What is Cognitive Dissonance in Business?

By Greg Silverman, Sep 07, 2020

Cognitive dissonance may be a term you’re vaguely familiar with from your college psychology course, but do you understand its implications in the business world?

Leon Festinger first investigated what came to be understood as cognitive dissonance after observing how individuals reacted when their beliefs were proved wrong. He found that those not entirely committed to their beliefs were more inclined to admit they were wrong, while those who were devoted to their assumptions faced mental anguish. To relieve this dissonance between their beliefs and outcomes, the committed individuals began to re-interpret evidence to prove their beliefs were correct in the first place.

The study proved that it’s human nature to try to diminish mental discomfort by changing behaviors - however, this is easier said than done. Consider people who smoke or habitually exceed the speed limit. They understand these behaviors could have negative consequences but breaking the habits become extremely difficult, and those people may remain in a state of cognitive dissonance until either their behavior or consequences change.

On an individual level, cognitive dissonance is draining - so just imagine the effects when it’s present in a business setting. Organizations are not immune to its effects, and it’s up to business leaders to ensure it is mitigated so everyone is able to work to their best potential.

Instances of cognitive dissonance in business

While cognitive dissonance is present in a multitude of situations, there are three specific instances when it typically occurs in an organizational setting:

1. Forced compliance: Often, individuals choose positions where they will be comfortable with the tasks at hand - essentially being proactive about reducing cognitive dissonance in their work life. However, there may be times when they are told to do something or use a certain tool they are uncomfortable with or unsure how to use.

In analytics, in particular, this occurs when a business leader deploys a model everyone across the organization must use to answer questions. There’s little to no room for other employees to change the process or system unless the person with authority allows it. If employees are not comfortable with the system but are required to use it, they experience dissonance that hinders their ability to process decisions for the benefit of the company.

2. Decision making: Every day, business decision makers are making investments and choices to move the company forward. But when the outcomes aren’t what they anticipated, individuals experience dissonance. For instance, if a business leader decided to lower prices in an effort to increase sales, but market share continues to decline, they are conflicted. The information owing to their decision was dissonant from the outcome.

The Hustle pointed out that a disconnect in decision making occurs often with consumers, and is what we typically refer to as buyer’s remorse. Consumers make a decision in the moment that is perceived to be sensible and will fulfill a need, but afterwards feel guilty or regretful about their choice and wonder if an alternative would have better suited their needs.

This is the same dissonance business decision makers feel when they form a choice that is sensible to reach their outcomes in the moment, but doesn’t lead them to the expected or desired result.

3. Effort and outcomes: Imagine working on a project or strategy for months or even years, and the result you anticipated is underwhelming. When the effort placed into a project doesn’t match the expected payoff, this causes cognitive dissonance. Consider when a business invests time and money in an analytics model, only to realize it doesn’t provide the information they need. Not only does this take a toll on company morale, it feels like a waste of resources.

Businesses are constantly faced with actions that cause cognitive dissonance. Conflicting feelings over the way things are deployed and the expected results depletes motivation and hinders productivity. Luckily, there are ways to mitigate these occurrences within an organization.

Overcoming the uncomfortable

When faced with cognitive dissonance in business, there are a few actions an individual should take to mitigate it. These are known as the levers of change - essentially actions that an employee controls to find their internal balance once again.

1. Change behaviors: This is undoubtedly easier than changing one’s beliefs. To reduce dissonance, one should alter their behavior - and if you're a business leader, you must help employees do this. For instance, if employees do not enjoy working with a certain analytic model, make the decision to change it or how they interact with it.

2. Mitigate the impact of beliefs: Beliefs are difficult, if not impossible, to change. However, they are able to be mitigated. If an employee is being told to work with a process they don’t believe works, provide them with information or resources that slowly work to show them that their conviction may not be so strong so the dissonance is lessened.

3. Acquire new information: Transformation without new information is stressful. Continuing to acquire new information that makes dissonance more understandable is an effective strategy. Seeking out many different sources of information and corroboration helps reduce the dissonance caused by leaning one.

Prescriptive analytics based on observable facts

New business technologies make overcoming the uncomfortable within an organization even easier. Prescriptive analytics and market simulation provide business decision makers with observable facts and a plan of action to reach their goals with extreme accuracy (upwards of 95% with Concentric).

In the current business climate, where sales are dropping across the board and consumers are hesitant to make purchases, it’s important to adopt an agile analytics solution that reduces cognitive dissonance across an organization. With Concentric, science is at the core of our in-house platform. Your business must begin observing these realities of the market faster to meet and exceed their expectations and sales goals in unprecedented times.

For more information on our model, contact a member of our team today.

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