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Who's in the Video
Dan Ariely is the James B Duke Professor of Psychology and Behavioral Economics at Duke University. He is the founder of The Center for Advanced Hindsight and co-founder of BEworks,[…]

“One of the problems with promotions is that we promote people based on outcomes, not about the quality of their decisions,” says Ariely.

Dan Ariely:  In the last Ig Nobel Award, which is one of my favorite awards of the year, there was an Italian paper that got the award, and they got it for theshowing that it’s better to promote people randomly than promote people according to their skill.  Now why is this the case? The Peter Principle is that people get promoted in their job until their level of incompetence.  Right?  You get promoted and promoted and promoted until you don’t perform that well.  So it means that if you follow this process, everybody will get to the level of incompetence, but if you promote people randomly, you might not get to this Peter Principle.  

One of the problems with promotions is that we promote people based on outcomes, not about the quality of their decisions.  So imagine if you were in charge with some news or some seafood restaurant and you decide to open a new restaurant in the gulf a week before BP decided to spill lots of oil intothe gulf.  Would you get promoted after that?  Now, if you just thought about the outcome, the outcome was devastating to the company.  You just opened your restaurant, you spent a lot of money, all the seafood supply is dissolved and there’s no more tourists.  So from the outcome perspective, it’s awful, from a decision perspective, you might have been the most careful, wonderful employee.  You must have checked all of the details and the tourist movement and this might have been the best decision possible.  

Now, if we have a tendency to reward outcomes rather than decisions, we’re not necessarily going to promote the right people.  Because what we want is people who have good skills in making decision, not people who are lucky.  Unless you believe in luck or you believe in people kind of have shoe horns and stuff like that and it helps them in the future.  But if you promoted or you didn’t promote somebody who made a really right decision, took all the information into account and then something terrible happened, there’s a good chance this person will continue to make right thoughtful, deliberate decision.  Whereas, if you took somebody who just, you know, waved their finger around and use their intuition and did some decisions that happened to be right, all of a sudden you are promoting somebody who might not be that good for the job.  

Now this is tough. Right?  Because outcomes are easily measurable and effort and thoughtfulness and quality of the decision is not as easily measurable.  But I think to promote the right people; we really have to shift away from promoting outcomes to promoting actual decision quality and investment in thedecision.  

Directed / Produced by
Jonathan Fowler & Elizabeth Rodd