Techno Finance and Executive Diary...

Tuesday, September 18, 2007

7 Stupid Thinking Errors You Probably Make

Lifehack published a very important and interesting article titled 7 Stupid Thinking Errors You Probably Make. They write:

The brain isn’t a flawless piece of machinery. Although it is powerful and comes in an easy to carry container, it has it’s weaknesses. A field in psychology which studies these errors, known as biases. Although you can’t upgrade your mental hardware, noticing these biases can clue you into possible mistakes.

Which made me consider the significant levels of thinking bias and error in HR processes. The tough part about these biases is that managers and HR practitioners are often unaware of them. Incentive programs are built on faulty assumptions. Training classes are offered without identifying underlying needs. Flawed assumptions tare made abilities. Logic flaws are dangerous in the HR environment. Awareness is the first step toward improvement.

So, I took Lifehacker’s list about thinking bias, and overlaid some HR implications. The thinking error labels in bold and the text in italics are from the original Lifehacker article (please go read it in its entirety). The commentary in the text blocks involve HR and people management practices.

Confirmation Bias. The confirmation bias is a tendency to seek information to prove, rather than disprove our theories. The problem arises because often, one piece of false evidence can completely invalidate the otherwise supporting factors.

HR Implications: When one employee accuses another — of uncooperativeness, lack of attention to detail, aggressiveness or discrimination — there is often confirmation bias present. As they say, “It takes 100 attaboys to make up for one uh-oh.” Very clever Machiavellians in organizations exploit this thinking bias by accusing early and often. Then the accused is on the defensive. And what do we do about this in HR? We look for others to confirm the story rather than looking at the composite of evidence over long periods of time that would argue against the accusation. From a people management standpoint, some look for confirmation that “people don’t work for money” and exclude all evidence to the contrary (like the last 60 people who left because they were underpaid).

Hindsight Bias. Known more commonly under “hindsight is 20/20“ this bias causes people to see past results as appearing more probable than they did initially.

HR Implications: This is one of those “I just knew he was going to turn out bad” kind of thinking errors. Managers use this one all the time with the “I was able to do it with one hand tied behind my back and you should too” speech. They often forget that a number of forces had to come together to create success.

Clustering Illusion. This is the tendency to see patterns where none actually exist.

HR Implications: This is about pay and incentive programs. Rewards programs are designed based on controllability, when, in fact, many outcomes can be attributed to purely random occurrences, e.g., the stock market just went up or people started buying more Hush Puppies. A lot of executive pay plans are built around the idea that there are patterns in management decisions that directly affect stock price. It just isn’t so. (Gifted executive compensation designers understand and account for absolute versus relative performance.)

Recency Effect. The recency effect is the tendency to give more weight to recent data.

HR Implications: In your performance review you’re only as good as your last mistake. When we ask managers to review a year’s worth of performance they often fall prey to the recency effect — they remember more vividly those things that happened in the last month that over 12 months. And reviews suffer for them.

Anchoring Bias. Anchoring is a well-known problem with negotiations. The first person to state a number will usually force the other person to give a new number based on the first.

HR Implications: The questions most hated by job applicants is “What was your previous salary?” It’s because as soon as the number is thrown out there it becomes the “anchor” for negotiations. Great sales people know this one stone cold. When companies spend three months each year getting employees to document their goals, it turns out that whoever writes down a number first wins. But if an HR manager writes down that a recruiter is going to bring on 300 new hires for the year, that’s the number, even if the previous all-time record in the company was 100.

Overconfidence Effect. Studies have shown that people tend to grossly overestimate their abilities and characteristics from where they should.

HR Implications: What happens every year at performance review time? Everyone comes in above average, right? There was a recent study (I’m still looking for it) in which something like 80% of managers thought they were well above average in performance. It’s the Lake Wobegon Effect. The same thing happens around pay: Everyone thinks they’re underpaid and should get more. Confidence is one thing; overconfidence as a thinking bias is dangerous.

Fundamental Attribution Error. Mistaking personality and character traits for differences caused by situations.

HR Implications: We like people who like what we like. When we’re managers, we like people who most resemble us and don’t like people who have different views. And it’s not that we don’t just dislike their ideas, we don’t like them. In a workplace environment that is encouraging more diversity, the fundamental attribution error can be very dangerous

Labels: Business Lessons, Excellence, human resource, motivation

Posted by "CPerformance" :: 9:52 AM :: 0 comments