Heuristics in Performance Management

Ever since the HR world woke up to the idea that the workplace is dependent on humans and not red tape, the idea of using behavioral insights to guide business decision-making has been gaining traction.

Behavioral economics is one of those HR "trends" that we know is important, we just don't know how...exactly. We're going to take a closer look at one of the main principles of behavioral economics to get a firm handle on how it might be helping or hurting.

Heuristics?

Here's a straightforward definition from Wikipedia:

"In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others."

In psychology circles, heuristics are also known as rules of thumb — mental decision-making hacks that help us make a call faster.

In her article for Psychology Today, cognitive behavioral therapist Alice Boyes gives some practical examples of heuristics in daily life.

"Rule of thumb: If it's the third time I've thought about a small decision, it's time to make the decision then and there. Specific example: A piece of mail came in about something in my neighborhood where the public could make submissions. I had it sitting around, and needed to make a decision about whether to read it properly or not. After glancing at it twice, on the third time, I ended up putting it in the recycling without reading it."

How much easier would life be if you always knew exactly when to scrap the junk mail? Or when to address (or NOT address) a situation with a top-performing employee?

The pros and cons of heuristics in the workplace

Heuristics are a crucial behavioral tool because they give us the ability to practice the kind of snap decision-making that's often necessary in the fast-moving world of business.

But shortcuts can be dangerous.

Heuristics are naturally prone to bias and, due to their quick nature, they can sometimes tempt us into making a rush decision at times when a slower, more rational approach would lead to a better outcome.

Here's a closer look at the pros and cons of heuristics in the workplace and in the world of performance management, specifically.

Pros

• Research shows that heuristics are excellent “tools for uncertainty."
• In chaotic environments where there is a lot of noise (i.e. meaningless data and analysis) and fast decisions are needed, heuristics can help pave a clear path through the chaos.
• Heuristics can a help a business move more quickly to seize opportunities.
• They offer an alternative to data, in scenarios where data is more inconclusive than conclusive.

Cons

• Research has also found that positive framing, arrogance from decision makers and contextual factors like emotion and culture can make measurements of candidates or employee performance less accurate.
• Availability bias, the tendency to put increased importance on things that are larger in one’s memory, is often found in heuristics.

There are plenty of healthy heuristics your organization might already use, like “trust your team” and rank and prioritize problems according to their impact on customers, etc.

But as mentioned, heuristics do create problems. In fact, that’s part of why they came under the spotlight in the first place. In their groundbreaking research, behavioral economists Amos Tversky and Daniel Kahneman found that heuristics often make us prone to making poorer decisions, without even knowing it.

(Funny enough, this is part of what makes people fear sharks more than mosquitoes, when in actuality, mosquitoes kill many more people than sharks. Anyone who's ever watched Jaws will agree that shark attacks are much more vivid than an unseen virus carried by a mosquito.)

Whether it’s jumping on a flash-in-the-pan HR trend or letting recent strong performance get in the way of a holistic assessment, heuristics can creep into parts of the workplace that are better left to rational thought.

And the racial, gender, and demographic biases holding businesses back? Yes. Those are heuristics, too.

Get real about your "rules of thumb"

The best way to use heuristics is the best way to use any tool: intentionally.

Don’t let your rules of thumb lurk under the surface. Take an honest look at your heuristics and ask yourself a few objective questions to see how well they work.

• Do they have a good basis in reality?
• Have they helped your business in tangible ways you can measure?
• Is there data to reinforce or replace your heuristics?
• What heuristics are necessary to match the pace of your organization?
• When is it better to slow down your decision-making process?

In the words of cognitive behavioral therapist Alice Boyes, "Use rules of thumb to make your decision-making better, not perfect."

Rules of thumb can help you stay flexible, but not when you’re all thumbs and no thought. Acknowledge your own heuristics and those of your managers, and you may end up with a more just, rational and productive workforce.