Evaluation bias muddying performance perceptions

However, players who scored a chance goal off the post were given significantly more playing time in the following match than ‘‘unlucky’’ players. They also received a higher rating from journalists and football fans.

A ‘‘lucky’’ goal was especially helpful to players if the goal was critical to the outcome of the match, and if a player was ‘‘up and coming’’ rather than already established on the team.

The study, Fooled by Performance Randomness: Over-rewarding Luck, with co-author Dr Romain Gauriot, was recently published in The Review of Economics and Statistics.

There are many ways luck can influence someone’s work. For example, they could be placed with a high-performing team, purely as a result of luck, and then judged on the team’s success, rather than their own skill and effort.

Our research provided clear evidence that luck was overly influencing managers’ decisions and evaluators’ ratings of footballers, so it is very likely that this tendency is widespread in business and other fields.

If there is bias in a situation like the football pitch, where a player’s actions are highly scrutinised and there is a huge amount of data, then it is likely to be pervasive in the workplace, where there is much less information available.

Managers and decision makers need to understand how to recognise ‘‘outcome bias’’, which is when we judge an action by its outcome, rather than the quality of the decision.

For example, if someone throws a brick out of an apartment window and it doesn’t kill anyone, that doesn’t mean it was a good idea.

Managers need to take process and effort into account when evaluating performance, and not give too much weight to outcomes.

In the workplace, outcomes are important, but they are also imperfect. Unfortunately, outcomes are very observable, whereas processes are more difficult to assess.

The potential cost to organisations from an outcome bias is significant as it introduces inefficiencies and inequities in the allocation of sanctions, rewards, and promotions.

It can mean that those who do not have the skills to do a job are promoted, while those with talent go unrecognised.

Success also breeds success – so those who were lucky in the past are assumed to be more competent, and offered further opportunities, while those who are unlucky are ignored.

Managers who focus exclusively on outcomes may also be encouraging workers to take more risks.

A financial trader who is only assessed on results and receives a big bonus for high returns, may opt for a portfolio that is riskier and more volatile than someone who is assessed on process.

It is important to remember that luck is likely to be a significant factor in someone’s success, and be aware that if someone was not successful, there may have been things that were not in their control.

Lionel Page is Professor of Economics at UTS Business School and director of the new UTS graduate certificate in behavioural economics.

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