The Boards of tax-exempt organizations, as well as the senior executives, operate in complex environments and are expected to make important decisions on a daily basis. While infrequent, decisions related to supplemental executive retirement plans, also known as SERPs, for key executives are critical. These decisions require careful consideration, a defined process including collection and analysis of all pertinent information, and objective deliberations. Keep reading to learn more about what steps businesses should take to avoid making biased decisions.
Important Step to Avoid Bias in Decision Making
When making decisions about SERPs and retirement benefits, the first step is picking the right firm to assist with analysis, design, implementation and administration of a selected plan. Using a “Request for Proposal” or “RFP” process is a way to determine what a firm can offer and how they can help your business. It is tempting to structure the RFP process too broadly, focusing on both selection of the executive benefits firm and the plan type. Instead, narrow the initial process to firm selection based on capabilities, experience, and reputation. This reduces the amount of data and information to be evaluated and makes the process more efficient. Once a trusted firm is selected, the organization can proceed with evaluating plan alternatives and, designing plans to address the specific needs of the employer and executive.
Next, the organization should define the process and decision criteria. While an RFP process can be a good course of action, entering into that process without a decision framework, or a plan for gathering the right information, analyzing that information, and making decisions based on it, can lead to a process that gets bogged down and does not result in action.
Further, organizations shouldn’t overvalue the status quo. This is a critical step to avoid bias in decision making. It is normal to place more value on what is current and fear the potential loss of what is known. However, overvaluing the status quo causes decision makers to potentially develop confirmation bias. This bias is seen repeatedly in existing plans that are flawed and unlikely to produce anticipated results. Even with rigorous analysis, many organizations and executives cling to these legacy arrangements, though the consequences are negative for both. This affinity to the status quo is common in both business and personal decision-making due to confirmation bias and an unwillingness to recognize “sunk costs.”
Lastly, organizations should be cautious with conflicts of interest. Given the significant demand on their time, decision-makers seeking to manage the mental energy required to make complicated decisions often opt for the simplest solution. This bias can lead to poor decisions and conflicts of interest, especially in important or strategic decisions. Certainties do not exist in the realm of complex decisions. A decision-making process, no matter how well designed and executed, will not change this fact. However, a well-thought-out process increases the probability that decisions will result in desired outcomes.
How TriscendNP Can Help
To learn more about TriscendNP and how we help organizations evaluate alternatives, avoid bias in decision making, and rest easy, visit triscendnp.com.