Article,
Include Extreme Points of View In Group Decisions
STANFORD GRADUATE SCHOOL OF BUSINESS, (January 2006)Eric Zitzewitz Assistant Professor of Strategic Management Stanford Graduate School of Business.
Abstract
When designing a group decision-making process for potentially biased
managers, intuition tells us that throwing out extreme opinions neutralizes
the most severe biases among the group?s members and leads to better
decisions. Surprisingly, research suggests our intuition may be wrong.
In a corporate setting, empirical data on the impact of biases in
group decision making is hard to come by. Luckily, a parallel setting
exists that offers a rich dataset of biased decision makers coming
together to attempt to reach an impartial decision: winter sports
judging in the 2002 Olympics. That year two gold medals were awarded
in pairs figure skating after a judging scandal involving scores
of Canadian and Russian skaters touched off an international debate.
?Nationalistic bias, vote trading, and Cold-war style bloc judging
was much more common in figure skating than people realized?there?s
more of it in junior skating than even at the Olympics and also occurs
in ski jumping,? says Eric Zitzewitz, assistant professor of strategic
management at the Stanford Graduate School of Business, who has used
data from sports judging in his research.
?As we?ve known since long before the 2002 Olympic vote-trading scandal,
figure skating judges are nationalistically biased. Traditionally
in Olympic skating judging, judges? scores were compressed into an
ordinal ranking of skaters, and then the winner was determined by
who ranked higher on a majority of scorecards. If four judges thought
the Canadian couple skated a lot better than the Russian couple but
five judges think they skated a little worse, the Russians won,?
he said.
It sounds like a good idea to throw out extreme scores when judges
may be biased, but this actually makes things worse. Throwing out
extreme scores throws away a lot of information. Using techniques
developed to study stock analyst forecasts, Zitzewitz found extreme
opinions have information, noise, and bias in the same proportions
as less extreme opinions. In short, those extreme opinions are not
as biased as we think. The same is true for analysts. When an analyst
says something very different from the pack, listen to her!
Zitzewitz outlines five things that can control vote trading like
the 2002 Olympic incident: 1) have the central body choose the judges,
2) find judges who care about the fairness of the results (like ski
jumping judges, who undo each other?s biases), 3) make the scoring
system as objective as possible, 4) don?t turn opinions into votes,
5) hold judges accountable for their scorings.
?Skating has made progress on 1, 3, and 4, but may have gone backwards
on 5, since they are keeping judges scores anonymous,? says Zitzewitz.
So what does this teach us in the corporate world? Suppose the promotion
committee of a professional services firm is choosing a new partner.
Or a company?s division heads must decide among several projects
to green light and devote resources. In both cases, the chair or
group leader must contend with the inherent favoritism of the partner
who is most familiar with the candidate or the division head who
would reap the most benefit from the approval of a particular project.
Olympic judging is most similar to a committee that allows biased
decision makers to participate rather than recuse themselves. Organizers
do not adjust for known biases, but as observed in ski jumping, sometimes
other judges do. Also, organizers can use career concerns to create
incentives for limiting biases.
An important departure from sports judging is that most organizations
do not insist on simultaneous voting, preferring instead to reach
consensus and resort to formal voting only when opinions become deadlocked.
Zitzewitz offers three observations that could apply to business decision
making as well as scoring competitive sports:
Value fairness. To the extent that organizations can cultivate a taste
for fairness among decision makers, nearly unbiased outcomes can
be achieved.
Be aware of career concerns. If managers are accountable to someone
who cares primarily about the quality of the decision, rather than
which decision is taken, you will get better decisions. Part of the
role of a strong committee chair is to make sure that members are
rewarded for providing un-biased information and act as a counterweight
to interested parties within the organization.
Recognize the cost of opinion truncation. Contrary to intuition, truncating
opinions into votes uses information inefficiently, with the additional
likelihood of encouraging bias and vote trading. This is why voting
should be a last resort in group decision making. In a well-functioning
committee, extreme opinions are respected and given extra weight,
and members are selective about when they give them. If members are
not selective enough, though, committees can fall into a situation
where every opinion is extreme, and the only way to make decisions
is to count votes. Keeping groups small can help, but the committee
chair is important as well.
FOR MORE INFORMATION:
Helen K. Chang, 650-723-3358, Fax: 650-725-6750
Nationalism in Winter Sports Judging and Its Lessons for Organizational
Decision Making
Eric Zitzewitz
Journal of Economics and Management Strategy, forthcoming Spring 2006Include
Extreme Points of View In Group Decisions
