Anticipating irrational reactions

As the expanding field of behavioral economics makes strides, we're gaining a much better understanding of our irrational conduct. We are far from the rational decision makers that classical economics presumes. We are extremely prone to misjudge situations and overreact to provocations.

I'm beginning to connect the dots between our cognitive biases and better ways to operate businesses. When we can anticipate the irrational reactions or customers, employees, managers and others, we'll be able to design better jobs, organization structures, value propositions, customer experiences and business models. Dan Ariely's new book: The Upside of Irrationality has been a big help in this regard. The first half deals specifically with workplace irrationality. Here's the four big ideas I've gleaned from those chapters:
  1. When we're in the running for too big of a bonus, it becomes a major distraction. We lose sight of what we're supposed to accomplish while we fantasize about spending the bonus money and worry about losing out on getting the bonus. We lose perspective about what's really important and our performance suffers. The bonus structure that sought higher performance backfires.
  2. When we're putting out an extra effort with our heart in it, we're devastated if the outcome gets canceled, discarded or disregarded. We cannot get motivated again after the betrayal of working long hours for naught, taking extra initiative for no good reason or seeing our best work get shelved. Attempts to rationalize it and get our perspective back usually don't succeed. Our need for our work to be significant to others runs very deep and we get very irrational when that need is not met.
  3. When we've created something either according to a prescribed regimen or by our own choices, it becomes "our precious baby". We over value our creation and get bewildered by others' not seeing it as exceptional. We have vivid memories of creating it while others cannot recall it. Our participation in assembling something it is enough to generate phenomenal pride of ownership that others inadvertently betray, disregard or contradict.
  4. When we've been cheated, betrayed, disregarded or taken for granted, we take great pleasure in revenge. We think we are entirely justified is restoring justice after a violation of fairness. We have no qualms about setting the world right after getting wronged. The decision to get even is neither rational or considerate of others' viewpoints.
All four findings suggest that most management, sales and H/R practices send people into irrational orbits. We're continually assuming incorrectly that people can handle it, take it in stride and get over it easily. We're finding out how destructive, disinterested and discouraged people can get when we provoke them to get their irrationality on.

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