The perils of performance management

This study shows that managers regularly fail to spot the difference between luck and skill.

by Stephen Jones
Last Updated: 25 Nov 2019

Bosses like to think they have a knack for spotting a good egg. Talent is the fuel that runs the business, and there’s no better way to measure talent than by looking at someone’s results. 

But a recently published study suggests that managers might just be confusing luck with skill. 

Researchers from the University of Technology Sydney analysed European football league matches, including more than 10,000 shots on goal that struck the post. The researchers compared scoring and non-scoring shots taken from a similar location and found that there was no significant difference between the average performance of players who scored and those who didn’t.

The prospect of getting a goal off the post or not was essentially due to chance, rather than the merits of the player, but the study found that players whose shot resulted in a goal were given significantly more playing time than ‘unlucky’ players - particularly if the goal had a defining outcome on the match and if the player was new to the team. 

The conclusion is that luck, rather than a player’s skill, significantly influences the likelihood that a manager will favour a player; it also influences whether the player receives a more favourable evaluation among football pundits and fans.

Lionel Page, who co-authored the study with Romain Gauriot, calls this tendency - to judge actions by their outcomes as opposed to the quality of the decision - outcome bias, and it’s a phenomenon that pervades the workplace. 

Managers and business decision makers need to be aware of this bias when deciding who to promote, take on certain responsibilities or reward.

The key insight is that results are not the same as merit. "If someone throws a brick out of an apartment window and it doesn’t kill anyone, that doesn’t mean it was a good idea," says Page. 

"Success also breed’s success, so those who were lucky in the past are assumed to be more competent, and offered further opportunities, while those who are unlucky are ignored." 

Page believes that the potential cost of outcome bias could be "significant" because rewarding outcomes through sanctions, rewards or promotions could introduce inefficiencies. An over-focus on outcomes could also encourage staff to take excessive risks. 

The implication is that managers need to give greater consideration to how a person performs - their effort and their process - when evaluating performance, and avoid giving undue weight to the final outcome. 

Of course, there are good reasons we generally favour outcome over methodology in business - results are tangible, and they pay the bills. Besides, it is potentially demoralising for staff if you spend too long scrutinising methodologies to determine whether their win was a result of luck or judgement. 

Nevertheless it’s clear that considering process is vitally important. Just look at the fallout from the global financial crisis as an extreme example of what can happen when financial returns are prioritised over practice. It’s a tricky balance, but an important one.

Image credit: Art Rickerby / Contributor via Getty Images

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