Cognitive Behavioral Therapy in Law and Business
Cognitive behavioral therapy (CBT) has been developed to treat psychological issues by changing distortions in thoughts, beliefs, and attitudes and their associated behaviors. In psychotherapy, CBT is intensely practical and focuses on solving problems. CBT is not only an effective therapy tool, it can also be used to obtain better outcomes in law and business.
CBT starts with identifying cognitive distortions, or unhelpful thinking styles. For example, we often engage in magnification and minimization, so we may overstate the effect of an event or make it seem less important than it is. For example, businesses must assess accurately risks to make good decisions and executives will sometimes overreact to a perceived risk and take action that may not be required. Similarly, an executive may ignore a real risk with no factual basis for doing so. We see magnification and minimization often in areas where action or inaction can have outsized consequences (such as class action litigation).
Similarly, contrary to what game theory teaches us, humans will tend to engage in emotional reasoning that may be less than logical. If someone feels it, they assume it to be true. Litigants are often, if not always, emotionally invested in their causes and may not settle when they would if they took an unemotional, logical view.
All or nothing thinking is another trap that affects many. The distortion is characterized by seeing things as black or white, complete success or dismal failure. Few things are so in business in law, and all or nothing thinking misses the fact that most issues are matters of degree. A course of action may not be simply good or bad, but somewhere in between. Closely related to this overgeneralizing, which results in finding patterns based on single events.
One of the most insidious distortions is the application of a mental filter in which a party only sees what they want to see. Is that employee as bad as you think? Or is it that you have filtered out the good?
Parties in negotiation must often engage in a form of mind reading in that they must understand the goals of their counter party. In this environment, it is easy to jump to unfounded conclusions. Does your buyer need to close this year? Or are you assuming so without evidence?
The number of cognitive distortions is limited only by the human imagination. CBT also offers an approach for resolving them.
The first step is identifying whether a belief is a distortion. Once that has occurred, the evidence or argument can be examined. For example, is your counter party dishonest? Or simply self-interested? Viewed in the clear light of facts, the answer may become clear.
After properly evaluating the belief, we can substitute problem solving for reaction in solving a problem. For example, if a tax or regulatory compliance matter carries a small chance of causing harm but the harm would threaten the viability of the business, the decision makers may reasonably determine to incur the costs to reduce the risk by restructuring, avoiding a transaction or simply taking a conservative approach to following the rule.
CBT was not likely developed with business transactions in mind, but since businesses are managed by people, CBT can be a useful tool to making better decisions.
