Complementing Intuition with Systematic Study

1. 1.2 Show the value of systematic study to OB.

Whether you’ve explicitly thought about it before or not, you’ve been “reading” people almost all your life by watching their actions and interpreting what you see, or by trying to predict what people might do under different conditions. The casual approach to reading others can often lead to erroneous predictions, but using a systematic approach can improve your accuracy.

Underlying the systematic approach is the belief that behavior is not random. Rather, we can identify fundamental consistencies underlying the behavior of all individuals and modify them to reflect individual differences. These fundamental consistencies are very important. Why? Because they allow for predictability. Behavior is generally predictable, and the systematic study of behavior is a means to making reasonably accurate predictions. When we use the term systematic study, we mean looking at relationships, attempting to attribute causes and effects, and basing our conclusions on scientific evidence—that is, on data gathered under controlled conditions and measured, and interpreted, in a rigorous manner.

Evidence-based management (EBM) complements systematic study by basing managerial decisions on the best available scientific evidence. For example, we want doctors to make decisions about patient care based on the latest available evidence, and EBM argues that managers should do the same, thinking more scientifically about management problems. A manager might pose a question, search for the best available evidence, and apply the relevant information to the question or case at hand. You might wonder what manager would not base decisions on evidence, but the vast majority of management decisions are still made “on the fly,” with little to no systematic study of available evidence.15

Systematic study and EBM add to intuition, or those “gut feelings” about what makes others (and ourselves) “tick.” Of course, the things you have come to believe in an unsystematic way are not necessarily incorrect. Jack Welch (former CEO of General Electric) noted, “The trick, of course, is to know when to go with your gut.”16 But if we make all decisions with intuition or gut instinct, we’re likely working with incomplete information—like making an investment decision with only half the data about the potential for risk and reward.

Big Data

Data, the foundation of EBM, have been used to evaluate behavior since at least 1749, when the word “statistic” was coined to mean a “description of the state.”17 Statistics back then were used for purposes of governance, but since the data collection methods were clumsy and simplistic, so were the conclusions. “Big data”—the extensive use of statistical compilation and analysis—didn’t become possible until computers were sophisticated enough to both store and manipulate large amounts of information. The use of big data began with online retailers but has since permeated virtually every business.

 CURRENT USAGE No matter how many terabytes of data firms collect or from how many sources, the reasons for data analytics include: predicting events, from a book purchase to a spacesuit malfunction; detecting how much risk is incurred at any time, from the risk of a fire to that of a loan default; and preventing catastrophes large and small, from a plane crash to the overstocking of a product.18 With big data, U.S. defense contractor BAE Systems protects itself from cyber-attacks, San Francisco’s Bank of the West uses customer data to create tiered pricing systems, and London’s Graze.com analyzes customers’ preferences to select snack samples to send with their orders.19

 NEW TRENDS The use of big data for understanding, helping, and managing people is relatively new but holds promise. In fact, research on 10,000 workers in China, Germany, India, the United Kingdom, and the United States indicated that employees expect the next transformation in the way people work will rely more on technological advancements than on any other factor, such as demographic changes.20

It is good news for the future of business that researchers, the media, and company leaders have identified the potential of data-driven management and decision making. A manager who uses data to define objectives, develop theories of causality, and test those theories can determine which employee activities are relevant to the objectives.21 Big data has implications for correcting management assumptions and increasing positive performance outcomes. Increasingly, it is applied toward making effective decisions (Chapter 6) and managing organizational change (Chapter 17). It is quite possible that the best use of big data in managing people will come from OB and psychology research where it might, for instance, even help employees with mental illnesses monitor and change their behavior.22

LIMITATIONS As technological capabilities for handling big data have increased, so have issues of privacy and appropriate application. This is particularly true when data collection includes surveillance instruments. For instance, an experiment in Brooklyn, New York, has been designed to improve the quality of life for residents, but the researchers will collect potentially intrusive data from infrared cameras, sensors, and smartphone Wi-Fi signals.23 Through similar methods of surveillance monitoring, a bank call center and a pharmaceutical company found that employees were more productive with more social interaction, so they changed their break time policies so more people took breaks together. They then saw sales increase and turnover decrease. Bread Winners Café in Dallas, Texas, constantly monitors all employees in the restaurant through surveillance and uses that data to promote or discipline its servers.24 Privacy and application issues abound with these techniques, but abandoning them is not necessarily the fix.

An understanding of deeper OB issues can help find the productive balance. These big data tactics and others might yield results—and research indicates that, in fact, electronic performance monitoring does increase task performance and citizenship behavior (helping behaviors towards others), at least in the short term. But critics point out that after Frederick Taylor introduced surveillance analytics in 1911 to increase productivity through monitoring and feedback controls, his management control techniques were surpassed by Alfred Sloan’s greater success with management outcomes, achieved by providing meaningful work to employees.25

We are not advising you to throw intuition out the window. In dealing with people, leaders often rely on hunches, and sometimes the outcomes are excellent. At other times, human tendencies get in the way. What we are advising is to use evidence as much as possible to inform your intuition and experience. The prudent use of big data, along with an understanding of human behavioral tendencies, can contribute to sound decision making and ease natural biases. That is the promise of OB