Sunday, June 7, 2015

Can You Be Fooled By Your Own Experience?

Emre Soyer and Robin Hogarth write in the Harvard Business Review (May, 2015) how “experience seems like a reliable guide, yet sometimes it fools us instead of making us wiser. The problem is that we view the past through numerous filters that distort our perceptions. As a result, our interpretations of experience are biased, and the judgments and decisions we base on those interpretations can be misguided. Even so, we persist in believing that we have gleaned the correct insights from our own experience and from the accounts of other people,” (p.73).
It can be one of life’s most embarrassing moments, when as a leader, you simply go on your own experience, confident beyond doubt that you are correct – only to find out that you are wrong – and it’s not just the realization that can be a shock to the system; but how you deal with the ‘error’ with your team or organization can have far reaching implications for your leadership long into the future.
Soyer and Hogarth remind us that “in the business environment, the outcomes of decisions are highly visible, readily available for us to observe and judge. But the details of the decision process, which we can control far more than the result, typically don’t catch our attention. If the aim is to learn from experience – mistakes as well as successes – acknowledging the process is critical. Where a good outcome can lead us to stick with a questionable strategy, and a bad outcome can cause us to change or discard a strategy that may still be worthwhile. For example, in the NBA, coaches “are more likely to revise their strategy after a loss than a win – even for narrow losses, which are uninformative about team effectiveness,” (p.74).
Our attention to outcomes – and disregard of the processes that create them – make solutions seem more valuable than preventative actions. A decision maker who solves a burning problem can be identified and rewarded, while one who takes action to avoid the same problem is far harder to spot. This common error has a serious implication on organizational culture that most leaders are totally unaware of – and the act of unrewarded, unnoticed, pro-active problem solving can lead to long term problems – as the ‘problem solver’ often moves on to greener pastures and the organization starts to encounter problems that they are not ‘geared’ to solve – and a once seemingly well run organization can suddenly look badly run and unsustainable in its current form.
“Honest feedback – an unbiased, undistorted assessment of one’s experience – is essential for improving decisions. Yet decision makers are often surrounded by individuals who have an incentive to feed them censored and self-serving information – and these people are not necessarily a crowd of yes-men.” (p.74).
Yet sadly it seems that too few leaders are genuinely open to receiving honest feedback, especially when mistakes have been made – and this one trait is ‘core’ not just to effective leadership, but has a significant impact on employee motivation, performance and hence overall productivity.
“Censorship is a powerful tool for influencing opinion. Restricting the information that reaches decision makers installs a strong bias in their perceptions. Even if we are aware of the existence of censors, it can be difficult to think beyond the immediately available information. Our intuitions are often shaped by the evidence we recall, no matter its relevance – a tendency cognitive scientists call the availability bias,” (p.74).
The issue of openness should be a key part of leadership development at the very start of the ‘talent pipeline’. That means leadership development at the start of an individual’s career should focus on teaching leaders to understand the importance of seeking different points of view; not just being open, but actively seeking ‘different’ opinions, to help them solidify their thoughts and to make this the rule in their decision making process.
Soyer and Hogarth remind us that “we can’t place the blame of our distorted view of the world on the environment and our inner circle. Some of the blame lies with us. Our own reasoning abilities can sabotage how we collect information and evaluate evidence. We end up learning the wrong lessons from our experience – even when it’s possible to learn the right ones. One issue is that we tend to search for and use evidence that conforms our beliefs and hypotheses, and we gloss over information that contradicts them – an exercise of selectively building and interpreting experiences known as the conformation bias” (p.75).
It’s easy to gloss over articles like this and adopt the ‘yeah, yeah philosophy’ where leaders ‘hear’ the words, but don’t internalize the problem – believing that it doesn’t really apply to them. Leadership has a very long way to go in the 21st Century, and in my opinion, is lagging way behind other developments in the last 20/30 years. We need leadership to develop at the same pace that technology has been developing – and the only way that is going to happen is for ‘us’ to create a global culture, where we all start being highly critical of ourselves (before we are critical of others) – whether we are currently leaders or not. 
Sadly the ‘social media’ scene is one of the greatest barriers against this happening – as social media encourages everyone to ‘pretend’ that they are brilliant and discourages them to be open and honest, and to share their failures and fears with the world.
Soyer and Hogarth identify six techniques that “can uncover the real lessons experience offers. None are easy, but making the effort to adopt them can help you base decisions on a clearer world view” (p.76-77).
Sample Failure: Failures and the processes that lead to them are doomed to stay in the dark unless special occasions are created to bring them to light – something that is not easy for managers to do.
Don’t Miss Near Misses: Another oft-ignored event is the near miss – a failure that’s disguised as a success, but only because there are no dire consequences.
Pursue Prevention: Recognizing a potential problem requires a different approach than solving an actual problem. One strategy is to harness employees’ collective talents by allowing people to raise concerns about the firms operations. Many companies incentive mechanisms work exactly to the contrary, and employees often hesitate to speak up for fear of reprisal or being labelled a nuisance. Employees should be made to feel comfortable reporting issues to the very top – even obliged to do so.
Disagree: As Peter Drucker wrote, “the first rule of decision making is that one does not make a decision unless there is disagreement. Ed Catmull, the president of Pixar and Walt Disney Animation Studios, stresses the importance of building a brain trust, a group of advisors who will deflate egos and voice unpopular opinions. He argues in his September 200b HBR article that disagreements in meetings end up benefiting everyone in the long run, because it’s far better to learn about problems from colleagues when there is still time to fix them than from the audience after it’s too late.
Disconfirm: Rather than finding clues that corroborate your hunch – all too easy in an information rich world – start by asking yourself how you could know you were in fact wrong. What evidence would contradict your belief and how likely is it that you would see it?
Lose Focus: Managers who acknowledge the role of serendipity and luck have an advantage over those who have illusions of control and are overconfident about the accuracy of their judgments. Change is both inevitable and unpredictable. A wide perspective can help, giving new meaning to our varied experiences and allowing us to learn from them and draw on them in surprising ways. The result is often serendipitous discovery and innovation.
These six techniques are a brilliant first step to becoming a better leader and improving your decision making processes. Beyond that, simply employing these techniques so that they become the rule and not the exception in your organization, will create a significant positive change on your organizational culture that will be traceable right through to the bottom line and also highly influence your potential for optimizing your sustainable growth into the future.
Finally as the late Hillel Einhorn, one of the fathers of behavioral decision theory, asked “if we believe we can learn from experience, can we also learn that we can’t?”
Sayer, E. and Hogarth, R.M. (2015). Fooled by Experience. What you think you’ve learned may be wrong. A guide to figuring out the real lessons. Harvard Business Review, May Issue, p.73-77.