|Behavioural economics is simply how our choices about what we do and how we do it – our decisions – affect performance, both hard and soft – results and reputation.
I never had much time for HR in my old corporate life. I was a commercial snob. They were on the margins of the business not seeming to understand what it meant to drive business and, frankly, being a bit irritating and time-consuming with their processes and procedures – so many loops to jump through. But now I see it differently. These poor undervalued, marginalised people professionals, experts in their field, never gave up trying to ensure that good people management and development decisions were made. While part of this was defensive, trying and keep everything legal, it was also to trying to build competitive advantage by getting the right people in the right places with the right support and culture to perform their socks off.
But now they’re not around, or they are fighting fires because there are so few of them left. In their wake, according to Harvard Business Review last month (Oct 2013), there is a significant problem for talent management which, in the hands of line managers, will result in a behavioural economic crisis.
HR used to put the rigour, balance and process in to these decisions but now we have no conscience challenging our assumptions, testing what the outcomes are that we really want; pointing out (with enormous diplomacy) that candidate ‘A’ might be a great bloke but Candidate’B’ will be the woman that delivers the result.
HRT, in this context, is the Homosocial Reproductive Tendency – in other words the tendency to promote and recruit in your own image and in keeping with the current profile of a group or team. And men over index on this tendency*. This means white men will favour recruiting and promoting white men and compounds the issues of unconscious gender and ethnicity bias. So, the outcome of pulling back on HR will be the dilution of any gains in diversity. And here’s some stark evidence that this is already happening, even in our most successful businesses
- Since the Lord Davis Report in 2010, the aim of which was to address the lack of women in executive positions in the FTSE 350, there has actually been a decline in the number of female executive directors. With Burberry’s CEO Angela Ahrendts leaving for Apple we have now only 2 female CEOs in the FTSE 100.
The fact is that the busier we are the more we rely on our judgement and our beliefs of what makes a good, great or just safe-bet for a key role. These beliefs are developed predominantly through the assimilation of the prevailing view and attitude of society, and rarely firsthand experience. Consider this – if you were in an aeroplane flying through a violent storm, how would you really feel if the captain spoke up and it was a woman’s voice? We all share the same default settings because that’s what we ‘know’, and the unknown – however logical – is just not what we go with when the chips are down. We know men are successful pilots, leaders, scientists but it’s only because that’s all there has really been till very, very recently and women remain the exception. Of course men are great leaders, they are also rubbish leaders and mediocre leaders and every shade in between. But we assume that they are naturally a better bet than women. This is just how human brains work, but this is at odds with how we approach the question of making a business succeed. We must be bold, innovative, creative. We must do what others haven’t yet done. We must spot opportunities they haven’t identified and go for it. We must be externally focused and be prepared to make mistakes on the path to greater success.
- Recent research has shown that the most successful innovation teams have a greater than 50% female composition**
So you must be as bold, as creative and as innovative in promotion, recruitment and project assignment. You must focus on what it is you want to achieve in order to be clear on the sort of talent you need and what sort of environment will enable that talent to thrive
- Credit Suisse Research 2012: “In testing the performance of 2,360 companies globally over the last six years, our analysis shows that it would on average have been better to have invested in corporates with women on their management boards tan those without” ***
Given we are human and our brains do prevent our judgement of people from being objective we must put in place check steps to give us the best chance of preventing behavioural economic damage – reputational damage and bottom line damage. And be really, really clear – you are not the exception to the rule (and neither am I). We must individually take responsibility – assuming it’s an issue for someone else is a classic response, as is, ‘it’s different here’. It’s not, and if you’re not acting on this issue then neither is anyone else.
So, here are the simple Pause for Success™ check steps you should implement whenever you are making a choice about people (project roles, talent assessment, promotion, recruitment and even extra curricula socialising). The more literal you are about following these steps the more likely you are to succeed – and vice versa!
- Articulate the key capabilities you are really looking for; Articulate the traps you could fall into if you let your cognitive short cuts dominate your true objectivity; Articulate the type evidence that would indicate individuals have the potential to deliver the outcomes you want.
- Before you make your final decision PAUSE.
- Challenge any decisions that feel instinctive or gravitational (you are pulled towards them, but struggle to justify them). Go back over the first point and check you are being as objective as you can be.
This critical challenge is vital for business health and the pressure is now on individuals to get the right people, in the right places with the right support.
Try the process and let us know what your before and after decisions looked like, and what you have learnt about yourself and what benefits the new outcome will deliver.
* Eagly, A. and Carly, L. (2007). “Through the Labyrinth”. Published by Harvard University Press
** London Business School. The Lehman Brothers Centre for Women in Business (2008), “Innovative Potential: Men and Women in Teams”
*** Credit Suisse Research Institute (Aug 2012) “Gender Diversity and Corporate Performance”