How Organizational Practices Can Compensate for Individual Shortcomings
Research by Joshua Klayman
More than 30 years of research in cognitive psychology
has resulted in rather mixed reviews for human judgment and
reasoning. Some researchers have marveled at what the human
brain can accomplish. Others have concluded that human reasoning
is seriously riddled with flaws, self-serving biases, and
shortcomings. How can we explain the apparent discrepancy
between the pessimistic literature on human shortcomings and
the optimistic evidence of human accomplishment? As one skeptic
put it, "If we are so stupid, how did we get to the moon?"
University of Chicago Graduate School of Business professor
Joshua Klayman, Richard Larrick of Duke University's Fuqua
School of Business, and Chip Heath of the Stanford Graduate
School of Business propose a resolution to this paradox in
their study, "Cognitive Repairs: How Organizational Practices
can Compensate for Individual Shortcomings." The authors
would answer the skeptic by observing that individuals did
not make it to the moon, NASA did.
In other words, the authors believe that although individual
thinkers are flawed, an organization can provide its employees
with "cognitive repairs"-institutionalized practices
that repair the flawed ways in which people think-that help
combat potentially serious biases in individual judgment.
"As a result, the organization shields others inside
and outside of the company from suffering the consequences
of one individual's flawed thinking," says Klayman.
While most organizational practices focus on motivational
repairs-incentives that make people work harder-most organizations
overlook cognitive repairs or use cognitive repairs inefficiently.
"Organizations are used to thinking about complex, 'top-down'
repairs, such as using outside consultants to work with upper
management to design and implement an improvement plan from
the top down," says Larrick. "What we are saying
is that there are many repairs that might be just as effective
in correcting the flawed thinking of employees. These repairs
may be quite simple and designed by employees within the company.
Corporations may be overlooking a rich source of innovations."
Short-circuits in Human Software
Psychological research indicates that individuals are not
ideal learners; they think and act in ways that reduce their
ability to learn effectively. Many studies have documented
that people draw conclusions too quickly, using unreliable
evidence or unexamined assumptions.
For example, individuals often gather a biased collection
of evidence to explain success or failure because their search
favors evidence that makes them feel good about themselves.
Research shows that individuals typically conclude that their
successes resulted from stable, internal factors (such their
abilities), but that failures resulted from unstable, environmental
factors (often called "bad luck").
How might organizations repair self-serving biases? Some
cognitive repairs can be quite simple. Traders on Wall Street
are warned, "Don't Confuse Brains and a Bull Market."
This compact phrase prompts individual traders to consider
the base rate of success in the market, and makes it more
difficult for them to indulge in self-serving explanations
for their successes.
The authors explain that organizational cognitive repairs
are not limited to company slogans, although slogans are catchy
and easy for employees to remember. Organizations also develop
techniques and practices that help individuals think more
clearly. For example, researchers note that individuals tend
to stop searching for the cause of a problem as soon as they
locate a plausible explanation. One organizational repair
for this general tendency is a technique known as the "Five
Whys." Workers at Toyota learned to ask "Why?"
five times before they stopped generating hypotheses to solve
a problem. When they did so, they were more likely to find
a root cause rather than a superficial one. For example: (1)
Why did the machine stop? Because the fuse blew due to an
overload. (2) Why was there an overload? Because the bearing
lubrication was inadequate. (3) Why was the bearing lubrication
inadequate? Because the lubrication pump was not functioning
right...and so on.
In general, when individuals ask "why" the first
time, they are likely to develop answers that invoke some
recent event. Subsequent "whys" are likely to cause
individuals to think more deeply about underlying problems
that may recur.
Habitual ways of thinking about events can lead to a narrow
understanding of problems, as well. Too much familiarity with
an event can thus blind people to new insights.
One way to repair narrow thinking in an organization involves
the gathering together of individuals with a wide variety
of perspectives. A good example of this is provided by Bridgestone
Tire, which conducts "kokai watches" to generate
alternative hypotheses for improving work practices. During
a kokai watch, a group of up to a dozen people from different
areas of the factory gather for a few hours to watch others
work. In one four-hour watch, a dozen people identified 63
potential dangers with a new machine.
In a similar example, when Motorola forms cross-functional
teams to evaluate new products, they do not allow employees
who have participated in one product team to participate in
another team with a similar product. This prohibition limits
the pool of potential team members in a costly way, but by
consciously disregarding previous experience, Motorola allows
new teams to develop recommendations independently from previous
teams. At the same time, Motorola avoids losing the knowledge
of the previous "veterans" by using them to review
the new team's work.
