Judging employees on results could reward luck over skill, argue top psychologists, and there’s a better way to do it

Don't punish bad luck.

caption
Don’t punish bad luck.
source
Strelka Institute for Media, Architecture and Design/Flickr

  • Evaluating people’s results, as opposed to the effort they put in, may penalize bad luck and reward good luck.
  • That’s according to top behavioral economists such as Daniel Kahneman and Dan Ariely.
  • What’s more, says psychologist Barry Schwartz, prioritizing results over process can hurt the quality of people’s work in the long run.

In most workplaces today, you don’t earn an “A” for effort.

If you failed to make a sale even though you sat at your desk for hours every day calling clients, it’s hard to believe you’ll get a pat on the back – or a promotion. Results matter.

But top psychologists argue that this system of evaluating performance is heavily flawed.

At the World Business Forum in New York, Daniel Kahneman told the audience that organizations should evaluate employees’ process instead of their outcome.

Kahneman won the Nobel Prize in 2002 for his pioneering work in behavioral economics; in 2011 he published the bestseller “Thinking, Fast and Slow,” in which he explored the intricacies of human decision-making.

Read more: A Nobel Prize-winning psychologist says the most successful decision-makers know how to use their gut feelings in a way the rest of us don’t

“The quality of people’s decisions doesn’t determine the outcome,” Kahneman told the WBF audience. “You can make a very good decision and get a bad outcome because of bad luck. You can make a bad decision and get a good outcome because of good luck.”

So when managers reward results and ignore effort, Kahneman said, “very often you are going to penalize bad luck and reward good luck.”

Kahneman’s argument recalls something Dan Ariely, a professor of psychology and behavioral economics at Duke University, told Business Insider in 2016. Ariely had just published his book on human motivation, “Payoff.”

Ariely said that the best way to motivate kids to achieve success is to praise their effort over the outcome – and the same logic applies to motivating adults. He said, “Often what we do is we reward or punish the outcome. And we do it in the business world as well: We give people bonuses if what they did was successful, regardless of whether the process was good or bad.”

Instead, Ariely proposed focusing on employees’ “input.” Otherwise, managers risk reinforcing a terrible process that just so happened to lead to a positive result.

Prioritizing results over process can reduce the quality of people’s work

On the one hand, evaluating employees based on their results makes sense. The workplace isn’t a school – you’re there to benefit the company, not to learn and practice your skills (or at least not exclusively).

Yet Barry Schwartz, a psychologist at Swarthmore College, argues that this system may have grave consequences. In his 2015 book, “Why We Work,” Schwartz uses the American education system as an example of how evaluating results undermines teachers’ ability to do their best work.

He writes that talented teachers are given ultra-detailed lesson plans to follow every day, leaving little to no room for creativity and autonomy. Teachers are instructed to “teach to the test,” or the standardized exam at the end of the school year. Their performance is measured – and their compensation determined – largely based on their students’ scores on those tests.

“The most tragic consequence of this de-skilling,” Schwartz writes, “is that it will either drive the energy, engagement, and enthusiasm out of good teachers, or it will drive these good teachers out of education.”

Perhaps the most plausible reason why employers focus on results is that it’s just easier, an unfortunate reality that sounds like a terrible excuse when you articulate it. You don’t have to spend time translating or quantifying a single number (e.g. sales revenue or hours billed), like you would have to do with qualities like “persistence” or “initiative.”

As Kahneman put it, “it’s much harder to evaluate the process than to evaluate the outcome. And it’s much more intuitively attractive and compelling to evaluate outcomes than to evaluate the process. So that’s what people do.”