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Every in-house lawyer makes decisions every day: whether to call or write, research further or stop, caution a client or charge ahead, work on a file or kick back. Yet few lawyers realize that when we make our decisions, especially the important ones, we may unwittingly fall prey to misconceptions, false assumptions and faulty reasoning. These traps, which distort how we make decisions, may to some extent be genetically determined. But many are learned, and often we can overcome them if we recognize them. Here are some of the most common decision traps that in-house counsel might encounter, along with a few techniques for sidestepping them, as well as some general antidotes. � We’ll Waste What We Spent! (Money Over the Dam) One obstacle to making a correct decision has been referred to as the “entrapment of sunk costs.” Once a law department has invested in a case management system, hired a person, or rebuilt its office space, the funds for those needs are gone. But the fact that the money is already spent should not bear on future decisions to upgrade the software, fire the person, or move offices. An investor should look only to a company’s future earnings projections, not its history. Similarly, a decision to move forward with a strategy should be based on a comparison of future costs and future benefits. Avoid this trap by repeating, “Sunk costs should not be considered in the equation.” A useful way to pre-empt this problem is to create milestones in your initial plan. Then, at each interim point you can scrutinize your results and cancel the activities if necessary instead of suffering along, thinking that you would be wasting the money that has already been spent. � I’m Sure I’m Right! (Being Certain but Incorrect) People in general, including lawyers, suffer from an “overconfidence bias.” As people become more certain that their answer to a question is correct, the actual likelihood of correctness does not rise proportionately. The overconfidence bias causes us to believe that our decisions are better than they really are — like the Lake Woebegone children, who are all above average. In law departments, examples might include overconfident lawyers who are overly certain of the correctness of the applicable law. Another example would be the litigator who has absolute certainty that the jury will see the facts — could only see the facts — in one light. We might say that dogmatic certainty is likely to precede a decision that’s going to the dogs. Alarm bells should ring when someone says, “I am absolutely sure about this.” � That’s a Given! (Not Questioning Assumptions) Another bugaboo of good decisionmaking is taking some part of the decision for granted. If a lawyer assumes that the security interest was perfected, for example, all the rest of the decision to foreclose may be undermined. Everyone is guilty of making assumptions and failing to test them for accuracy. It is important for us all to know our expectations and balance their biasing effects by developing arguments against their occurrence. Thus it is useful to dredge up all kinds of possible explanations. We look at the data, and without conscious effort we pull into the picture a belief we hold, often locked away in our minds, unexamined. One can skirt this decision trap by listing assumptions and testing them. � Don’t Confuse Me With Facts! (Noticing Only Confirming Evidence) Decision-makers find familiar, supporting facts comforting and tend to explain away inconsistent data. These decision-makers do not improve with practice. If a lawyer in a law department evaluates the performance of a law firm, the evaluation — the decision to keep using that firm — may be skewed by previous evaluations, and the lawyer may tend to brush off contrary opinions. We tend to find evidence for what we already believe, and disregard information that is likely to falsify it. Part of this is selective exposure, where you only read or attend to what confirms your beliefs. Part of this decision trap follows from what academics call “cognitive dissonance,” which holds that we try to reconcile contrary evidence into a consistent belief system. If you complain that you are underpaid, you will attack the methodology of a consultant who shows you that you are in the top quartile of compensation, for example. � Remember Their Billing Rates? (Exaggerating Available Data) Or, if you know the billing rates of partners at a particular firm (that being the most visible and memorable fact), you accord it too much weight when someone asks you whether the firm is cost-effective. Like the drunk looking for his lost keys under the streetlight because the light is better there, we make decisions by placing too much emphasis on data easily at hand, rather than on data that actually would help but are harder to develop. It also means that we place more importance on what we can recall. For instance, which words are more common: those that start with “r” or those that have an “r” in the third position? Most of us would choose the former because we can think of those words more quickly. The point is that if you want to sidestep this decision trap, think through the data that will clarify the decision. Do not simply fall back on whatever data can quickly be brought to light. � Remember That Awful Time When … (Stressing Dramatic Past Events) In one law department where I conducted an assessment, senior management had forced out a popular senior lawyer. The rest of the department’s lawyers remembered that dramatic firing and became overly cautious, slower and more addicted to decisions by groups. Every law department has some horror story about a rogue client, a terrible settlement or an ambiguity in a press release. Humans seem genetically disposed to remember more vividly the dramatic event in the past — and place disproportionate weight on it — than to recall the unexceptional events that came before and after. We remember an air crash that kills 100 far more clearly than the toll of car crashes that kill more than 100 people every day. Salient, dramatic events influence decisions disproportionately to their relevance or frequency. We can protect ourselves from this bias by asking for quantitative evidence of the memorable events, and balancing those data against the ordinary events that take place all the time. � The First Time I Saw That Judge … (Relying on Quick Impressions) First impressions weigh disproportionately in our decisionmaking. Whenever in-house counsel interview to hire employees or outside counsel, they need to shake themselves not to make too much of the first sense they have of someone. Keep initial impressions in mind, certainly, because intuition has power, but try hard to keep their influence on later decisions within bounds. � But the Meteorite Risk … ! (Overestimating Low-Likelihood Risks) Clients most frequently criticize in-house counsel for their conservative view of risk. The lawyers do not want to approve an action — make a decision — without addressing and fretting about risks. This overestimation of the likelihood of risk infects all manner of decisionmaking. Lawyers seem by nature to be a conservative and cautious species. We need to balance this orientation by realistic appraisals of the likelihood of risks and the cost of minimizing them. � Look, All We’ve Got Here Is a … (Misframing the Decision) You are environmental counsel for your company, and a client has just brought to your attention a messy situation. If you didn’t know about decision fallacies, you might quickly sum up the situation this way: “We’ve got an EPA situation here.” That step of summing up is known in the research literature as “framing.” The accuracy of how you frame a decision goes a long way toward determining how well you will choose. Research teaches us that we should delay framing a situation as long as we can because it is hard to reframe later. ANTIDOTES FOR DECISION TRAPS A few general antidotes apply to all of these decision fallacies. Below are some techniques that offer more specific help for each fallacy. � Understand that we are not rational, computing machines, but struggle with biases that undermine good decisionmaking. � Allow time to mull over any important decision. � Play devil’s advocate to your own decisions. � Do your homework, gather your facts and test your assumptions. Rees W. Morrison is a principal at Altman Weil Inc., a Newtown Square, Pa., legal consulting firm. He heads its law department team.

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