Be Rational About Irrationality
Murray Gell-Mann, Nobel
Prize-winning physicist and co-founder of the Santa Fe Institute, once said,
“Think how hard physics would be if particles could think.” His sentiment
captures the importance – and complexity – of dealing with the human side of
leading organizations.
In our view, the
challenge is even greater than this sentiment implies. It’s not just that the
“particle” equivalents in organizations can think, it’s that they often do so
seemingly irrationally.
The phenomenon of human
irrationality illuminates why leading people is a challenge for even the
smartest, hardest-working and well-intentioned leaders and why so many
“textbook” recommendations miss the mark. Messages are sent but not heard,
actions misunderstood and incentives create unintended consequences.
But luckily we can
predict human irrationality in many areas, thanks to research by social
scientists. Grasping this, savvy leaders can use irrationality to accelerate
vs. derail their change efforts.
Motivate others through involvement
Consider Nobel Prize
Winner and Princeton Professor Daniel Kahneman’s experiments involving a
lottery with a twist. Half of the participants were assigned a lottery ticket
randomly. The others received a blank piece of paper and wrote any number they
wished on it. Before the winning number was drawn, researchers offered to buy
back the tickets. The question they wanted to answer: How much more would they
have to pay to those who wrote their own number than those who received one
randomly.
The rational answer
would be that there was no difference at all since a lottery is pure chance and
every ticket, written or given, enjoys the same odds. What they found was that,
regardless, of geography or demographics, they had to pay at least five times
more to those who wrote their own number.
The lesson for leaders?
If you want to increase the motivation for – and, therefore, the speed of –
execution, it pays to involve others in creating the strategy, even when the answer
may already be clear in your mind.
Engage through anchoring heuristics
There’s another
experiment where soup cans are put on sale at a supermarket and, as a result,
shoppers on average buy 3.3 cans. Yet, when the same sale includes a “limit 12
cans” sign, shoppers buy seven cans on average. Psychologists call this the
“anchoring heuristic.”
In the first instance,
shoppers “anchor” on however many cans they came to buy and adjust upward when
they see the cans on sale. In the other, shoppers anchor on 12 and adjust
downward.
When we ask leaders
their cost reduction goal, we typically hear a percentage reduction from last
year’s budget (the “anchor”). We rarely hear that no cost is considered a given
(the “anchor” is zero). The difference in impact is both proven and profound,
yet taking a zero-based approach to cost reduction is rarely practiced.
The predictability of irrationality
Further examples of
predictable irrationality abound with important business implications. We cite
many of these in our new book, Leading Organizations: Ten Timeless Truths, including the importance of fair
process over fair outcome; the motivational benefits of focusing on strengths
vs. deficits; and how leaders possess a self-serving bias that makes them
believe changing behavior is everyone else’s problem but theirs.
The field of economics
already has been transformed through behavioral economics that offers an
improved understanding of how humans are predictably irrational. It’s high time
the same transformation happens within the practice of leading organizations.
January 2,
2018 – by Scott Keller & Mary Meaney
https://www.mckinsey.com/business-functions/organization/our-insights/the-organization-blog/be-rational-about-irrationality
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