Availability Heuristic and Organizational Decision-Making

Yeah, but what have you done for me lately?

Sometimes, certain words or phrases merely sound so complex that they signal to people not even to bother. Things like, "the drag coefficient," or "the Neolithic Era."

But sometimes they only seem complicated. "Assessments of probability" is just such a case. In auto-pilot mode, that translates to, "This is a question for a stats PhD, not for me. Back to Fruit Ninja."

But in this case, assessments of probability just describe best guesses. And we make them every single time we make a decision, whether changing lanes, selecting from menus or planning careers. In each case, you are assessing your options to determine the one that is most likely to satisfy wants and needs. (Especially when someone is going the speed limit in the left lane on the highway.)

The availability heuristic describes how we deem whatever is top of mind, or easily cognitively "available," as far more likely to happen.

Learning that air travel is far safer than automobile travel does nothing to minimize the fear of flying. It's because stories of plane crashes are so vivid in our minds that we substantially overestimate the possibility of being in a plane crash.

The sale of flood insurance goes through the roof in the immediate aftermath of a terrible flood, but then recedes along with the coverage of it.

And every time you have ever started seeing the same thing everywhere, the availability heuristic was doing its thing.

And of course, the availability heuristic operates at a group level as well, making it enormously consequential for organizational decision-making.

Sometimes when we see multiple firms within an industry take similar steps, they are in fact copying each other (social proof). But more often, they are inflating the probability of the same thing – whatever is most top of mind – and as such taking the same steps in anticipation.

Organizations capable of recalibrating their assessments of probability to account for availability heuristic would enjoy a significant strategic advantage over competitors.

Fortunately, the steps to account for availability heuristic are fairly simple to take. The real challenge is in getting people to actually do it? Why, especially for high-stakes decisions?

As with all cases of systemic irrationality, the answer lies in biases, heuristics and behavioral science.

The Brain's Limitations

The human brain has enough mental energy to process only a tiny fraction of the information available to it. Were people to try to think through every decision, they would become mentally depleted, and effectively paralyzed, by breakfast.

To compensate, human beings have adopted what Daniel Kahneman calls The Dual Systems Theory. Kahneman suggests that people engage in two very different types of thinking: System 1, which is fast, easy and unconscious, and System 2, which is slow, difficult and effortful.

By necessity, we spend the overwhelming amount of our time engaging in System 1 thinking (estimates typically reach 90% and above), reserving System 2 thinking for the relatively rare moments in the day in which we really need it.

If people are spending 90% of their time in unconscious autopilot, it begs another question: who's flying the plane? The answer to that is, "Biases and heuristics," the foundations of behavioral science.

Biases and Heuristics

Biases are mental tendencies, and heuristics are mental shortcuts that help us make decisions without expending mental energy. They fly the plane while we are in autopilot.

Fittingly, people have a bias against the word "bias," because they conflate it with racism, sexism, ageism, and all of the other isms that are worthy of our scorn.

Biases, however, are neither good nor bad. I have a positive bias for people who wear Canvas Chuck Taylor sneakers. As soon as I see them, I feel as though we have shared values and feel a kinship. It's just a mental tendency that helps me avoid spending any of my precious System 2 thinking.

Of course, bias can lead to all sorts of awful problems, especially when we perceive threats where there are none. But the answer is not to eliminate bias, because that is impossible. We could not survive without relying on biases. The challenge is learning how to recognize and mitigate the biases that our rational minds can understand are dangerous.

Heuristics face no such stigma, but play just as big a role in flying the plane in autopilot. Heuristics are mental shortcuts on which we rely when pressed to make decisions we can't "afford" to think through. The affect heuristic describes how we rely on emotions, or "our gut," to make decisions, rather than an extended thought process. Anchoring describes how we hold onto the first piece of information as our reference point in negotiations, without re-evaluating for accuracy or relevance.

And, of course, the availability heuristic describes how ease of recall affects our perception of probability.

So, what is the cognitive purpose of the availability heuristic? The same as every other bias or heuristic: to save mental energy. On the plus side, at least it's evidence that you don't have your head in the sand.

The Emotional Purpose of The Availability Heuristic

Uncertainty is uncomfortable because it is exhausting. We have a very difficult time turning our brains "off" when facing uncertainty, as we try to create a plan for every scenario we may encounter. As long as the uncertainty exists, we can't stop scenario planning, yet our brains require rest. Uncertainty makes us feel as though we've been awake for the last 72 hours.

But if the exhaustion isn't enough, then there is the fear. Anxiety is the fear of what may come, and uncertainty is its biggest driver.

So, human beings look to diminish uncertainty to the greatest extent possible. Countless experiments in behavioral science show the huge degree to which people overvalue certainty in making evaluations and choices. For example, most people choose $10 guaranteed over a 50-50 chance at $25, technically an irrational choice if we assume value maximization as the primary motivator.

Given this, is it surprising that people would embrace anything that provided a sense of certainty, even if it was wrong?

The availability heuristic provides that sense of security. It's actually more comfortable to live in a world where floods and plane crashes happen than to live in a world where floods and plane crashes might happen.

