Forum participants were challenged to make evidence-based decisions in a number of real-world scenarios introduced by Jared Harris, PhD, whose research centers on the interplay between ethics and strategy. Beginning with limited data sets on a race car’s performance and the conditions of an upcoming race, participants had to decide whether or not to race. As Dr. Harris provided more data to the picture, participants changed their decisions, as the risk/benefit analysis altered. Eventually, the group voted 47 to 3 to race the car.
The scenario was actually derived from the data used in the decision to launch the ill-fated space shuttle Challenger in 1986. Despite best efforts to make the right call, the group, like Mission Control, experienced some of the decision biases that are impediments to optimal decision-making. The group recognized that racing, like making decisions in government, had significant risk, potential for reward, reliance on a team (the pit crew), dependence on accurate technical data, and constantly changing conditions.
Dr. Harris continued the exploration of decision biases by providing written quizzes describing several different forced-choice scenarios, including rescuing a cargo at sea, guessing the population of Fiji, attending a concert, and comparing the frequency of death from Alzheimer’s disease versus accidents.
As the discussion evolved, it became clear that participants had received different versions of the scenarios. In the cargo illustration, some quizzes described a potential for “loss” of cargo, while others talked about “saving” cargo. The decisions that participants made varied depending on which version they received. “Words influence how data are perceived. The framework we use to structure a decision can influence the outcome of the decision,” Dr. Harris said, noting, for example, that giving a briefing or a report to a subcommittee is a specific framing for information.
In the second quiz, the population of Fiji was described either as “greater than 1.5 million” or “greater than 500,000” people. Estimates varied dramatically based on which version the participants read. This scenario demonstrated the decision bias of anchoring. “In situations involving uncertainty, we tend to believe initial data and ignore subsequent data,” Dr. Harris pointed out.
In the example using concert tickets, some people had been given the high-priced tickets while others had purchased them. The choice to attend or not was influenced by the sunk costs. Dr. Harris described this decision bias, saying, “What we have already invested makes us more inclined to continue an activity, even when it is irrelevant to future results.” He drew the parallel to legislative decisions where there may be an escalation of commitment, with time, emotion, money, and a sense of ownership already invested in a project or policy. This is one of the political pressures that can fuel a decision bias, he noted.
In these scenarios, participants had to decide within each pair of events, which causes more deaths in the US each year. One pair compared Alzheimer’s disease or motor-vehicle accidents, while the second pair matched malnutrition or fire and flames. Dr. Harris reported that across many cohorts, people generally assume that motor-vehicle accidents and fire cause more deaths. The facts are that Alzheimer’s disease accounts for significantly more deaths than car accidents do, but it is infrequently reported, with only 1 media report compared to 137 media reports on car deaths. People believe that fire is a greater cause of death when, in fact, fire and malnutrition are equally fatal. But there are 0 news reports on malnutrition compared to 24 reports on fire-related deaths. The decision bias of visibility causes us to place a higher probability of occurrence on those things that we notice more or that are more frequently presented in the media.
In the next decade, needs in the States will outstrip the resources, and this will require some hard decisions, Dr. Harris observed. Having raised awareness of the decision biases that can be impediments to optimal decision-making, he then challenged the participants to explore strategies to overcome these biases as they broke into small groups to discuss the biggest, looming, long-term investment issues facing the States, and the biggest impediments to dealing with these issues. The groups focused on generating concrete ideas that could be implemented today to prepare for future issues and reported their findings to the Forum.
Reporting for his group, Sen. John Cullerton (IL) said that funding for capital improvements such as roads and bridges is a key challenge, especially as revenue from gas taxes falls as mileage efficiency goes up and more electric cars are on the road. Strategies to raise those funds discussed by the group included fee increases, rather than tax increases and a halt to the diversion of funds earmarked for roads. His group reported that in Tennessee, bipartisan agreements have allowed the legislature to raise gas taxes, which has created jobs and long-term benefits for the State.
Sen. Wayne Niederhauser’s (UT) group also identified infrastructure improvements as a key challenge. He observed that a major impediment to making these choices was legislators’ concerns that they would not be reelected if they raised the gas tax. Utah had not seen a gas tax hike since 1996 and relied on tolls for funding capital projects. “In 2016, we had to make a hard choice about implementing a gas tax,” Sen. Niederhauser said. “We reframed the discussion by informing people that the gas tax was not bringing in sufficient revenue to fix the roads. We had to sell the idea of a new gas tax. But it was successful without anyone losing an election.”
