In our working lives, we make many decisions every day. Consequently, we are always asking ourselves: "How can I make sure that I'm making the right choice?" ».
Looking for the most rational approach has now become a natural reflex when it comes to ensuring good decision-making. Based on presumed common sense, this strategy is reassuring because it provides decision-makers with a sense of validation — that they are making appropriate choices. However, it is not without flaws, because human thought is full of preconceived or mistaken ideas known as cognitive biases. These biases affect decisions and reasoning by distorting reality. In other words, they change our perception of things, while maintaining the illusion that we are following a perfectly logical approach.
Learn about the cognitive biases specific to procurement and find advice that buyers can rely on to avoid allowing cognitive biases to influence their strategic decision-making.
How do cognitive biases affect procurement?
Cognitive biases are mechanisms specific to human thought which alter the way an individual thinks about or analyses things. They influence supposedly logical thought processes and undermine efforts to apply a rational approach to strategic decision-making, ultimately causing buyers to make the wrong decision in specific situations.
Nevertheless, cognitive biases represent a process that meets a natural need arising in professions in general, and procurement in particular: They simplify decision-making in situations where there is too much information to process. In such cases, the human mind creates a simplified interpretation of a given situation based on stereotypes, categorisations or even beliefs.
This process of simplification has now become absolutely vital for buyers due to the fast pace of the business world. They need efficient thought patterns to act quickly. However, cognitive biases sometimes influence these patterns and lead buyers towards misguided choices.
Often, we are not aware that cognitive biases are even present. As a result, it can be difficult to guard against them. However, it isn't impossible. Becoming aware of how they work is the first step. Understanding these biases enables procurement professionals to start recognising them more easily when they exert their influence.
The six main cognitive biases in procurement
As with any profession, certain tasks are specific to procurement: coordinating the supply chain and delivery flows, negotiating procurement contracts and so on. However, the fact that these tasks are specific to procurement means that the profession is susceptible to recurring challenges, such as these six cognitive biases that frequently occur in a buyer's day-to-day work:
- The partial vision bias: Quick decision-making can lead a buyer to only consider part of a situation. In procurement, the risk is to forget about essential aspects of the situation when completing day-to-day tasks, such as trying to understand a customer requirement or preparing for a negotiation.
- The anchoring bias: In procurement, the need to be quick and efficient can lead buyers to make a decision based on a first impression. This cognitive bias leads to poor decisions because buyers tend not to carry out a deeper analysis using all of the information available.
- The availability bias: When it comes to making a decision quickly, buyers may rely exclusively on the information most deeply embedded in their memory. They only consider the information that is most easily accessible, either because it has often been proven in the past or because it is emotionally charged. But when the current scenario differs from situations encountered in the past, this cognitive shortcut can be misleading. In particular, buyers encounter this cognitive bias when faced with new types of customers or markets because the "rules" may not necessarily be the same.
- The commitment bias: The failure of human beings to recognise their own mistakes has another negative impact in procurement. In other words, this involves committing to a path that will fail, despite having full knowledge of the facts. If this ego-protection mechanism is repeated, its implications can be among some of the most serious for a company.
- The guru bias: Every industry has its own set of opinion leaders, some of whom are followed blindly. For procurement, the guru bias takes the form of excessive trust in the point of view expressed by experts, to the point that buyers lose their ability to think critically.
How can we avoid cognitive biases in strategic decision-making?
Strategic decision-making in procurement involves finding the right balance between efficient thinking in order to act quickly and effectively (categorisations, simplifications, comparisons etc.), and over-simplification, which leads to a mistaken view of a given situation. To achieve this, buyers can:
- Increase awareness during day-to-day work: Understanding the cognitive biases that are specific to procurement helps buyers to be aware of them during their day-to-day work, which in turn enables them to be corrected.
- Allow time to take a step back: Most cognitive biases in procurement are encouraged by the need for efficiency in our day-to-day work. Therefore, it is worth remembering not to confuse speed with excessive haste: Buyers can avoid oversights made in the heat of the moment by putting things in perspective before making strategic decisions.
- Employ critical thinking: The most skilful strategic decision-making is based on intellectual honesty and full awareness, and does not place blind trust in preconceived thought patterns. Re-evaluating their own behaviour allows buyers to change and adapt the patterns that they use, rather than applying them automatically.
- Recognise their mistakes: By addressing their mistakes head on, buyers also guard against cognitive biases because they will not repeat yesterday's mistakes today.
Human nature is full of mechanisms designed to simplify decision-making: for analysing a situation, assessing possibilities, determining the action to be taken and so on. In procurement, as in all professions, it is difficult to guard against these cognitive biases that sometimes lead us to make poor decisions. However, understanding them enables buyers to recognise them during their day-to-day work and guard against them when they exert their influence.
