Experience is not Always an Asset on Decision-Making

Analogical Strategic Reasoning
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Chloe Xu
Director, Australia

Experience is not Always an Asset on Decision-Making

🔥NEW Most of us believe that we stay rational when deciding upon some news we received. However, Staats, KC and Gino (2018) argue that experience affects an individual's response to negative news, and thus influences decision-making.

The impact of experience on decision making when receiving bad news. Research findings

The researchers conducted a field study and two lab studies to understand how people update their beliefs when receiving bad news. Their main findings include:
  • People change their views after hearing negative news.
  • Experience determines the likelihood of an individual to change his/her mind about a decision made. To be specific, individuals who think they have more experience are less likely to change their mind than those who think they have less experience.
  • Peer experience influences individuals' update on belief. Individuals surrounded by more experienced peers are more likely to stick to their previous decision - even confronted with bad news.
  • Self and peer experience are substitutive in terms of the impact on decision-making. However, this substitutive relationship lessens significantly after receiving negative news.
  • More experienced individuals discount negative news more quickly than less experienced individuals do.

Managerial Implications

  • Managers and policy-makers should clearly communicate negative news to facilitate better decisions.
  • Be prepared for challenges in persistence, starting from understanding where gaps in belief update may occur.
  • Design a system for decision making, which has the information and tools for interpreting it in ways that enable the decision-makers to respond successfully. When designing such a system, the strengths and weaknesses of individual decision-makers should be considered.
  • Understand how to address experienced individuals differently from those inexperienced. Managers probably need to educate experienced individuals about the risk of belief persistence and encourage them to understand how a less experienced person will interpret the situation by shifting their perspective. Managers might also share negative news more frequently with experienced people than they do with the inexperienced ones.
  • Be aware that peer experience can influence individuals' decisions within an experienced group, and this should be factored into the decision-making system design.
Do you agree that experience is not always an asset on decision-making? Please share your thoughts with me.😃

Source: Staats, B., KC, D. and Gino, F., 2018. Maintaining Beliefs in the Face of Negative News: The Moderating Role of Experience. Management Science, 64(2), pp.804-824.

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