Wednesday, June 9, 2010

People are Irrational

In a shocking revelation, the Harvard Business Review recently announced that studies are showing that people do not behave in a rational manner. In fact, human beings have a tendency to act irrationally. It seems that people do not always do what is best for them, do not always weigh the pros and cons before making decisions, and do not always recognize the possible downsides of their decisions.

At some level, we all know that this is true and we have known it since we were small children. We saw this irrational behavior play out in high school and later in college, where some of us even took pride in our ability to act irrationally. And then we entered the business world and, for some reason, we expected people, both our employees and our customers, to behave rationally. We expected them to make logical, rational choices to purchase the better quality product, to make the right decision when choosing which job to take, and to follow the incentives that maximized their income as part of the employee compensation plan. And then, when that didn’t work out the way we expected, we took a closer look at the details, because clearly we had some mistakes in the way we developed that plan.

People are irrational.

Your employees are people.

Therefore, your employees are irrational and don’t always behave in the manner you would expect.

On the surface, we might find this surprising, or even shocking. But at a deeper level, we’ve known this all along but, for some reason, chose to suppress the notion because… well, it just isn’t logical and doesn’t fit into our view of how the adult world is supposed to work.

Now that we know this, what exactly are we supposed to do about it?

Let’s understand what it really means to us at a practical level. The fact that employees behave irrationally explains why managers who manage only by the numbers often produce short term results and disappoint in the long term. They believe that the employees will behave logically and then create incentives designed to produce the results they desire. But since they ignore the emotional connection that employees need to produce satisfying long-term results, they must constantly tweak their incentive programs to try and continue to show progress.

The reality is that, to really get the most from your employees, you need to make a personal and emotional connection with them so that they see you as a person who cares rather than the “incentive maker.” And when you have created that emotional connection you will be well on your way to being the kind of leader that produces long term results with a loyal team that takes pride in their success and yours.

At ECI Learning Systems LLC, we are dedicated to helping companies get the greatest return from their most valuable asset: their employees. We work with you to align 3 key organizational factors:
• Your Company Culture
• The Leadership Styles of your key managers
• The Expectations of your Employees

When these 3 factors are aligned, you create an energy in your company that improves productivity, reduces absenteeism, increases creativity, and positively impacts your bottom line. Contact ECI Learning Systems LLC today to get your free Workplace Evaluation.

Until next time.....

Dave Meyer
ECI Learning Systems, LLC

1 comment:

  1. Dave

    I am LOL. When I was in college I took extra Logic because I knew that with the perfect syllogism I could rule the world.

    Ask me how that is working...

    With respect to incentives Daniel Pink has some very interesting things to say about the value of incentives vs. Autonomy, Mastery and Purpose.

    Keep Banging the Drum