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Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Chief Consulting Editor's Desk
Rajita Chaudhuri
A.Sandeep Editor's Desk
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Is that a correct decision?
Experience helps us in managing others, but, paradoxically, it’s precisely this same experience that can mislead and even trap us in poor practice and decision making
Issue Date - 22/09/2011
Managing people and organisations is strongly connected to our experience, perhaps more so than other B-school disciplines such as economics, accounting, and finance. All of us have had a wealth of experience in dealing with others at home, in school, and, as our careers develop, in organisations. By the time we reach B-school, we have naturally evolved expertise in managing these relationships, resulting in practical skills that often exceed our pre-business school capabilities in, for example, analysing a balance sheet, or modeling complex production processes.

This human experience helps and guides us in managing others, but, paradoxically, it is precisely this same experience that can mislead and even trap us in poor practice and decision making. Experience & expertise can produce a false sense of confidence when confronting problematic situations that require more than simple good sense & logic.

Logic & experience are critical elements of good decision-making. But sometimes they can lull us into too-simple explanations and to embracing what I call “management mythology.” What seems reasonable and logical becomes embraced by many, but when put into practice can yield surprisingly unsuccessful results. Let’s take a look at one such popular and too simplistic idea that is at the heart of many efforts in change management: “What gets paid for is what gets done”.

This view says that if we reward people on the basis of the behaviours that we desire, we will get more of the desired behaviour. So, believing this, we put this idea into practice only to discover that not only are we not getting more of the behaviour we want, we are getting less of it. Nordstrom stores discovered this as they implemented performance contingent pay systems intended to encourage customer service. When Nordstrom did this, something strange happened. People who had been hired on the basis of their interest in and ability to deliver service beyond their basic job requirements began to become less customer oriented, and delivered less service.

Why did this happen? Because the management myth, “what gets paid for is what gets done,” is overly simplistic. Certainly compensation is a powerful tool for motivating, perhaps even the most important one. But other, more complex issues were relevant and obscured by too-simplistic thinking. In this case, there are consequences of pay (an extrinsic reward) for intrinsic motivation. Meta-analytical research by Deci, Koestner, and Ryan, based upon 128 studies of the relationship between intrinsic and extrinsic motivation, illuminates this complex relationship. Their research shows us that the more we utilise performance contingent rewards (pay) to induce a person to perform an act that they are naturally inclined to do, the less important that behaviour becomes to them. We actually decrease a person’s intrinsic motivation by paying them to exhibit it, no matter how well-intentioned our effort. Precisely this same error occurs over and over in large-scale change efforts as we seek to change organisational culture, structure, or strategy. Over reliance on too-simplistic thinking leads to underperformance in the marketplace.

Logic & experience are essential elements of successful management. However, the conclusions we reach on the basis of this experience alone can be insufficient. And this is precisely where management research and theory are helpful. Where the correct decision is contrary to simple logic, or when we face a choice from among a set of decisions that all appear equally plausible, good research can illuminate the correct decision.

Rex Stout’s famous fictional detective Nero Wolfe often advised his protégé, Archie Goodwin, to “use your intelligence guided by experience” when he faced problematic situations. This admonition is just as relevant in managerial decision-making. Over time, everyone accumulates experience, and we will not, perhaps cannot, distinguish ourselves as managers on the basis of this experience alone. Distinguished practice requires managerial intelligence – research & theory – applied and guided by logic & experience.
Amir Moin           
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