There is a very powerful and widespread tendency that will cause you to delay decisions you could and should make immediately. It’s called the disjunction effect and is one of my favorite bias to look for when analyzing decision-making processes.
What is a “disjunction effect”?
It occurs when you need to decide whether you should proceed with a course of action A that is somehow linked to a future event which has several outcomes—let’s set 2 different outcomes here, TRUE or FALSE. You need to decide whether to proceed with the action or do nothing.
If you project yourself in the situation where the event outcome is TRUE, then you prefer to proceed with the course of action A. Now, if you project yourself in the situation where the event outcome if FALSE, then you also prefer to proceed to proceed with the course of action A.
So you should, rationally, proceed with course of action A immediately. But in some context, a disjunction effect occurs and as long as you don’t know whether the outcome of the event is TRUE or FALSE, then you don’t proceed with course of action A.
The uncertainty makes you delay your decision, even though you will proceed to implement the same course of action once you know the outcome of the event with certainty, whatever it is.
To dig deeper, the canonical article on this effect dates from 1992 and is by Tversky & Shafir1
Application to business decision-making
You can see easily how this applies to a lot of areas for executive decision-making. This effect is in full swing when executives are facing a changing environment and are holding on adjusting their strategy to see how the market and their competitors will react.
While waiting is certainly often warranted, in some cases, it’s mostly the fear of taking the wrong decision that is impeding immediate action. By justifying waiting over whether some future event occurs or not, executives can put of decisions.
Disjunction effects lead to unnecessary delays in strategic decision-making, and are powerful enough to bias even experienced executives.
Deciding on a course of action that you know will be impacted by a future, uncertain event is very difficult to do for the human mind. It’s a source of anxiety and discomfort for most people and is not easy to overcome.
How to mitigate potential disjunction effects?
The best way to prevent the occurrence of disjunction effects is to use scenario planning to help evaluate strategic decisions. If by rigorously mapping the possible scenarios you end up with the same course of action in each case, then you will feel much more confident in going through with it immediately, even if the event outcome itself is uncertain.
Some relevant case studies:
- The Disjunction Effect in Choice Under Uncertainty, Amos Tversky and Eldar Shafir, doi: 10.1111/j.1467–9280.1992.tb00678.x Psychological Science September 1992 vol. 3 no. 5 305–309 ↩