More information is not always better information, or leads to better decisions

Quick update for a busy, cold Monday in the Northeast. Over the weekend while enjoying my typical evening of NBA League Pass and catching up on some reading, I ran into this excellent piece on the Behavioural Investment blog titled 'Can More Information Lead to Worse Investment Decisions.'

In the piece, author Joe Wiggins references a research study titled 'Effects of Amount of Information on Judgement Accuracy and Confidence' that was published in 2008 in the academic journal Organizational Behavior and Human Decision Processes, (I trust you are all up to date on your stack of these journals). Long, (really long) story short, the researchers found that having more information available that was meant to help subject make decisions had interesting and counter-intuitive effects. Essentially, more information did not increase the quality of decision making in a significant way, while at the same time increasing the subject's level of confidence in their decisions, which as we just noted, did not in fact get any better.

Here's a simple chart from one of the experiments showing what happened to decision quality and subject confidence when more information and data about the decision was made available to subjects. 

The data above shows how subjects in the study had to forecast a winner for a number of college football games based on sets of anonymised statistical information about the teams  The information came in blocks of 6 (so for the first trial of predictions the participant had 6 pieces of data) and after each subsequent trial of predictions they were given another block of information, up to 5 blocks (or 30 data points in total), and had to update their predictions.  Participants were asked to predict both the winner and their confidence in their judgement between 50% and 100%. The aim of the experiment was to understand how increased information impacted both accuracy and confidence in their decisions/predictions.

Joe at Behavioural Investment sums up the results of the experiment really well:

The contrasting impact of the additional information is stark – the accuracy of decision making is flat, decisions were little better with 30 statistics than just 6, however, participant confidence that they could select the winner increased materially and consistently.  When we come into possession of more, seemingly relevant, information our belief that we are making the right decision can be emboldened even if there is no justification for this shift in confidence levels.

A really important reminder and a kind of a warning for any of us, say in HR in 2019, who are increasingly seeking to and are more able to gather more and more data and information to use and apply in HR and talent decision making. If more information does not always, (or maybe ever), lead to better decisions, then we need to be really much more careful how we plan to gather, process, and apply data for decision making. 

The most basic takeaway from this kind of study is that we probably need to spend much more time thinking about what data and information is meaningful or predictive towards making a decision, rather than increasing our efforts to simply gather more and more data, from all the possible available sources, under the probably false impression that more = better.

There are plenty of reasons why we are inclined to gather more data is we can - we might not know what information is actually relevant, so we look to simply collect data, we want to show we did a lot of research before taking a decision, or we want to be more comfortable with our decision if it is supported by more data. 

But I think it's best to start small with our data sets we apply to decisions, take time to test if the data we already possess is meaningful and predictive before chasing more data for its own sake.

Ok, that's it, I'm out - have a great week!

Stack Ranking is somehow still a thing in Corporate America

This week over on CNBC.com a pretty major piece dropped on the workplace culture at Facebook, for years one of America's Top/Best/Greatest places to work, but after a really tough 2018 on a number of fronts, has seen both its market value and its employee morale decline.

There is a ton of detail in the report, but one of the primary contributing factors that led CNBC to describe the workplace culture as 'cult-like', was the company's approach to managing employee performance. Two specific performance management practices were called out for having potentially negative or detrimental impacts on culture and engagement.

The first practice is Facebook's requirement that employees solicit 5 peers at the company to provide feedback on their performance two times a year. This feedback can be given to the employee or to the employee's manager and is kept confidential and importantly, cannot be questioned or challenged. Critics of the process claimed it leads to employees having to make sure they buddy up to a number of colleagues in order to ensure positive feedback only is given, and serves to hide or ignore negative feedback or even just honest and open dialogue.

But the second, and probably more important performance management practice in place at the company is a familiar one - the now infamous 'Stack Ranking' of GE and Microsoft fame. Under Facebook's Stack Ranking process, employees are placed (after a lengthy talent calibration exercise), into one of 7 performance categories, with semi-strict percentage quotas and limits for each category being enforced by management.

For example, the top category or highest grade is given to fewer than 5% of employees, while a grade of 'Exceeds' is said to not to exceed about 35% of staff. The CNBC piece cites several anonymous former Facebook employees who indicated that they felt like they had to invent or stress overly negative feedback and comments for employees in order to avoid having too many of their teams in a given performance category - a common problem with just about all Stack Ranking systems.

While in some circumstances and companies (heavy, sales driven ones for example), Stack Ranking can and does work fairly well in setting expectations and managing employee performance. But in complex, creative, technical companies like Facebook, the practice almost always leads to infighting, politics, favor trading, and ultimately, unhappy teams. GE and Microsoft both eventually shifted away from Stack Ranking, it will be interesting to see if this piece and other problems at Facebook will lead them to do the same.

Really interesting stuff and a fascinating look at how a fundamental HR/Talent Management practice is impacting a major organization. It will be interesting to see how it plays out.

Have a great day!

World Bank Report: How work and workers are changing

I know you have better things to do so you, unlike me, probably did not devote a sizable chunk of your down time this past weekend reading the recently released World Bank's 150 or so page report titled 'The Changing Nature of Work', a look at the future of work, and how work is expected to change as a result of technological, societal, and demographic changes.

The report is really interesting, pretty comprehensive, and probably contains enough information and ideas for a dozen or so deeper dives. But for today, beyond just calling your attention to the report, I wanted to highlight one important set of findings from the World Bank - ideas on how employee skills are changing and more specifically the kinds of skills that will become more in demand moving forward, as technology continues to shape and re-shape work. 

