9  Group decision making

Much decision making in the corporate environment involves groups.

Group decisions are often better than individual decisions. Groups are often formed to achieve this better performance.

9.1 Statistical versus deliberating groups

To analyse group decisions, we need to distinguish two different types of groups.

Statistical groups involve members giving their inputs individually. Those inputs are aggregated to make the forecast or decision. Voting is a simple example, which works well if the majority is right.

There is strong evidence that statistical groups make better decisions than individuals. A story involving Francis Galton is a classic example. Galton (1907) had people estimate the weight of an ox. The median of the individual predictions was only 0.8% from the actual figure.

Deliberating groups involve individuals providing input during deliberations. Those inputs can affect and be affected by the inputs of other group members. People aim to influence others. People might change their minds.

The evidence that deliberating groups improve decision making is mixed. Deliberating groups have the potential to arrive at the correct answer even when the majority have an incorrect belief at the beginning. But the converse is also possible.

Thorndike (1938) had people answer questions individually before answering those same questions in groups. If the majority of the group knew the correct answer to a problem, the group’s decision was correct 79% of the time. (The incorrect minority were able to derail the group 21% of the time.) If the majority of the group answered a question incorrectly when answering individually, the group converged on the right answer only 44% of the time. The result of this dynamic was that the average group decision was better than majority voting, but only marginally so (66% versus 62%).

9.2 Deliberating group failures

Deliberating groups can generate poor decisions due to both the rational conduct of group members and because of their “biases”. They can also temper some biases seen in individuals.

9.2.1 Rational group failures

The following are “rational” reasons as to why group decision making processes may fail:

Informational signals: It is sensible to take into account what others have said in a group deliberation. If you know Jane is knowledgeable and has good judgement, hearing that she supports a project is evidence that can affect your support. But if she is wrong, she can derail the group. Seeing other people make errors can provide “social proof” to an error.

Consider what would have happened if you stated your opinion first. What if Jane trusts your judgement?

Self-censorship: People tend not to give information contradicting their preferred outcome. In one study of over 500 mock jury trials, the experimenters never once observed someone giving information in this circumstance.

Reputational cascades: People might know what is right (or what they think is right), but they go along with the group or certain members of the group due to concern for their reputation or standing.

9.2.2 Group biases

Many of the failures of individual decision making occur in or are amplified by groups. (Many of the below observations are based on single studies.)

Escalation of commitment: Deliberating groups are more likely to escalate commitment to a course of action despite receiving negative feedback about the outcome. They are also more susceptible to the sunk cost fallacy, the consideration of past costs that should be irrelevant to the decision about future action (Stasser and Dietz-Uhler (2001)).

Representativeness: Groups can amplify the representativeness heuristic, where we judge probability based on resemblance or similarity (Stasser and Dietz-Uhler (2001)).

Overconfidence: People in deliberating groups set narrower confidence intervals than individuals around their estimates. As a result, despite their increased accuracy, groups exhibit a similar level of overprecision to individuals. Groups also overplace their judgements. 98% of subjects believed their group judgements were in the top half of all group judgements with respect to accuracy. (Sniezek and Henry (1989))

Shared information dominates: Shared information has a disproportionate effect on group members. If information is distributed so that key material is unshared (held by only a few group members), this can cause deliberating groups to perform worse. Stasser and Titus (2003) describe a study in which experimental participants were asked to consider candidates for the president of the student government. When individuals had all information, the group chose the best candidate 83% of the time. When information was unshared, and participants’ personal information suggested an inferior candidate was better, the groups rarely chose the best candidate despite having all the information required for a good decision distributed between them.

9.2.3 Reductions in bias

Deliberating groups can temper some biases. Here are two examples.

Availability: Groups tend to rely less on the availability heuristic (we discussed this heuristic on page 2.5). The availability heuristic is tempered possibly because the group members have different memories. Across the group the available memories may be more realistic. However, groups can also be subject to availability cascades. An idea held by one person can spread through the group, eventually producing a widespread belief.

Hindsight bias: Groups tend to have reduced hindsight bias, with groups more likely to recall accurately their original prediction than individuals. (Stahlberg et al. (1995))

For further reading on group biases, see Sunstein and Hastie (2014) and Sunstein and Hastie (2015).