How can you minimise bias in your portfolio?

Since knowledge, experience, nor intellect protects against unconscious biases, the first step is to acknowledge that no matter how effective a decision-maker you think you are, you’re still affected by cognitive biases.

Mental shortcuts and biases operate at an automatic and unconscious level. As a result, awareness of these biases does not eliminate their detrimental effects. However, steps can be implemented and strategies adopted to minimise the risks to effective human capital decision-making. 

Here are a few tips:

• Beware of the traps of informal management assessment; the more informal and less structured an approach, the more open it is to bias. Whilst it’s tempting to form your views about management capability based on referencing, observation of the initial management presentation, and other informal interactions with the deal team, these are highly unreliable sources of assessment and unlikely to give you an accurate picture of a leader’s real capability. 
• Clearly articulate, in as much detail as possible, the outputs c-suite executives need to deliver, both in terms of WHAT and HOW. Make explicit the early signs that will provide you with confidence that things are moving in the right direction as well as worrying signs that suggest that things are off to a bad start. 
• Implement Investment Committee processes to mitigate ineffective decision-making through the influence of unconscious biases or group think. Since evidence for the effectiveness of anti-bias training for decision-makers is mixed1, instead focus on implementing processes to reduce the scope for bias, and create conditions which make bias less likely to go unquestioned. This includes training in effective selection and assessment techniques and processes, and implementing steps to enhance decision-making quality in key forums such as ICs e.g. appoint a devil’s advocate, encourage constructive challenge and counterarguments, and develop scenarios of possible outcomes. 
• Ensure you have processes in place to make sharp evaluations of leadership performance across the lifecycle of a deal. This involves determining upfront the leading and lagging leadership performance indicators, and agreeing the trigger points for action to avoid ‘wishing and waiting’. In terms of optimism, whilst it’s right to give people a chance, to avoid this simply being a waste of everyone’s time, leaders need to be clear on these metrics, against which their performance will be evaluated. 
• Conduct robust management assessment as a matter of course, ideally pre-closing. Assessment should not be seen as a death warrant; whether leaders stay or go you need to know how you can fully maximise their capability. Effective assessment is predictive of future performance; it gives you a good degree of certainty about how an individual will perform in the future.2 High quality assessment is also context rich, giving an insight into how people are likely to behave in the actual operational reality that they will be confronted with. Since assessment should replicate as closely as possible the reality that people need to operate in, Kiddy believes strongly in the value of using bespoke simulations designed to replicate those key operational challenges, for example. This provides added confidence, above and beyond past behaviour, closing the gap between assessment and reality and stopping you from having to make a ‘leap of faith'.