If the world were fair, whether you succeeded or failed would be entirely down to your skill or effort, but we all know we don't live in such a world.
Sometimes you can progress well but narrowly miss a target because of bad luck, bad timing or some other unexpected stumble. Your technique and approach was right, the winds of the universe just weren't at your back.
We know this intellectually (most likely through frustrating personal experience), but a new study out of Brigham Young University suggests that when we barely miss our goals, many people forget this truth and over-react. The new paper recently appeared in Management Science and examines the phenomenon within a highly specific subset of professionals—basketball coaches.
Falling prey to outcome bias
The study co-authors crunched through two decades of data on NBA results, comparing how often coaches made substantive changes to strategy following narrow wins versus narrow losses. As basketball fans know to their annoyance, when one team wins by a tiny margin, the outcome is likely down to simple luck, so experienced coaches should know to keep calm and not make radical changes to their teams based on these sorts of outcomes. But it turns out that like the rest of us, coaches really hate losing.
The technical term for this is “outcome bias” and its effects mean the coaches paid way too much attention to the final score and not enough to whether the underlying strategy was sound. This led the coaches to make far more changes after narrow losses than after narrow wins. “Losing by a point versus winning by a point, most of that is just noise,” explained Brennan Platt, a BYU professor of economics and study co-author. “To say ‘a win is a win’ ignores important information in the intensity of the win, causing narrow losers to overreact and narrow winners to be complacent.”
The lesson for leaders
What was the result of these overhasty shifts in strategy following narrow losses? An extra loss per season on average. Which of course is interesting if you happen to have a gig coaching a professional basketball team, but according to Platt, other sorts of professionals are likely to over-react in similar ways, binning potentially successful strategies on the basis of one unlucky setback. He offers the example of how managers respond to employee failures as an example.
“A lot of the goals businesses set are related to zero/one outcomes—did you meet your sales quota, did the patient recover, did the plane arrive on time,” he said. “You need to be careful to process all of the information. Things that are out of your control should be accounted for before you start evaluating staff. The intensity of the outcome—by how far they missed the goal—should give you an indication of whether it was just bad luck.”
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