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Distortions – How perceptual errors jeopardize success

Yvonne Wicke | 20. July 2023

Mistakes in companies: How perceptual errors influence success

In many companies, perception errors often lead to unexpected problems. These planning and control errors are systematic and prevent us from making well-founded decisions. To recognize and avoid them, we need to be aware of them. In our consulting work, we repeatedly come across certain patterns.

Distortions are no coincidence

Deviations from planning do not only result from the unplanned implementation of decisions made or the occurrence of unforeseen events. Biases such as overconfidence or unfounded optimism can also lead to mistakes. It is important to understand that bias does not occur randomly. They should not be confused with the random deviations in decisions (dispersion).

Think of the bathroom scales in your bathroom, they are a good illustration of the difference. If the scale always indicates a weight that is either too high or too low, there is a systematic error, a bias. If the weight depends on where you place your feet on the scales, this is a random deviation; this is known as scattering. (Daniel Kahneman, Andrew M. Rosenfield, Linnea Gandhi, Tom Blaser 2016).

Expose distortions and make smarter decisions!

Unconscious errors of perception

Psychologists and behavioral economists have discovered many cognitive biases that impair our ability to objectively evaluate information, make sound judgments and make meaningful decisions. A cognitive bias is a cognitive psychological collective term for systematic erroneous tendencies in perception, memory, thinking and judgment. They usually remain unconscious and are based on cognitive heuristics (rules of thumb). There are over 100 cognitive biases, as Rolf Dobelli describes in his book "Klar denken, klug handeln" (Dobelli 2015).

Types of cognitive distortions

Let's take a look at some simple categories that we uncover time and again in our consulting work in companies.

  • Action-oriented distortions

Overconfidence bias: We are too optimistic about the outcome of planned actions.

Example: A CEO of a company is convinced that the new product line will be a huge success, even though the market analysis shows only limited potential. As a result of this overconfidence, resources are invested in a risky project that ultimately does not generate sufficient sales.

  • Cognitive distortions when perceiving and evaluating alternatives

Anchoring effect: Decisions are influenced by currently available environmental information, even if this is actually irrelevant. It is therefore an effect in which the judgment is based on an arbitrary anchor. The result is a systematic distortion in the direction of the anchor.

Example: The company management has set an upper price limit for a new product. The marketing department decides to set the price just below this upper limit in order to create a supposed "bargain" atmosphere. As a result, the value of the product may be underestimated and the company fails to recognize its true market value.

Group thinking: We look for consensus and neglect a realistic assessment of alternative approaches. The danger of groupthink lies in its pronounced rigidity and irrationality.

Example: At a board meeting, various approaches to overcoming a crisis are discussed. Most Board members agree to pursue a specific strategy in order to achieve a uniform consensus. This suppresses alternative ideas or critical voices and the company may miss out on innovative solutions.

Confirmation bias: We select information that confirms our own expectations and are not objective in our search for information.

Example: A company plans to invest in renewable energies. Decision-makers are mainly looking for information that confirms their positive view of renewable energy, neglecting potential risks or problems. As a result, they could overlook important aspects and make a less balanced decision.

  • Cognitive distortions when formulating alternatives

Loss aversion: In psychology and economics, it is the tendency to value losses more highly than gains. Loss aversion is a component of the new Prospect Theory, which was developed by Kahneman and Tversky in 1979 (Kahneman and Tversky 1979). An important finding of this theory is that individuals behave irrationally in decision-making situations when uncertainty plays a role.

Example: The company is on the verge of a decisive merger that has the potential to significantly increase sales. However, there are also risks and costs involved. Decision-makers tend to give greater weight to potential losses than to potential gains. This could lead to an inability to make decisions, even though the merger could be successful in the long term.

  • Stability errors

Status quo error: Most people prefer the status quo to change. In planning, this can mean that decision-makers often stick with the current situation as the most convenient and least risky alternative (an obstacle to a culture of innovation).

Example: A company has been established in a certain market for years. Although there are signs of a change in the market environment, the company is sticking to proven strategies and neglecting potential innovations. As a result, it fails to adapt to the new challenges and may lose competitiveness.

These and of course other practical distortions are confirmed in the relevant specialist literature.

Understanding bias and making better decisions

Our aim is to explain the concept of bias as a source of error in more detail and to make it accessible to the interested reader. Distortions are often the main cause of problems in companies. Although it is difficult to change the mindsets of those involved, we can improve the decision-making environment of our employees. If we are aware of how biases influence us, we can take specific measures to get out of this trap. This broadens our perspective and helps us to make better decisions.

At TD Trusted Decisions, we support our clients with various tools from our systemic consulting approach to successfully tackle these challenges.


Decision-makers can use various strategies to protect themselves from the effects of cognitive biases and make more informed decisions.

Create awareness

The first step is to become aware of the existence and impact of cognitive biases. Decision-makers should sensitize themselves and their team to these distortions in order to better recognize them.

Obtain diverse perspectives

Obtaining opinions and perspectives from different team members or experts can help to get a broader view and avoid groupthink.

Structuring the decision-making process

A clearly structured decision-making process with clear criteria and analysis tools can help to reduce emotions and subjective influences.

Play through alternative scenarios

Instead of focusing on just one solution, decision-makers should run through various alternatives and scenarios and evaluate their possible consequences.

Asking critical questions

Decision-makers should ask themselves and others critical questions to identify hidden assumptions and possible confirmation bias.

Obtain external advice

Bringing in external consultants or experts can help to reduce blind spots and provide a more objective assessment.

Rethink decisions

In some cases, it may make sense to pause and reconsider a decision before finally implementing it.

Data-based decisions

Decision-makers should rely on facts and data, but not suppress intuition or gut feeling.

Risk management

Careful risk analysis and assessment can help to realistically assess potential losses and counteract irrational loss aversion.

Equip yourself against the insidious decision stumbling blocks in your company! By consciously dealing with cognitive biases, you can take your decision-making process to a new level. Use the various strategies we have presented to you to protect yourself from the influence of these biases and make smarter decisions. Keeping a decision diary can also help you to reflect on your own decision-making processes and learn from past experiences.

Explore the hidden aspects of your decisions together with your team and critically scrutinize the assumptions you make. Be brave to include alternative perspectives and appreciate the value of data and facts in your decision-making process.

Together with TD Trusted Decisions GmbH, you have access to valuable tools from our systemic consulting approach. Feel free to contact us for further support on your way to a successful decision-making culture.

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Valuable insights and practical tips in the podcast

Dive even deeper into the topic and listen to interesting interviews on cognitive biases and decision-making strategies in the podcast programs by Peter Bluhm (Atvisio) and Philipp Wicke, Managing Director of TD Trusted Decisions Hannover GmbH.

Literature tips

Last but not least, we would like to offer you further opportunities for in-depth study: Learn even more about the exciting topic of cognitive biases and their impact on decision-making processes in the corporate world through our recommended reading list.

  • Think fast, think slow; Siedler 2012; Daniel Kahneman
  • The halo effect: How managers let themselves be deceived; Gabal 2008; Phil Rosenzweig
  • The art of clear thinking: 52 thinking mistakes that are better left to others; Hanser 2011; Rolf Dobelli
  • "Prospect Theory: An Analysis of Decision under Risk"; In: Econometrica. 47 (2), pp. 263-91.Kahneman, Daniel; Tversky, Amos (1979)
  • "Always in the black 12/2016"; In: Harvard Business Manager; Daniel Kahneman, Andrew M. Rosenfield, Linnea Gandhi, Tom Blaser (2016)
Free advice

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