Management psyche

2006

The huge growth of blogs has given the World Wide Web a new and dynamic dimension where the bloggers can communicate speedily and effectively in a dialogue of mutual benefit.

A blog of mine recently was inspired by new evidence on forecasts, as covered in the book Expert Political Judgement: How Good Is It? by Philip Tetlock.

The answer that the title poses is of interest to business managers because their success is dependent upon political decisions. However, it is relevant to all managers who rely on business and industry forecasts in their particular markets.

It is common knowledge that the majority of fund managers, whose sole function is to predict the rise and fall of shares, fail to beat the market. So do other pundits fare any better?

In order to find the answer to his question, Tetlock studied 284 people making money from 'commenting or offering advice on political and economic trends' for 20 years. The results thrown up by examining 82,361 of their forecasts strike at the heart of management.

Pundits proved to be poorer forecasters than dart-throwing monkeys

In his review of the book in the New Yorker, Louis Menand said that in this study the pundits proved to be 'poorer forecasters than dart-throwing monkeys'. In other words, the so-called experts would have had more success had they given an equal probability to the three alternatives (33.33%).

You would imagine that specialists in a subject must have a commanding edge but it would appear not to be so. Specialists are not significantly more reliable than their non-specialist counterparts, according to the study.

Experts often fall in love with their own supposed expertise – in other words, they fall in love with themselves.

There are several possible futures that the pundits select from but hindsight always shows the trail of events that could only lead to the future that transpired. Managers reflecting on success are mistaken to think that what happened was always bound to occur.

There is often wishful thinking involved too, when the manager or pundit hopes something will happen or not happen.

The significance of the role of the mind and heart was first brought to my attention by a book called The Psychology of Military Incompetence by Norman Dixon. In chapter after chapter Dixon showed how commanding officers made disastrous errors in planning and execution with men's lives and nations' fates at stake.

A professor of psychology, Dixon made an inexorable connection between the mismanagement of these leaders and their inadequate psyches.

All too often the failures came about simply because they didn't think or thought wrongly – usually for irrelevant emotional reasons – rather than being outmanoeuvred or misunderstanding complex situations.

Managers really need a guide to the psychological behaviour of their subordinates and themselves that will lead to a higher degree of competence – or even the highest.

If managers stick to thinking modes through psyche and habit, they lose effectiveness as individuals and members of a group.

But I guarantee that only a few managers will put into practice an unfamiliar intelligent approach to higher managerial competence once introduced to it.

If they reject it then they can keep things as they are and stay with what is familiar, whereas accepting it means action and the risk of something new and unfamiliar. This is not a logical, competent approach – it is illogical and emotional.

You can use your emotional powers but only when you recognise their use and effect on others whose emotions will also determine the outcome.

But bear in mind the advice of Menand. Do your own thinking and don't use the emotional crutch of the pundit. Sometimes you have to admit that you are or have been very wrong.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".