Reducing cognitive biases in strategic business decisions: a framework for enhanced leadership and organizational success
Authors: Deshpande Kedaresh 
Published: February 2025

Purpose

Cognitive biases and heuristics can negatively influence business leaders, causing adverse impacts on organizational direction. This paper summarizes various cognitive biases and articulates why it is crucial to proactively implement solutions to avoid illogical decision-making. It also develops a framework to help organizations eliminate irrational judgments and provides strategies for business-centric thinking.

Design/methodology/approach

Integrating literature on behavioral economics research to summarize how heuristics and cognitive biases take effect, this paper shows why business leaders make irrational decisions in high-risk environments. This paper also provides a concise viewpoint on preventive measures based on the author’s insights and conclusions on organizational initiatives to foster business growth.

Findings

Limitations on time and resources can induce mistakes in risk assessment and resource allocations. This paper articulates a logical framework to help organizations create a culture of data-driven thinking and communication for strategic decision making. It also highlights the importance of using predictive modeling, feedback from diverse cross-functional teams, and continuous improvement training for business leaders.

Research limitations/implications

This paper proposes a framework of iterative continuous improvements for businesses to prevent biased decisions. This model is based on the author’s viewpoints. The study does not use new empirical data or scientific research. Further research is recommended to develop data-driven models. Research is also needed on advanced predictive techniques and artificial intelligence to help leaders make rational choices. This study condenses extensive literature on behavioral economics into an easy-to-understand summary for executives and motivates further discussions on behavioral training as a standard onboarding tool.

Practical implications

This paper provides a concise, easy-to-read summary of extensive literature on behavioral economics for business executives. It prompts further dialog on understanding the need for behavioral training in global organizations. Implementing the same iterative model will not generate identical results in every organization. Variations in organizational structures, cultures, regional conditions, and team demographics require careful assessment of how to implement such training. This paper also documents a comprehensive summary of practical mitigation strategies, concise descriptions, and succinct explanations on how such strategies can prevent the negative impacts of specific cognitive biases.

Originality/value

This paper recommends an iterative process of coaching business leaders to identify instances of biased thinking and creating guardrails to prevent those in future, which can be used by global organizations for reducing cognitive biases in business decisions. The study also condenses literature on psychology into an easy-to-understand summary for executives. It motivates further discussions on adopting education in organizational behavior as a standard onboarding tool.