How the status quo bias affects decision-making inside the company?
One of the types of biases that can affect corporate decision making is status quo bias. According to Samuelson and Zeckhauser status quo bias is when people prefer the current state and tend to resist change. If we experience something every day, we get comfortable with it. For example, if we go to the workplace by bus, we are unlikely to walk there or even change our usual route. We do not want to risk by changing the things. In everyday decisions the risk is small, but still, we tend to stick to the usual way of doing things. We do not want to get out of our comfort zones even being aware that something needs to be changed. Let’s look at the USA gun culture. Since the country’s earliest days, guns were integrated into the spirit of the American society. As stated in the Pew Research Center study, forty-eight percent of Americans grew up in a household with guns. By American gun policy, firearms are more available in the US than in other countries of the world. Small Arms Survey identified that Americans own almost half of the estimated civilian-owned guns worldwide. According to the Gun Violence Archive, which provides data for gun violence, there were 1,368 mass shootings in the USA during the period from 2014 to March 2018. Despite these tragic events and a terrifying number of deaths, people still support for the right of owning a gun. According to Pew Research Center surveys, support for firearms ownership among the public has increased since the 2000s. Another vivid example of status quo and status quo bias in decision-making is the International Financial Reporting Standards (IFRSs) developed and approved by International Accounting Standards Board (IASB). The development of technologies, the introduction of cryptocurrency, the increase in the number of companies, whose main assets are intangibles – nothing of that were duly reflected in the standards. Undoubtedly, one of the main reasons of that is politics and bureaucracy, but an important role is also played by status quo bias that affects people in decision-making. As all of the above is happening for the first time and there is no previous experience and default option of dealing with such things, Board members tend to defer a decision by keeping things as it is and having lots of discussions that do not lead to needed changes.