Here's what the folks at the World Bank think about what kind of employee skills are going to have to change in the future:

It is easier to assess how technology shapes the demand for skills and changes production processes than it is to estimate its effect on job losses. Technology is changing the skills being rewarded in the labor market. The premium is rising for skills that cannot be replaced by robots—general cognitive skills such as critical thinking and sociobehavioral skills such as managing and recognizing emotions that enhance teamwork. Workers with these skills are more adaptable in labor markets.

Technology is disrupting the demand for three types of skills in the workplace. First, the demand for nonroutine cognitive and sociobehavioral skills appears to be rising in both advanced and emerging economies. Second, the demand for routine job-specific skills is declining. And, third, payoffs to combinations of different skill types appear to be increasing. These changes show up not just through new jobs replacing old jobs, but also through the changing skills profile of existing jobs.

The World Bank offers up as an example of this changing nature of what kinds of skills the new and future economy will need and reward the below chart of how the general job requirements for a hotel management trainee have changed in the last 30 or so years (see below)

The point being that while the job, in general, is more or less the same in 2018 as it was in 1986, the skills and characteristics of the kind of person who is likely to be successful in the job has shifted. In 2018, there is more emphasis on attitude, communication skills, ability to effectively team with others - the kinds of skills that are essential to business today, and that are still incredibly difficult to automate or replace with technology. Recent data from other sources such as LinkedIn' hiring trends report suggest much the same - "soft" skills, the ones we can't replace with an algorithm or a chatbot are in increasing demand. Said differently, that philosophy or psychology degree your kid wants to take at University may not be such a bad idea after all.

I plan on exploring the World Bank report further in the coming weeks, and encourage anyone interested in the Future of Work to give it a look.

Have a great week!

CHART OF THE DAY: How should we evaluate companies?

Happy New Year!

To start 2019, I wanted to share a chart from and the link to the fascinating report titled 'From Insight to Action: JUST Capital's 2018 Survey Results & Roadmap for Corporate America'.

For those not familiar, Just Capital, is a nonprofit founded in 2013 by a group that includes billionaire investor Paul Tudor Jones, and who has conducted an annual survey since then to determine which corporate-behavior-issues the American public cares about the most. Just Capital then ranks 1,000 large companies based on their performance on those issues which the survey has shown the public is most concerned with. The rankings are also the basis for the Just U.S. Large Cap Equity ETF, which launched in June 2018.

Of interest to HR folks, in these surveys, worker pay and benefits consistently rank at the top of respondents' priorities. Here's the chart, which shows which general category or issues, (workers, customers, environment, etc.), that survey respondents indicated where more or less important to them when assessing a company (and compared to the 2017 survey). Here's the chart, then some comments from me after the data.

 

Some quick observations from this data, which shows that the broad range of 'employee' issues are what the American public cares about the most when evaluating companies.

1. Concern for workers issues is trending up. In both the chart above, and in some underlying data from the report, Americans are increasingly concerned about worker's conditions, pay and benefits, and work/life balance issues. Perhaps this is the outcome of a 10-year run of an improving and tightening labor market that is leading individuals to be more open and assertive of what they look for in an employer and what they see as just treatment of workers by a company.

2. Shareholders may not be 'first' forever. Despite 'shareholders' seeming to be the ones to benefit the most in the last decade, the public cares about how companies treat shareholder and leadership issues the least. While millions of American workers are also shareholders of companies through retirement and other investments, most average employees see themselves in a different category than the large, institutional investor class. By this logic, if employee issues and concerns are going to be more important, shareholder concerns are seen as less important.

3. Creating a 'just' company for employees is not that complicated. The Top 3 underlying components that influence how the workplace treats employees are providing good benefits, paying a living wage, and providing a safe workplace. There were the elements ranked as most important to survey respondents, and quite honestly, seem to represent the lowest common denominator for employers to strive for. Said differently, it probably is not as hard as the experts make it out to be, to create a workplace that is just and fair for employees.

This is really interesting data, I encourage you to check out both the report and the Top 100 rankings according to Just Capital's survey of American workers. While there are quite a few companies on the list we frequently see on other 'Great' workplace type lists, there are also many other names you might not be as familiar with.

Have a great day and a happy, and successful 2019!

PODCAST: #HRHappyHour 351 - Creating a Culture of Ownership at Anheuser-Busch

HR Happy Hour 351 - Creating a Culture of Ownership at Anheuser-Busch

Hosts: Steve Boese, Trish McFarlane

Guest: Ago De Gasperis, VP, People, North America, Anheuser-Busch

Sponsored by Virgin Pulse - www.virginpulse.com

Listen HERE

This week on the HR Happy Hour Show, Steve and Trish were joined by guest Ago De Gasperis, VP, People North America for Anheuser-Busch who shared how the legendary brewer continues to innovate and develop its culture of "ownership" - where employees are supported and empowered to feel like true owners of the company, and not just dispensable resources whose opinions and ideas don't matter. Ago shared how Anheuser-Busch tries to bring this idea of ownership to life by instilling the idea in leaders and employees and how ownership is embedded in everytihng they do. From creating and shaping a Diversity and Inclusion agenda, to supporting a wide range of employee resource groups, to fostering a culture of innovation - the idea of employee led programs and employee ownership informs just about everything they do. 

Additionally, Ago shared some of the details and thinking that goes into A-B's efforts to recruit, develop, and support the next generation of company leaders and how in particular the People function looks to recruit from a wide range of backgrounds and disciplines.

You can listen to the show on the show page HERE, on your favorite podcast app, or by using the widget player below:

This was a really fun show, thanks to Ago for joining us and a big 'Cheers!' to the team at Anheuser-Busch.

Remember to subscribe to the HR Happy Hour Show on Apple Podcasts, Stitcher Radio, Google Podcasts or your favorite podcast app - just search for 'HR Happy Hour'.