The human brain constantly seeks to make sense of the world around us. As a result, it’s highly adept at over-simplifying things – but this can cause problems in business terms. Over-simplifying without gathering sufficient information can lead to errors in judgement.
The Halo Effect
In his book Thinking, Fast and Slow, Daniel Kahneman refers to these errors of judgement as “exaggerated emotional coherence,” which is also known as the halo effect.
Let’s say you went to a party, and you met Joe. He was a nice guy and you got on with him. Later on, you get chatting to another person, who asks if you know anyone who’d like to contribute to their charity. Straight away, Joe comes to mind – even though all you really know about him is that he’s easy to talk to.
In basic terms – because you appreciated one aspect of Joe’s character, you instantly assumed you’d like everything else about him, and that he’d be the sort of decent guy to donate to charity. That’s what we call the halo effect.
How Does This Relate to Your Business?
The Halo effect also applies to many of your business decisions, believe it or not. In fact, I’ve encountered many companies who invest in decisions even though they lack the appropriate information to make an informed choice. They invested because it was ‘expected’ or because other businesses were doing it, or because they thought they’d ‘miss the boat’ if they didn’t. Does that sound at all familiar to you?
The Power of Information
Rather than making all key business decisions yourself, it’s advisable at times to seek the opinion of someone who isn’t emotionally invested in your company. They’ll be able to examine all the available information, and advise you on how best to proceed. Of course, it’s important to work with someone with business experience, acumen and awareness of how your company operates.
Be prepared to accept that their opinions may be different to yours – but listen with an open mind. A new voice, no matter how different to your own, may have value. It is worth your consideration.