Recognizing Human Judgment in Economics and Performance

When I was in college, several of us would joke that you could not cheat on an economics test because each year the questions were the same, but the answers were different.  In those days, capitalist economic theory was driven by the presumption that the actors (markets and people) were fully rationale (e.g., would make decisions that would benefit them financially).  However, observing someone buy a car because of the color or purchasing a stock based on whether they like the product/service tells you that emotion plays a big role in economics.

In today’s announcement of the Nobel Prize in economics, the committee continued its trend of recognizing the impact on human decision making in the field.  They started acknowledging this in 2002 when the award was given to a psychologist, Daniel Kahneman.  Given the research of the three winners, the committee continued to concede that people are not always financially rationale.  Also, they recognized that human behavior leads to more short-term than long-term market fluctuations.

This provides us with some insight to performance at work and how we evaluate it.  We do react more emotionally to things in the near term than over the long haul.  That makes job performance seem more variable than it probably really is.  This would also lead to seeing larger differences in feedback provided on a monthly basis than on a six-month basis.  But, we want to provide frequent coaching.  How can we do this and be as consistent as possible?

1)    What are you doing to measure performance objectively?  The more objective the criteria of performance the more reliably you can give feedback.

2)    Focus on the behavior (good or bad) and how it affects the work (or others involved in the work) and not how you feel about it (unless the performance directly affected you).

3)    As always, think of the big picture.  An individual example of performance is rarely as impactful as it seems at the time.

Congrats to the Noble winners.  Who knows, if this trend continues perhaps another psychologist will win it.  In the meantime, the work recognized teaches us a valuable lesson about behavior appearing more rationale over time.  It is a good example to remember when assessing performance.

For more information on improving job performance, please contact Warren at 310 670-4175 or [email protected]

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