One of the great mythical beliefs held by most economists is that people make decisions based on objective criteria and reason (called rational choice or rational action theory). Just about all traditional economic theory rests on this assumption, yet we know from experience in life in general and, in particular, life in modern organizations, that this is hardly the case. Life is just too complex to be so objective.
Douglass North, a Nobel Prize winning economist at Washington University whose work I've been reading lately, goes so far as to suggest that true objectivity in decision-making is impossible, since at any point in time we simply don't know what we don't know. Even yesterday's tried and true solutions are in no way guaranteed to solve tomorrow's problems, since the human environment we live in is constantly evolving.
This ubiquitous uncertainty, in his view, is what really drives human behavior. We try to mitigate uncertainty by creating explanations and theories based on socialized beliefs, accumulated knowledge, and personal experience. The resultant web of "rational" myths, in turn, drive our decisions and dictate how we craft the "institutions" that impede or facilitate economic exchange and growth.
So, he says, much of the explanation for economic disparity between countries lies in the fact that some were simply lucky enough to get it "right" more often.
It's an interesting proposition. And if you think about corporate strategy, it's starts to come to life a bit more. Why would any rational CEO place the future of his/her company in the hands of a best guess around what will spell success (i.e. a "strategy")?
The explanation lies in the fact that uncertainty can't be circumscribed. So we've created this concept of "strategy" to take over where certainty ends. (Another reason we shouldn't be surprised that financial performance has more to do with execution than strategy.)
If you believe any of this, you'll also note that it flies in the face of the idea of evidence-based decision making. If access to data and analytics can't guarantee you'll make the right decisions, then why go to all of the trouble?
Well, because while you may never be able to predict the future perfectly (e.g., will this person really make a good regional sales manager?), you do want to position yourself to get it right more often, and that's where data is so helpful.
There may be no set of organizational decisions that rely so heavily on rational myths as those that concern talent, and perhaps also no set of organizational decisions that so heavily lack access to reliable data. The relationship, I think, is no coincidence, and the impact can be seen in the fact that so many of us have somehow come to accept success rates of, say, 50% when hiring and promoting employees.
That sucks.
As Douglass North suggests, we'll never be able to get it right 100% of the time, because the world is just too complex, our world views are too full of bias, and we simply don't know what we don't know. But that doesn't mean we should give up on trying to be more predictive, by doing things like:
1. Creating a ready supply of valid and current talent data within our companies
2. Empowering line managers to use talent data to make better decisions, through education and by delivering useful talent management analytics back to the business
It's a huge task, but take a leap of faith and start pushing to make your organization more data-centric in its decision-making.
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