Identifying biases in your goal setting process

Outside of my day job as a Viva Goals Advisor, one of my passion projects is related to finance. For the past 5 years, my friends and I meet quarterly to talk about finance topics. This year we have been exploring cognitive biases and how it affects our behaviours and decisions as investors.  

 

As I prepared for our next meetup in September, I realised how some of these biases might show up in an organisation’s goal setting processes, hampering our ability to full execute on the objectives we set out.  

 

Biases are simply mental shortcuts, unconscious and automatic processes we use to make decisions quickly. Some biases might show up when launching a goal setting framework like OKRs, and others during the execution phases.  

 

Here are some examples: 

1. Status Quo Bias 

Definition: Resisting change due to fear of loss or attachment to the familiar, a preference to leave things as they are.  

Example: When launching a new goal-setting process like OKRs, status quo bias might manifest as resistance to adopting the new framework because the team is comfortable with their existing goal-setting methods even when there is a need to improve strategic alignment and transparency in the organisation.  

Tip: Change is hard! Frame the change in a way that highlights potential gains and benefits rather than losses. A change management process like Prosci’s ADKAR model can be used to help employees understand why the change is needed.  

 

2. Confirmation Bias 

Definition: Seeking information that confirms existing beliefs while ignoring contradictory evidence. 

Example: Imagine a team is working on setting key results for a specific objective. They have an idea of how they want to achieve their goals and start looking for information that supports their idea. They focus on data and examples that confirm their initial beliefs while ignoring information that might suggest a different approach could be more effective. 

Tip: Encourage your teams to actively seek different perspectives and data that challenges their initial assumptions. Avoid groupthink (Another bias). 

 

3. Hyperbolic Discounting  

Definition: Prioritizing short-term rewards over long-term gains. 

Example: A team might decide to prioritize executing on key results or initiatives for quick wins and that provides immediate satisfaction even if initiative does not contribute as much to their long-term objectives.  

Tip: The dopamine hit we experience when we achieve a goal can be a good catalyst for motivation, encourage teams to set key results and initiatives with both short and long-term wins to fully achieve the objectives set.  

 

4. Sunk Cost Fallacy  

Definition: The tendency to continue investing resources in a failing strategy or endeavour due to the resources already committed, rather than objectively evaluating its viability. 

Example: In a goal setting process sunk cost fallacy could lead a team to stick with a failing project simply because they have invested a lot of time and effort into it. For instance, if a team's OKR involves launching a new product feature that is not meeting user needs, instead of pivoting and reallocating resources they might continue working on it to recoup their investment. Sunk cost fallacy causes the team to make decisions based on past investments rather than evaluating the current situation objectively.  

Tip: It is important to regularly assess the progress of your goals and make data-driven decisions. With Viva Goals, you get real time data on the progress of your OKRs with our robust data integrations. If an objective is not yielding the expected results, it is time to pivot.  

 

5. Anchoring 

Definition: The tendency to rely heavily and make decisions based on the first information we have, using it as an ‘anchor’ or point of reference to evaluate any new information we receive. 

Example: In a goal-setting process, anchoring bias might occur when a team member suggests a specific target, like a percentage increase in sales, during discussions. Other team members might adjust their targets around this initial suggestion, either raising or lowering their goals based on the anchor, rather than independently evaluating what is realistic. 

Tip: While setting key results, encourage the team to independently produce their own target suggestions before discussing them as a group. This can help prevent the team from fixating on the first suggestion and allow for a more diverse range of targets that are well-considered and aligned with the objective. 

 

Just as biases can impact our financial decisions, they can also impact an organization's ability to effectively execute its objectives. They are mental shortcuts we often take unconsciously, so awareness is key. Recognize biases, challenge assumptions, seek diverse perspectives, and regularly assess progress when setting goals for your organization.