Will the Wisdom of Crowds work for you?
Collective intelligence and the wisdom of crowds has been popularised by James Surowiecki’s 2004 book in which he argued that in some circumstances, large groups exhibit more intelligence than smaller, more elite groups, and that collective intelligence shapes business, economies, societies and nations.
Recent evidence might suggest that business judgement is only getting worse. Each day brings word of some fresh leadership misstep. Indeed, The Motley Fool has launched a new feature: “CEO Gaffe of the Week.”
Dispatches from the fields of behavioural and cognitive science, meanwhile, prove how biased and emotion driven we are in making decisions—and the penalties for making bad ones are growing worse. But the good news is that the more we encounter the cognitive limitations of individuals, the better it is for business judgement, because it helps us shed the myth of the lone wise leader. Could you use the wisdom of your in-house crowd to make smarter decisions?
That myth goes back at least to the 19th century and Thomas Carlyle’s “great man” theory, and it lives on in our view of CEOs as the sole agents of their companies’ fortunes. Only when we dispense with it do we see how capable of great judgement an organization can be.
An example comes from WGB Construction, a small home builder west of Boston. When an important judgment call has to be made there, perhaps because a particular property isn’t selling, Greg Burrill, the president, asks all those with relevant knowledge or a stake in the outcome—from demographers to deck builders—for their thoughts. This canvassing recently led to a decision that not only sold a house but inspired a new floor plan that appealed to a whole segment of buyers.
At the data storage giant EMC such participation is enabled by a social media platform called EMC|One. In the depths of the recession, when cost cutting became imperative, EMC used the platform to do something most companies would leave to top management: decide just where to make the cuts. Thousands of employees logged on and pointed out inefficiencies that came as news to their bosses. The cuts that were made were less painful both because people had been involved in the process and because the decisions were better.
Multiple perspectives are one antidote to individuals’ flawed decision making. Another is the amount of information a committed organization can compile. Nowhere is this more evident than in medicine. Partners HealthCare, an academic medical centre, has managed to reduce “adverse drug events” by 55% using a system that sees the prescriptions doctors are writing and issues relevant alerts. And medicine is hardly the only arena in which access to information yields better outcomes. After Charlotte-Mecklenburg Schools started collecting detailed data on student performance, it was able to dramatically improve standardized test scores and narrow racial achievement gaps. Educators saw more clearly where the problems were and targeted interventions more wisely.
If it works for NASA
Chances are you work in an organization that employs diverse thinkers and collects extensive data. What else is needed to produce good organizational judgement? Two things: clear processes to ensure that both are called upon appropriately, and a culture strong enough to keep people pulling in the same direction. NASA comes to mind as an organization that, after disaster proved its judgement shockingly fallible, has worked hard to put all this in place. Today it has clear protocols to subject the best data to diverse opinions and due deliberation. A question as momentous as “Should we launch?” culminates in an all-hands decision event in which the astronauts themselves participate.
Lives may not be at stake in the decisions most of us are party to, but similar capabilities are being cultivated by enterprises large and small. Gradually we are learning not to rely on the personal judgement of only human leaders and to tap the superior judgement of organizations.
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