Other repairs involve company practices that encourage the
development of new ideas. Disney instituted a "Gong Show"
in which employees presented new ideas in a group setting
where they could hear immediate feedback from colleagues at
every level in the corporation.
"This encourages people to bring their ideas into the
open, instead of feeling that their input is of no use to
management," says Klayman. "Managers may not realize
the range of ideas that exist in their own companies-ideas
from the line workers to the high-technology engineers."
Finding the Best Repair
"Cognitive repairs differ in a couple of key ways,"
says Larrick. "Some are more general than others and
can be applied across various industries, whereas some are
very specific and generated from within the company. And although
some derive from formal academic disciplines like economics
or statistics, many involve very informal procedures."
In order to be successful, a cognitive repair must not only
be effective, but it must be accepted into the organization
and actively used. To identify the best repairs, the authors
describe dimensions that may affect the costs and benefits
of each kind of cognitive repair, enhancing or diminishing
its success. Important dimensions include the following.
Simple Versus Complex
Simple repairs, such as company slogans or short corrective
procedures, have profound advantages over complex repairs
such as formal financial or statistical analysis. Simple repairs
are easier to remember and implement than complex repairs
and can be passed on from person to person with less distortion.
However, the tradeoff between simple and complex repairs is
a tradeoff between ease of use and accuracy. For example,
a simple aphorism such as "Don't Confuse Brains and a
Bull Market" suggests the correct direction to adjust
one's judgment, but provides no guidance about exactly how
much one should discredit individual success. To precisely
estimate the amount of credit due to brains versus the market,
an individual would have to perform a more complex repair
procedure.
Domain-specific Versus Domain-general
Domain-specific repairs are tailored narrowly for a specific
context or industry, such as the slogan "Don't Confuse
Brains and a Bull Market." Domain-general repairs, such
as the "Five Whys," are more abstract, and can be
applied across most industries. While both types of repairs
have benefits, domain-specific rules have the advantage. Individuals
find it easier to recognize that a domain-specific rule is
relevant because the situation itself reminds them of the
rule (traders/bull market). In addition, individuals find
it easier to apply domain-specific rules to their jobs. The
slogan about brains and the bull market is easier to use for
traders on Wall Street than shop managers on Main Street,
although the underlying concept of the repair is relevant
for both groups.
Top-down Versus Bottom-up
Cognitive repairs may originate from either top-down or bottom-up
within an organization. Typically, top-down repairs are designed
and implemented by managers or outside experts. Bottom-up
repairs appear through informal observation and are often
discovered by the people who are doing the work. The source
of the repair is important because it is likely to affect
its form and effectiveness. Top-down repairs may be perceived
with suspicion or hostility because they originate outside
of the organization or because they are imposed from above.
Front-line workers may doubt that outsiders understand their
situation well enough to make wise recommendations. Often,
when managers suggest a repair, they seem to imply that employees
have been performing poorly.
Bottom-up repairs, such as employee-derived slogans or procedures,
will often benefit from their local, homegrown origin. Local
repairs have a meaningful history that makes them memorable
and appealing, and they may be more acceptable if organizational
members see them as their own inventions. Just as lawyers
feel entitled to tell lawyer jokes, organizational members
feel entitled to develop self-critical repairs and to convey
their insider status by using them. Homegrown repairs furthermore
evoke a stronger sense of ownership; at the same time that
they call attention to a potential shortcoming, they also
give the user credit for fixing it.
Based on their research on the advantages and disadvantages
of various cognitive repairs, the authors believe that many
of the most successful repairs will be simple, domain-specific,
socially administered (the repair works because individuals
interact with others) and evolve from bottom up rather than
top down. This conclusion is intriguing because it describes
repairs that differ sharply from those that are recommended
in academic literature on decision analysis, statistics, and
economics.
"We do not think that cognitive repairs will overcome
every individual problem," says Klayman. "Like the
mental processes they repair, cognitive repairs are pragmatic
and often efficient, but also approximate and inexact. In
addition, there are often instances when organizational intervention
can make problems much worse. But managers who think explicitly
about cognitive repairs will be in a better position to foster
improvements in their organizations."
Successful cognitive repairs may already be in use in an
organization, but their effectiveness may remain unappreciated
or underutilized. In order to recognize these repairs and
encourage their use, a manager must begin with an appreciation
for the flaws in individual learning documented by psychologists.
Managers who understand these limitations can then look for
practices to address them.
"Managers already think about factors such as incentive
systems and information technology as tools to foster learning
and innovation," says Klayman. "We believe that
cognitive repairs will be a useful addition to the toolbox."
