For so many reasons I hate and try to avoid using any jargon.

 However, this one is so valuable, I’ll make an exception.

 The word or term is “Fundamental Attribution Error.” It’s psychology jargon, and it is likely to be very relevant for you in these challenging economic times.

 I’m not a psychologist, but let me give you my understanding of what Fundamental Attribution Error is – as I got it from a psychologist. Particularly as it is relevant to your business decisions.  I promise to use simple language.

 Making Good Decisions
It goes without saying, that decision making is a major factor in just about any form of planning. Bad decisions can be hard or impossible to correct with diligent actions.

 So what does Fundamental Attribution Error have to do with decision making?


 We make business decisions based on what we believe to be the truth or the real situation. In other words, we make choices based on our conscious understanding of an opportunity or problem or situation etc.

 Now here’s where it get interesting (and dangerous).

 In simple terms, our conscious awareness comes from what we see and hear – and two other sources. The two other sources are imagination and memory.

 At present, your conscious awareness is coming from information being transmitted to your brain from what your eyes are seeing on your computer screen or a printed page.

By some incredible miracle, you brain is converting a pattern of dots or pixels on a computer screen or page into meaningful information.

 Now this is a big simplification, but let’s considers what happens when you see something or hear something.

 One part of your brain recognises patterns i.e. letters, words, numbers. And I think you will agree, we can usually do this with a high degree of accuracy. If I’ve made a typo error (which I often do), you will likely recognise the pattern error.

 Then – and this is the interesting bit, another part of your brain gives meaning to the data or information being received.

 This is where your accuracy can go to hell!

 When your brain interprets or puts meaning to what you see, hear, imagine or remember, something else occurs. Your brain applies filters.

 Your brain takes into account your emotions, beliefs and past experiences etc. This step can enhance or distort the raw information being processed by your brain.

 In some situations, your brain can completely filter out certain sights, sounds and memories etc. If you want more on this, do a Google search on “Reticular Activating System”.

 Back to plans, decision making and Fundamental Attribution Error.

 Fundamental Attribution Error is when your brain gets it all wrong. It distorts information to such an extent that you make choices or decisions that in hindsight or the cool light of day are wrong.

 Here’s an example. Last week, I was talking to a client, let’s call him Joe.

 Joe told me that because of the current economic conditions, he had decided to suspend the planned release of a new product.

 As the conversation continued, I noticed that he was getting quite emotional and a little irrational. It occurred to me that his decision to cancel his product release may have been questionable.

 After a bit more discussion, I asked him get out pen and paper and work through a simple four or five step procedure. (I have listed this procedure for you below).

 Later that day I got an email from Joe.

 As it turned out, there was only one factor was likely to impact this specific product release. And all that was required to address this factor was the addition of one paragraph in the distribution agreement.

 The product lunch is now progressing.

 What does this mean for you?
If you have to make important decisions, consider this procedure:

 Make a list of what has changed that will or could impact your situation.

For each item, indicate the importance with an number between 1 (low and 10 (high)

Then, for each item indicate the likelihood of the event occurring. Same scale 0 = very unlikely, 10 = very likely.

For each item/issue, multiply (3) by (4). This will give you a weighted impact factor. If you add up these numbers, you have a weighted decision factor.

If the consequences of this decision are important, show your assessment to other people for comment. Preferably people will knowledge and experience in the issues involved

Now this procedure is still open to errors, but it should help you avoid the damage or consequences of Fundamental Attribution Error.


Andrew Smith

The Business Plan Guy