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Example Interest Rates: Home Loan Variable: 5.69% (5.89%*) • Home Loan Fixed: 5.48% (6.24%*) • Fixed: 5.48% (6.24%*) • Variable: 5.69% (5.89%*) • Investment IO: 5.74% (6.40%*) • Investment PI: 5.49% (6.27%*)

Broker Bias and SOPs

Confirmation bias is an inherent and stubborn flaw in the human condition. We like to validate our decisions and actions, even if those opinions are wrong, and even after evidence is introduced that rejects our position. The more we debate something, the more we engage with those that share our dillusions, or the more erroneous industry groupthink we're exposed to, the more and more likely we are to commit ourselves to and rigorously defend our flawed understanding.

What this means is that our confidence systematically exceeds accuracy... implying we are often 'more sure' about something than we should be. In times of crisis, or simply on occasions where workload and stress is high, we often become so task-saturated that we don't have spare cognitive processing power to question our actions. This is where SOPs fit in. Regardless of task-saturation, operating procedures provides guidance and frees up cognitive power for task completion.

Overconfidence leads to a situation where we form an irrational escalation of commitment, or commitment bias, leading to anchoring 'tunnel vision'. The longer we vacate dynamic lateral thinking and tolerate a cognitive dissonance, the more and more we commit to a bad decision and "make the wrong decision the right decision". So, the whole "we've always done it this way" quote slowly takes on another form; "I have to do it this way because this is what works".

SOPs are an escape from the infinite loop of a commitment bias in that they will often force us to consult decision models so our personal bias' don't interfere with best-practice fact-based outcomes.

Implementing SOPs in an organisation is a genuine professional development opportunity for staff. Discussing best practice, better practice, implementation timelines, cost benefits, risks, and so on, are all means to improve upon procedures but also educate stakeholders and mitigate the risks associated with introducing change.

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