Think of a time when an employee or team member performed a task particularly poorly. Was your reaction harsh – or did you even punish them? They probably performed better next time, but don’t think you had anything to do with it. Here’s the proof from one of the world’s great thinkers!

It’s probably safe to say that performance evaluation is not a favorite task for most line managers. Measuring an employee’s performance and providing direct feedback needs to be handled with great care. But these sorts of performance management activities are part of the job today.

Daniel Kahneman, the renowned pyschologist and winner of the 2002 Nobel prize in economics, gives some valuable insights into human nature that may surprise you, shedding light on just how difficult it can be to evaluate performance accurately and fairly. In his wonderful book ‘Thinking, Fast and Slow’, he tells the story of the Sports Illustrated jinx:

“…an athlete whose picture appears on the cover of the magazine is doomed to perform poorly the following season. Overconfidence and the pressure of meeting high expectations are often offered as explanations. But there is a simpler account of the jinx: an athlete who gets to be on the cover of Sports Illustrated must have performed exceptionally well in the preceding season, probably with the assistance of a nudget from luck – and luck is fickle.”

Regression to the mean

Kahneman refers to the statistical phenomenon ‘regression to the mean’. In situations where a person has underperformed or overperformed remarkably, luck plays a big part. We cannot therefore accurately judge future performance on these past achievements.

So when your colleague performs particularly badly, anything you say or do will have little, if anything at all, to do with the subsequent improvement. The poor performance was likely to be the result of bad luck or, in Kahneman’s words, a “random fluctuation”. Statistically, the next performance will be closer to the average, which is an improvement on the poor performance.

Similarly, if your colleague performs a task particularly well and backs it up with a not-so-good performance, it’s not because she was ‘jinxed’. She’s simply performed at a level closer to the statistical average.

In fact, Kahneman warns us that we are often punished for being nice and rewarded for being nasty. He writes, “…because we tend to reward others when they do well and punish them when they do badly, and because there is regression to the mean, it is part of the human condition that we are statistically punished for rewarding others and rewarded for punishing them.”

What does this have to do with managing performance?

Imagine a scenario where you can promote just one member of your sales team. You can choose between Sofie who has delivered one major client or Erica who consistently delivers positive results, but results that are unspectacular on an individual basis. (Everyone talks about Sofie’s achievement – it was a really great client. Can you actually remember any of Erica’s sales?)

As a manager, you need to be aware of taking too much notice of remarkable achievements – either extremely good or bad – and thinking that these represent true abilities. Instead, performance should be evaluated with a level head over the long-term and based on consistency. (Kahneman refers to this as ‘System 2’ or slow thinking.)

It might sound sensible and straight-forward enough, but Kahneman proves how easily our judgements are biased by noteworthy achievements, rather than the monotonous day-to-day achievements. The remarkable achievements, whether positive or negative, are so much more memorable. We all love a good story (or our ‘System 1’ thinking does!) – but the best story is not always the best choice.

So who would you choose? Sofie or Erica?

Daniel Kahneman talks about regression to the mean:

 

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