Yahoo Finance Why groupthink is responsible for some of the worst business decisions
Business failings aren’t always the result of a single bad decision. Normally, a catalogue of errors – both technological and human – leads to serious problems. And this is what happened when hundreds of Post Office subpostmasters were wrongly prosecuted after faulty computer software calculated that money was missing from post office branches.
More than 900 workers were convicted – left bankrupt, imprisoned or shunned by their communities – for stealing money because of incorrect information provided by a computer system called Horizon. The Post Office itself brought many of the cases to court.
While the problem was triggered by faulty tech, it was the Post Office bosses who presided over one of the largest miscarriages of justice in the UK’s legal history. And it highlights how a dangerous psychological phenomenon called groupthink can contribute to serious failings by businesses.
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First coined by social psychologist Irving Janis in 1971, the term ‘groupthink’ describes how people strive for consensus within a group, casting aside their own beliefs or adopting those of the rest of the group. Individuals may refrain from disagreeing with other group members, or ignore ethical or moral issues in the interest of making a decision that furthers their group's cause.
Groupthink has been attributed to many real-world political decisions. The Bay of Pigs Invasion – a political move widely viewed as a textbook case of failed decision-making – was the primary case study that Janis used to formulate his theory of groupthink.
However, the phenomenon occurs in many different group scenarios. It can influence children to side with school bullies, encourage poor decision-making among healthcare professionals, and lead corporate bosses to ignore critical evidence, as was the case in the Post Office scandal.
“From the boardroom to the frontlines of our retail spaces and manufacturing sites, most of the work we do and decisions we make in companies are collective,” explains Andre Martin, an organisational psychologist and author of the book Wrong Fit, Right Fit.
“Thus, the impact of misguided, ill-informed, or irrational decisions can profoundly impact the quality of our products or services, the experience of our employees, and even the longevity of our companies.”
Redundancies aren’t always an inevitable consequence of a financial downturn. Sometimes, Martin says, they can be attributed to groupthink.
“Multiple CEOs have apologised for ‘growing too quickly’ and ‘over hiring’ during the last few years,” he says. “In the end, they are admitting to making poor decisions. If they had all the information and were able to see the tides shifting, would they be in a different position? Probably so.”
How to avoid groupthink
So why exactly does groupthink contribute to businesses making bad decisions and how can you prevent it? Not all group decisions are marred by groupthink. For example, having a diverse group – with individuals of different genders, ages and backgrounds – can lessen the chances of falling prey to it.
Step back in times of stress
“There are a number of reasons why groupthink occurs including moments of high stress,” says Martin. “These punctuated, pressure-filled moments can cause our attention to narrow and the speed of our decision-making to increase. Therefore, groups might miss or choose not to share pertinent information so as not to slow down the team. As a result, we move quickly but in an ill-informed direction.”
So in times of stress, it’s crucial to try to avoid making snap decisions. Taking a step back and considering all the different facets of a problem is key.
Make sure all voices are heard and encourage critical thinking
Groupthink is also more likely to take place when a strong, charismatic leader is in charge of the group. “When a group or team is led by a strong personality or authoritarian leader, the team might look to limit bad news or contrary information out of fear or to avoid punishment,” says Martin.
“When you have a few strong voices in a team, they can take up the space in the room and so other opinions, perspectives, and information is stifled or not allowed into the conversation.”
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In a group setting, it’s essential to make sure all members remain critical. However, this means creating a ‘safe’ environment where people can raise concerns or disagree without fear of repercussions. This kind of positive environment can also foster creativity and problem-solving, both of which benefit businesses. Before big decisions, all members should be given a chance to speak up about potential issues.
It’s also important to discuss decisions or ideas with impartial people, for example, those outside of the immediate decision-making group.
Don’t get blinded by purpose
Deep commitment to a purpose or strategy can also lead to groupthink. “Purpose has become the buzzword of business as of late,” says Martin. “Though purpose can provide tailwinds to a business, becoming too much of a believer can cause us to make poor decisions as we might drift into thinking that any decision that furthers the purpose is a good decision. And, we know that isn't true.”
Don’t get distracted by past successes
When facing a problem that requires a decision to be made, it can help to look at the issue in isolation - rather than rely on solutions that have worked previously. “Because a method or approach worked well in the past, we might simply assume it will work again even though we find ourselves in a new situation or different context,” says Martin. “Often, this is due to confirmation bias where we only bring information forward that confirms a long held belief or decision we want to make.”
Finally, learning to recognise the signs of groupthink is crucial. Uniformity, complacency, fear, intimidation and the dismissal of dissent are all signs and symptoms of the problem. If there’s a niggling feeling something is wrong with the decision being made, speak up.
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