Thinking about Thinking - Overcoming Cognitive Bias in Procurement

Every person in the world – and procurement professionals are no exception – is subject to errors in thought processes known as cognitive biases. In today’s inclusive work environment, being biased may sound like a problem, yet these biases are part of human nature. While society may popularly define bias as synonymous with prejudice, cognitive biases are different and include mental errors such as Negativity Bias, Confirmation Bias, Recency Bias, and Hindsight Bias. 

Since these biases are natural, procurement professionals cannot be immune to them. What they can do is examine how and when these biases manifest themselves, raising awareness and making sure they don’t get in the way of good decision making and healthy business relationships. 

In this article, I will consider when and where these biases may affect procurement professionals, the sources of bias, and the ways we can all learn to recognize and address bias. 

Bias at Work in Procurement 

Let’s say a trusted supplier with a stellar track record suddenly struggles to perform. Maybe they fail to deliver the product on time, or their services fall short of expectations. In a momentary lapse of judgment, a procurement professional might forget all about that supplier’s years of reliability and focus only on the failure that has just taken place. This is an example of Recency Bias, or overemphasizing the most current information or experience and forgetting about the past.  

In the moment, the procurement professional doesn’t intend to disregard the past relationship with that supplier, but due to the bias, perception of the past is clouded by the present. Negativity Bias may rear its ugly head here as well, in that the negative tone of the incident inappropriately overshadows the vendor’s vastly positive track record, and that dark shadow could persist for some time. 

Bias might also appear when someone buys something off-contract. Procurement teams often characterize this spend as “maverick” or “rogue.” These labels are clever enough, but they are also intrinsically negative and judgmental. It is easy to fall into the trap of thinking a frustrating choice was intentional, that the person chose to go against established processes or outside of a contract just to put their preferences over policy. This is representative of a cognitive fallacy known as the Fundamental Attribution Error – blaming the buyer for doing something for their own personal reasons or failings while not considering extenuating circumstances outside that person’s control.  

In reality, people buy off-contract for lots of reasons, and most are harmless. Maybe the person was confused or in a hurry. Maybe they didn’t know there was a contract in place. Perhaps what was already in place didn’t meet the real needs of the stakeholder, suggesting a gap that needs to be addressed. How procurement professionals choose to manage this kind of situation will have lasting implications, both on the relationships with that person and anyone else they choose to share their experience with. 

Where Do Biases Come From? 

In general, most biases must start somewhere. Prejudicial biases are learned from our environment and experiences and persist due to our own rationalizations and resistance to change. Once those sorts of biases take root, they are extremely hard to dislodge, often because people aren’t consciously aware of them. While prejudicial bias is beyond the scope of our discussion here, cognitive biases are hardwired and common to the human experience.  

While everyone suffers from them, corporate culture plays a role in how prominently cognitive biases surface. A company’s culture sets the tone, priorities, norms, and values that guide each person’s decisions and perspective. In stressful work situations, culture and process can quickly give way to emotion and instinct. Under pressure, people tend to react reflexively rather than turning to data for support, and this can lead to biased decision making.  

This can manifest as subconsciously relying on something called a Mental Set, which is the set of cognitive biases, rules and heuristics, and strategies that has worked in the past – for better or worse. The more often those Mental Sets work, the more ingrained they become, even if they are mistaken or incomplete.  

So, especially when faced with pressure, procurement professionals must find a way to make decisions and recommendations based on the best data available, and should pull in team members for assistance, relief, or perspective as needed. 

Is There a Cure for Cognitive Biases? 

One of the best ways to mitigate cognitive biases is to insist on making data-driven decisions. This is a practice that should come naturally to procurement professionals, whether that data is from spend transactions, supplier proposals, contracts, or market insights. There are many options available, so the trick is remembering to use it.  

A data-driven approach helps mitigate Confirmation Bias, where a procurement professional only absorbs information that reinforces what they already believe to be true. Best practices in procurement processes already prescribe a data-driven approach, so simply following those guidelines can, in and of themselves, make any individual biases far less prominent and reduce the burden of remembering to rely on data in the first place. 

When analyzing an event, it is also critical for procurement professionals to separate what has happened from why it happened.  

Just like the example of the off-contract buyer, we must ask ourselves if a person or organization acted with malicious intent or if there was a misunderstanding, or perhaps decision-making with incomplete information. It is too easy, especially with the bulk of information and experience, to look back on a purchasing event after the fact and pass judgment, but Hindsight Bias is a cognitive bias like any other. Providing the benefit of the doubt and ensuring open communication can go a long way toward combating bias and improving outcomes simultaneously. 

When procurement professionals acknowledge their own cognitive biases and proactively mitigate their influence, they are no longer a problem. Advantages like the power of data, critical thinking, results-oriented analysis – and, most importantly, being part of a team – are a procurement team’s best weapons in the ongoing battle against cognitive biases and, subsequently, in more efficiently finding maximum value in procurement for their organizations.