Reward Evidence-based Decision-Making

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“Good judgment comes from experience; experience comes from bad judgment.”
                                                        –Mulla Nasruddin, 13th Century Sufi sage/fool

Success in business today requires many things. Perhaps most importantly, organizations need to embrace learning. And both the employer and the employee have responsibilities in this learning.

Employers should do what they can to engage employees and keep them intrinsically motivated to learn. And this learning must include the ability to be implemented otherwise it undermines the employee’s motivation as well as limits organizational improvement.

At the same time, employees should adopt a growth mindset so they continually achieve and learn as they navigate their careers. This means taking on new challenges, expanding their skills, and broadening their area of expertise. It also means challenging the status quo.

Here are two scenarios:

Bob discovers the new product his company is launching has a fatal flaw that may undermine its success in the marketplace. He double-checks his research and concludes it is correct. His company however discourages naysayers and, despite his certainty, Bob is concerned that speaking up will be detrimental to his career. He stays silent, the product flops, yet Bob’s career growth is preserved.

Nancy discovers the new project her company is rolling out will miss its target completion date. She double-checks her research and concludes it is correct. Because she works for a learning organization that encourages direct feedback, Nancy presents her findings, the project is given additional resources to complete on time, and it is a resounding success. Nancy is rewarded with a promotion and celebrated throughout the company.

Which company do you work for? Are you Bob or are you Nancy?

Organizations should encourage employees to challenge assumptions, speak directly about the “elephant in the room,” and take calculated risks when it’s right for the business. This theory must go beyond mere words in an employee handbook and extend into actual practice for how things get done inside the organization.

On his way to inventing the light bulb, Thomas Edison reportedly said, “I have not failed. I’ve just found 10,000 ways that won’t work.” That is a healthy perspective on reaching success and how learning is paramount.

The best companies perform a post-mortem on projects and products with the purpose of pointing out and learning from what went well and not so well. Too often, however, the lessons of what went wrong are not adequately documented and communicated, so the missteps are likely repeated.

Economists too often see people as highly rational in their decision-making and don’t take into account the irrationality of human beings, says Richard Thaler, professor of behavioral science and economics at the University of Chicago Booth School of Business in his book Misbehaving: The Making of Behavioral Economics.

“It is time for everyone—from bureaucrats to teachers to corporate leaders—to recognize that they live in world of Humans and to adopt the same data-driven approach to their jobs and lives that good scientists use.”

Here are some basic lessons in behavioral science Thaler suggests can make this possible in the corporate world. Observe, collect data and speak up.

Observe – This means seeing the world not as you wish it be, but as it really is. The first step to overturning conventional wisdom, when conventional wisdom is wrong, is to look at the world around you as it is.

Collect Data – People become overconfident because they never bother to document their past track record of wrong predictions, and then make things worse by falling victim to confirmation bias—they look only for evidence that confirms their preconceived hypotheses. The only protection against overconfidence is to systematically collect data, especially data that can prove you wrong. This is what proves especially difficult because we are so devoted to our hypothesis.

Speak Up – Many organizational errors could be prevented if someone is willing to tell the boss something is wrong. Thaler cites the tragic 1977 runway crash of a KLM flight because the second officer was too timid to speak up to the pilot, his boss. Culture, professional courtesy, and most of all fear keep people from challenging the boss, even when they know the boss is wrong.

“But we cannot expect people to take risks, by speaking up or in other ways, if by so doing they will get fired,” says Thaler. “Good leaders must create environments in which employees feel that making evidence-based decisions will always be rewarded, no matter what outcome occurs.”

In Thaler’s ideal organizational environment, everyone is encouraged to observe, collect data, and speak up. And the bosses who create such environments risk only a few bruises to their egos, which is a small price to pay for increasing the flow of new ideas and decreasing the risk of disasters.

It comes down to more humility in leaders and more courage in employees. When both are present, organizations can learn from their experiences and become more successful. And organizations should encourage more Nancys and fewer Bobs.

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