Decision making is inherently a cognitive activity, the result of thinking that may be either rational or irrational (i.e., based on assumptions not supported by evidence). Individual characteristics including personality and experience influence how people make decisions. As such, an individual's predispositions can either be an obstacle or an enabler to the decision-making process.
From the psychological perspective, decisions are often weighed against a set of needs and augmented by individual preferences. Abraham Maslow's work on the needs-based hierarchy is one of the best known and most influential theories on the topic of motivation—according to his theory, an individual's most basic needs (e.g., physiological needs such as food and water; a sense of safety) must be met before an individual will strongly desire or be motivated by higher-level needs (e.g., love; self-actualization.
The Myers-Briggs Type Indicator (MBTI) is a widely used diagnostic for identifying personality characteristics. By categorizing individuals in terms of four dichotomies—thinking and feeling, extroversion and introversion, judging and perception, and sensing and intuition—the MBTI provides a map of the individual's orientation toward decision making.
Types of Cognitive Bias
Biases in how we think can be major obstacles in any decision-making process. Biases distort and disrupt objective contemplation of an issue by introducing influences into the decision-making process that are separate from the decision itself. We are usually unaware of the biases that can affect our judgment. The most common cognitive biases are confirmation, anchoring, halo effect, and overconfidence.
1. Confirmation bias: This bias occurs when decision makers seek out evidence that confirms their previously held beliefs, while discounting or diminishing the impact of evidence in support of differing conclusions.
2. Anchoring: This is the overreliance on an initial single piece of information or experience to make subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from that anchor, which can limit one's ability to accurately interpret new, potentially relevant information.
3. Halo effect: This is an observer's overall impression of a person, company, brand, or product, and it influences the observer's feelings and thoughts about that entity's overall character or properties. It is the perception, for example, that if someone does well in a certain area, then they will automatically perform well at something else regardless of whether those tasks are related.
4. Overconfidence bias: This bias occurs when a person overestimates the reliability of their judgments. This can include the certainty one feels in her own ability, performance, level of control, or chance of success.