One group, reported by Kevin Lynch (Avangrid Renewables), focused on the aging population and increasing costs of Medicaid and nursing homes as a key challenge. His group advocated providing services that allowed people to age in place with adequate services to keep them safe in their homes. The group also recommended using new technologies such as tweeting to build a consensus for funding such strategies.
The group led by Sen. Ginny Burdick (OR) observed that government does not exist in a vacuum, stressing the importance of building partnerships of trust among constituencies such as the business community and social networks. The group discussed the importance of outreach, commenting that establishing trust among people is fundamental to stability in the State.
Holly Borgmann (ADT) said her group examined workforce development as a key challenge. She said “we need to reframe the message about education, that it is not only 4-year degrees that are valuable but also that vocational education and retraining can offer paths to success.”
In the group represented by Sen. Danny Martiny (LA) stressed the importance of informing people and reframing the rationale for decisions made by the legislature. “People have gotten into partisanship camps and we need to get them to pay attention to what the actual facts are,” he observed.
Affordable housing and homelessness were at the top of the agenda for Sen. Ronald Kouchi (HI)’s group. “We have to look for innovative solutions,” he said, “and then collaborate and influence to make those solutions work.” Sen. Kouchi gave the example of addressing the challenge of affordable housing in Hawaii. The Carpenters’ Union agreed to a 15% wage reduction while they were building affordable housing, with the incentive that some of those houses would be available to union members who met appropriate criteria.”
Sen. Larry Taylor (TX) shared his group’s discussion on the challenge of unfunded liabilities of public pensions. The main impediment that his group identified is the entrenched interests of pension participants who refuse to consider any changes. The group recommended that the issue be reframed by increasing awareness and communications about how public pensions are higher than most private retirement savings plans. They also suggested capping benefits for new employees.
“Without strong leadership, the problems that the States face just get kicked down the road to the next session or the next legislature,” Dr. Harris pointed out. “Senate Presidents are always thinking about how to manage the looming thorny issues. But they also have to lead the conversation, reframe the issues, inform and influence people. You must not only make the right decisions but also inform others and bring them along with you,” he concluded.
Sen. John Cullerton (IL), Sen. Kevin De Leon (CA), Sen. Bob Peterson (OH), and Sen. Ron Kouchi (HI) discussed the implications of the group exercises during a break in the session.
Associate Professor Jared Harris, appointed to the Samuel L. Slover Research Professorship, teaches both Ethics and Strategy courses in Darden's MBA program and a doctoral seminar on corporate governance and ethics. His research centers on the interplay between ethics and strategy, with a particular focus on the topics of corporate governance, business ethics and interorganizational trust. His work on corporate financial misrepresentation won the 2007 Best Dissertation award in one division of the Academy of Management (social issues in management) and qualified him as one of six finalists in another division (business policy and strategy). His work has been published in Organization Science and Business Ethics Quarterly and has been featured in The New York Times, the Washington Post and The New Yorker as well as other media outlets in the United States, Canada, Germany, India, Portugal and the United Kingdom.
Prior to joining the Darden faculty in 2006, Harris taught at the University of Minnesota's Carlson School of Management. Previously, he worked as a certified public accountant and consultant for several leading public accounting firms in Boston, Portland and Oregon. He also served as the CFO of a small technology firm in Washington, D.C.
A fellow with the Business Roundtable Institute for Corporate Ethics and a senior fellow with Darden's Olsson Center for Applied Ethics, Harris is also a research partner of Open Ethics and Compliance Group (OCEG) and the Institute of Management Accountants (IMA). He consults with several leading financial services companies on the topics of strategic management, ethics and compliance.
Other Winter 2017 Forum Highlights articles:
Jared Harris, PhD
University of Virginia
Darden School of Business
The framework we use to structure a decision can influence the outcome of the decision.
In situations involving uncertainty, we tend to believe initial data and ignore subsequent data.
What we have already invested makes us more inclined to continue an activity, even when it is irrelevant to future results.
The decision bias of visibility causes us to place a higher probability of occurrence on those things that we notice more or that are more frequently presented in the media.
Sen. John Cullerton
Sen. Ginny Burdick
Sen. Danny Martiny
Sen. Ronald Kouchi
Sen. Larry Taylor
You must not only make the right decisions but also inform others and bring them along with you.
Jared Harris, PhD
University of Virginia
Darden School of Business
Senate Presidents’ Forum
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