Until 2007 we lived in a world where the ultima ratio was guiding probably most of our decisions or at least we believed it did.
And so were the designs and concepts for most of the leadership development programs and all the messages to our leaders therefore were targeted to the rational side of their brain. It did not stop here the same approach was applied to change management and change management communication.
By 2013 slowly but surely a new paradigma emerges. In the last years the research of our brain thanks to the advancement of the diagnostic systems has come up with totally new insights on how we process informtion and make decisions. Also other fields such as behavioural economics show that the paradigma of a rational guided decision making process in humans does not exist. There is not one fundamental ego – the homo economicus – that drives the decision ultimately towards the most personal gain which can be calculated by a mathematical formula.
Examples of irrational behaviours:
Bird in the Bush Paradox is based on the Proverb “A bird in the hand is worth two in the bush.”
It stands also for the unwillingness to let go of a valued possession and also the fact that people place a higher value on a good that they own than on an identical good that they do not own. This explains why housing prices rarely decline even though the demand of houses is at the lowest point of the market. The same also applies for investors as they fear the loss more than the gain. This is why investors are more reluctant to sell shares if there will bear a nominal loss of their invested capital versus selling shares when they gain.
People also pay more attention to immediate costs and benefits. Very similar to the bird in the bush proverb. They pay less attention to equally significant benefits that are likely to occur in the future. One of the biases that prevents people to change unhealthy behaviour. http://mobile.commonwealthfund.org/Newsletters/Quality-Matters/2013/June-July/In-Focus.aspx?omnicid=13
Based on the mood and how stressfull the day was consumers buys things to make them happy rather than having a clear plan and a requirements list before deciding the purchase. See the example : http://www.whatiseconomics.org/behavioral-economics
Based on the believe that every series breakes and that there are interconnected. If gamblers at the roulette table for example observe the ball landed on black the last 6 times most of them believe that the seventh time red will have a higher probability. Yet the roulette wheel has no memory. It does not care if red or black was the outcome of the spin before. It is totally random.
People tend to think that other individuals’ behavior is caused by their personality or character, but their own behavior is caused by the situation.
– For example, if you see a co-worker come late several days you think they are a lazy or slacking off. You assume that the co-worker has control over his/her punctuality.
– However, if you come in late several days you may know it is because there were outside circumstances that made you late (e.g., kids were sick, car broke down, etc.). You therefore attribute your own performance to factors outside of your control.
Drop Your Tools (Karl Weick):
27 even very experienced fire fighters were ordered to drop their tools to outrun an exploding fire. They did not follow orders and died within sight of safety. Similar behaviours was observed with fighter pilots who refuse to eject when ordered or navy seamen to remove their heavy steel-toed shoes when the boat is sinking.
In more detail: http://www.jstor.org/discover/10.2307/2393722?uid=2129&uid=2&uid=70&uid=4&sid=21102504797137
Crowding Out Effect (Deci und Ryan, 1985):
Evidence from the field (2013). Timothy Gubler, Ian Larkin, and Lamar Pierce just showed in their research how awards let to a decrease in productivity in laundry company. “The Dirty Laundry of Employee Award Programs – Evidence from the field.” Awards for employees showing up on time at work had a negative impact on the productivity of the other employees, who before the award program was initiated usually showed up on time or even before. These “good” employees now felt unfairly treated by the award.
People can become tired after having to make to many decisions in certain period of time. They may make ill-considered or inconsistent choices, or fall back on the status quo and do not want to go through a systematically proven decsion process to come to the right solution.
More examples to follow soon…..
If we are surrounded by irrational customers and investors and emplyoees, to which extend are we reaching the people we want to lead through rational concepts and techniques ?