Performance analysis and regression to the mean!

In his seminal book, “Thinking Fast and Slow”, the Nobel laureate Daniel Kahnemann talks about an epiphany he had while working with the Israeli Air Force. Kahnemann was trying to push the idea with the higher ups that the carrot works better than the stick; that people do better when they are praised than when they are shouted at. The Air Force higher ups thought that this was a load of utter poppycock since in their experience, they knew that whenever they bawled the heck of an errant cadet, he did better and whenever they heaped praise on someone he tended to do worse.

Kahnemann realized that what was actually happening was what he and Tversky termed “regression to the mean”. Think about it this way. Every single person, for whatever skill has a mean level. Let’s say someone is good at football (the kind the Americans call soccer). Lionel Messi for example. Even Messi has an average level of play (of course his average level might be higher than nearly everyone’s high level but that is besides the point). On some days Messi would play better than his average level and on other days, worse. Assuming that on a particular day Messi played better than his average level, the chances of his playing closer to his mean would increase the next time around. What this implies is that he would be seen to have “worsened” in his level of play after a particularly stunning performance.

Similarly following a match in which he had played worse than his average level of play, he would in all probability again play closer to his mean, which would be seen by people as him having improved! This is precisely what was happening with the Israeli Air Force and which Daniel Kahnemann was astute enough to pick out.

Why am I going into this? Well, think of performance management in an organization. If someone has been ranked “Superior” this year, he is probably going to regress to his mean (which might be a “Very Strong”) the following year. Will the powers that be in an organization think that his level has fallen from the heights of the previous year and attribute that to any number of completely irrelevant factors? Are managers in organizations even aware of “regressing to the mean?”. The same applies to those who suddenly seem to improve by leaps and bounds. I know that organizations, for this very reason, tend to look at a three year window for assessing the potential of employees but how assiduously do most managers do it?

Do HR IS systems provide an easy way for managers to compare assesments done three years ago to current ones? (We are not talking GE here! but your average, run-of-the-mill, organization.

From a predictive analytics perspective, it is obvious that using just a single year’s performance to predict future performance is fraught with all sorts of risk!

I doubt if Luke Skywalker would have graduated to Jedi-hood if Obiwan or Yoda had based their opinion of him based on his inability to do things right a few times. And we would never had had the famous “Do or do not, there is no try” dialogue if Master Yoda had graded him on the bell curve and cut him after the first couple of times he failed to raise his plane!

4 thoughts on “Performance analysis and regression to the mean!

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