The availability heuristic provides us with a sense of certainty without forcing us to do the analytical work that would warrant it. And given the speed with which we have to make decisions, the analytical work just isn't possible most of the time. Unless we force it to be.

Common Examples and Effects

Fear of travel and natural disasters are the most commonly cited examples of the availability heuristic, but they are hardly the only consequential ones:

Our own personal experiences and memories play a huge role in what is top of mind for us, and as such affect our decisions through the availability heuristic, as so aptly captured in the proverb, "Once bitten, twice shy." When people over-react to relatively normal situations, it is often the result of being triggered by a traumatic memory that remains top of mind.

We cannot survive without the availability heuristic, because we don't have enough mental capacity to process all the data we face. We need mental shortcuts. But we also need to know when not to rely on them.

The Availability Heuristic and Organizational Decision-Making

The most commonly discussed example of the availability heuristic in organizational decision-making may also be the least consequential: recency bias in annual performance ratings. This is one of the most well-covered topics in all of Industrial and Organizational Psychology. And whenever you bring up recency bias in performance reviews, everyone nods in acknowledgment that this is an unavoidable problem.

But here's the irony. We've spent so much time discussing recency bias in performance reviews, and made the idea so cognitively available, that we all now assume it happens all the time.

But consider the assumptions needed for those assessments of probability to be accurate:

If performance is not actually being measured in performance ratings, then the problem of recency bias is not one of performance, but one of relationship. Employees don't need to worry about having a performance letdown before a performance appraisal. They need to worry about not pissing off their boss.

As such, recency bias in performance ratings is a purely theoretical problem. But we talk about it so much, we assume it needs to be addressed. So, we move to monthly reviews or weekly check-ins while ignoring the actual problem of manager motivation.

Imagine that. An idea that is high in cognitive availability is making us see and overreact to something that isn't there.

Meanwhile, the actual problem of availability heuristic in organizational decision-making, which is massive, goes largely ignored.

Both individually and in groups, whatever is top of mind plays a disproportionate role in determining strategy, leading to potentially enormous missteps. If one major client leaves for an idiosyncratic reason, organizations have a tendency to overfocus on customer success moving forward and taking their eyes off their other key targets. If an important employee leaves the entire company might change focus to employee retention to the detriment of everything else. If a board member makes a comment about EPS, the executive team may find itself consumed with increasing profits, even when that's not the actual strategic priority for the company.

But the impact of the availability heuristic on organizational decision-making when something is top of mind for a particular industry, or the entire economy, is perhaps the most consequential.

The more that media talk about the possibility of recession, the more companies make layoffs. This despite the abundant research showing that layoffs cost organizations far more than they save.

The more that Generative AI dominated headlines, the more that companies launched expensive projects without even understanding how it works. (The truth is that Gen AI can do incredible things in a very limited sphere, but in no way resembles the type of AI that can replace all our jobs. That type of AI does not yet exist, and one would be wise to check the track record of any thought leaders who say it is imminent.)

And of course, seeing a competitor having seeming success with anything has the capacity to derail completely the existing organizational strategy. When that becomes top of mind for an organization, outcomes seem inevitable, and orgs tend to jump right in. In most cases, though, had they waited a few weeks, the world would look very different, as would good decision-making.

The Existing "Solutions" for the Availability Heuristic

The solutions most commonly offered to combat the availability heuristic are very much aligned with most biases. Maintaining awareness during decision-making, using tools and processes to counter bias and heuristics, and relying on data to do so are among them.

And these solutions, when attempted, tend to produce great results. The problem is that these solutions are so infrequently attempted.

That is understandable for a number of reasons. For starters, that degree of evaluation is far too much work given the sheer number of decisions we have to make, and we have far too little mental energy to do so.

For individuals, better decision-making requires intention and discipline, while groups require coordination and facilitation. But even those are not enough to overcome the availability heuristic, because they still fail to address the most powerful obstacle of all: emotional resistance.

The New Solution for Availability Heuristic

If following a structured decision-making process might make someone's past or current decisions seem foolish, it eliminates their motivation to do it. No one wants to appear stupid, to themselves or especially to a group. If forced into a group structured decision-making exercise, they will be concerned exclusively with impression management, muddying the waters for an honest and objective evaluation.

The point must be made forcefully and effectively upfront: errors in judgment from biases and heuristics are as universal as breathing. Every single human has and will make countless of them, both consciously and unconsciously. And hindsight is always 20/20. To feel foolish for making errors in judgment is, quite literally, foolish. And it is a huge blocker to growth and improvement.

This mindset is a requirement for better decision-making, and facilitators must be skilled in making the point. But even that is not enough.

People's status and positions are often tied to certain decisions and/or supportive of the status quo. As such, they are strongly motivated to avoid or muddy any exercise that might threaten that order. This resistance must be eliminated as well. Fortunately, there's a framing to get us there.

Stories of agility success, like Play-Doh, Frisbee and Netflix, and of agility failure, like Kodak and Blockbuster, help to drive the point home.

What makes this the "new" solution to the availability heuristic is that it addresses the emotional blockers before proceeding to the cognitive exercises. Solutions are meaningless for people not motivated to use them.