Don’t bother me with details, I am interested in delivering results.”?
Let’s assume a positive outcome, a desired object achieved. The good outcome justifies the means and any intention at the outset. We could also say the intention, decision and way & means of execution become irrelevant if only we achieve our objective.
On the other hand, if there’s a bad outcome, the decision or the intention (or – enter Fundamental Attribution Error – the actor or decision-maker themselves) must have been / be “Bad”. Add to that the Hindsight Bias (“I knew all along this wouldn’t work.”).
How can we defend against outcome bias?
By acting with clear (and “good”) intent. At my Company, we have defined “Acting with clear intent” as one of the five core principles of our Professional Practices Policy, the way we interact with out customers.
“purpose,” early 13c., from Old French , “goal, end, aim, purpose; attention, application,” and directly from Latin “a stretching out,” in Late Latin “intention, purpose,” noun use of past participle of “stretch out, lean toward, strain,” literally “to stretch out” (see intend). In law, “state of mind with respect to intelligent volition” (17c.).
To really act with clear intent we need to consider three perspectives:
- Our own intent: Are we really clear about our own intent? Are we sure we are not subject to narrow framing bias, self-serving bias and ethical blindness? Is there not a secondary underlying intent that might actually dominate our decision-making? Example: Am I giving a charitable donation only for supporting the charity or do I have a connected self-serving interest like lowering my tax rate gaining good reputation or even receiving a favor in return? At least for ourselves we need to be clear about all our related interests in the decision. In particular about anything that may a possible conflicting interest.
- Does our direct counterpart in the decision or transaction (business partner, customer…) share the same perception of our intent in the activity? We may be as clear and pure in our intent as we want, but if our counterpart has another perception of our purpose (or conflicting interests themselves) then all our clarity and goodness of intent does not really matter and we should probably consider ways to first achieve a common clear understanding. And I don’t mean having a clear and good-looking paper trail only.
- Finally, how would an independent outside observer (the general public, media, government, regulator, competitor, potential new customer…) perceive the engagement? However good and clear our (implicit) intent (1) may be for us and however good and clear it might be for our counterpart (2) -, if there is the possibility that the intent of the engagement may appear to be improper or questionable, if there are possible appearances of conflicting interests from an outside perspective, we must create more clarity and transparency (before the decision, not afterwards- it will only be perceived as justification) or stay away. Here lie the actual reputation risks and the risk to erode trust with stakeholders and society in general.
Conflicting interests are the “mother of misconduct” and the root cause of loss of trust(worthyness) and reputation.
If we want to protect against outcome bias and build, maintain and improve trust with our stakeholders, we need to take into account all 3 perspectives of “clear intent” above in making our decisions. For me, this is the “Golden Principle” of decision-making.
(Note that I am using the term “conflicting interests” instead of “conflicts of interest”, because I want to express that this is a more broad view than the usual catalogue listed in conflict of interest policies. Conflicting interests go to the core meaning of such policies in the sense that we need to avoid situations in which we make a decision where our own personal interests conflict (or could appear to conflict) with the interests of the company. Everyone of us can be subject to conflicting interests all of the time. It can start as small as wanting to be at home in your warm bed instead of the office early on a dark and cold winter morning…)