The discounting principle comes from psychology. It says that when making a decision, people tend to give less credence to expected evidence or data supporting one option when many options exist. This principle has several possible applications in the process of hiring, training and leading employees, as well as in making business decisions.

Excusing Failures

A common reason individuals discount their own experiences is to save face or avoid negative repercussions from mistakes. A manager trying to explain away a bad decision or costly mistake might discount his own direct involvement in lieu of external factors, such as bad timing or unexpected competition. The problem in this situation is that if you discount your own role in the mistake, you have a better chance of making it again than if you fully weigh your own involvement in assessing the results.

Theory X Leadership

A controlling manager who puts little stock in the internal motivation and drive of employees likely discounts worker efforts on a regular basis. A manager might, for instance, believe his own leadership and decision-making, sheer luck or other factors led to an employee's good performance as opposed to the employee's own effort and ability. Constant discounting of employee work can lower morale and ultimately demotivate workers.

Planning and Preparation

While a business may happen into a profitable situation, many of the successes you experience result from effective and thorough planning and preparation. You might find that when you plan out a marketing strategy and implement it for a new product launch, the product takes off and customers line up. You could discount the influence of the planning process and instead give credit to good timing, spontaneous promotion or anxious customers. Any of these attributions may inhibit your willingness to commit to planning future business activities.

Hiring and Interviews

Discounting can become a big problem when hiring. You could fail to accept a candidate's plausible explanations for past accomplishments or you could discount potential red flags in favor of superficial qualities. A retail manager in an understaffed store is potentially tempted to discount red flags to fill a necessary spot on staff. He might discount a previous termination as a one-time incident or as something beyond the employee's control to justify a hiring. If you falsely discount in this way, you risk making a bad hire.