Is Your Professional Judgement Reliable? Not as Much as You Might Think!

How reasonable is it for your customers to expect consistency from you in their dealings? Given a repeating set of circumstances, how consistent is your organization in delivering the same results?

Unless your organizational culture addresses this overtly, the chances are high that you are not doing as good a job as you might think and the consequence is having a much greater material impact on your bottom line.  That is, instead of an acceptable misstep in judgment ranging from 5%-10% of the time, these researchers found that an error range from 35%-70% was not uncommon. Mostly due to “noise”.

In their Harvard Business Review article Noise: How to Overcome the High, Hidden Cost of Inconsistent Decision-making, Daniel Kahneman, Andrew M. Rosenfield, Linnea Gandhi, and Tom Blaser introduce us to a little-understood and more rarely tackled issue that we as professional managers wrestle with every day…effective decision-making.

No one likes to have their answers questioned but enlightened leadership demands it.  While humans are certainly fallible, the importance of getting this right more often than not has enormous consequences for our family businesses.  Consistency is but one consideration. For any transaction between us and our customers, customers have a right to expect consistency. This is true when picking up a prescription, making a bank deposit, ordering a cup of coffee, or receiving raw materials dockside.  That is, it is reasonable to expect the same outcomes given the same inputs all, or certainly most, of the time. It turns out that rules (governance) help. Noise, however, gets in the way…a lot!

Noise, as defined here, is the influence on the judgment of irrelevant factors.  Examples of these irrelevant factors, according to the authors include but aren’t limited to weather, mood, blood sugar levels, and domestic bliss. Don’t laugh.  Where subjectivity in decision-making bears a greater role, “noise” is louder. Where “noise” is louder the decision-making process becomes increasingly vulnerable and outcomes are affected in ways that negatively impact the business. Here’s the thing…it can be minimized or avoided altogether.

Subjectivity in this context is described as the absence of rules.  It turns out that experiments conducted by the team demonstrated that the same data sets provided to the same management teams at different times resulted in widely differing recommendations.  This was also true in the healthcare setting where the same physicians reading the same charts provided at different times reached different diagnoses. Clearly then the topic of noise has potentially graver consequences than reducing our bottom line.

What to do?! The authors acknowledge that simple algorithms can serve us here.  It is not necessary to have reams and reams of data from which to develop these algorithms either.  Simple common sense rules serve the purpose.

Understanding that our subjective judgments may not be as reliable by a wide margin as we think, is a very important discovery indeed.  While most people reading this will brush it aside or dismiss its relevance to them, I would encourage you instead to pause and consider the evidence.  

Having courage is a hallmark of leadership. Acknowledging our humanity is as well. Check out the Harvard Business Review article Noise: How to Overcome the High, Hidden Cost of Inconsistent Decision-making, and consider the tips it includes.