2012-06-19

Statistics are powerful

Drake Editorial Team

This is something every writer knows, teachers embrace and politicians abuse. Leaders and managers are also very sensitive to the power of numbers, although they may not always use them wisely.

I was reminded of this as I read a recent report from Harvard – a reputable source for certain – and then pondered over what I was expected to do with the information that it was promoting.

The topic is the relationship between ethics and earning power: the report summary told me that, in a University of Memphis study*, while companies have focused greater attention on the need for ethical practices over the past few decades, male business professionals who admit to high ethical character earn, on average, 3.4% less than their peers who make no such claim. Those who reported that their ethical standards were enhanced by their professional education actually received 6.5% less.


What does this tell me?Then I learn something else from the same source – that the situation is different for women. Female business professionals who self report high ethical standards receive no pay penalty and those who said that their schooling had raised their ethical standards received a premium averaging 5.5%.

If I assume that the study is reliable and reputable, and I’m sure that it is, this is depressing news. Not only are male business professionals being penalized for trying to be ethical but there’s also a double standard in play!

In addition, if you are a male contemplating higher education the message is clear – you’ll not be rewarded for learning and striving to be more ethical in your business practices, so why bother?

Of course, I could recall what the British Prime Minister, Benjamin Disraeli, is reputed to have said about statistics; "There are three kinds of lies: lies, damned lies, and statistics."  On top of this I know, for a fact, that six out of seven dwarves are not Happy!

The point though is that we rely heavily upon statistical evidence to support many, if not most, of the critical decisions we make in our businesses. Are we deluding ourselves?

What many executives will do is select and promote those statistics that help their intuitive processes and ignore those that do not. While this may not be strictly ethical, it is likely practical.

I have learned that I will tend to rely on rationality, including statistical evidence, to make simple, straightforward and immediate decisions but rely on my intuition to a far greater extent, and so less on statistical supports, when the decisions are more complex and/or consequential.

Complex decisions include issues such as hiring and investing in people where there are infinite variables and substantial consequences. Surely I should be able to depend on objective, tangible and statistical evidence to help me here?

Indeed I can, but I need to use such data wisely, looking into the evidence rather than at it. By this I mean that I should be using objective input as patterns and trends, not as singular proofs. So, a single test to assess the viability of a candidate isn’t going to prove anything, no matter how good it might appear. On the other hand, a battery of tests that reveal a pattern of facts could work.

Back to the original point about ethics and earnings. Isolated data can be dangerously misleading and the superficial conclusions indicated above would not be prudent ones. There are many, many other factors that determine compensation and decisions regarding higher education.

We should use statistical evidence to create and modify patterns in our understanding of complex issues, but not to justify rational decisions that can be unduly influenced, perhaps even distorted by isolated facts no matter how impeccable the source might appear to be.

To achieve this we often need to allow sufficient time for new data to permeate our subconscious minds and avoid rushing to judgment; in short, sleep on it!

Statistical information is a guide that does not provide answers; rather it is an opportunity to develop further, likely insightful, questions. Think on it!


About the author:David Huggins MASc, FIoD, CMS is an experienced behavioral scientist and executive coach who’s dedicated to bringing out the best in individuals and groups. His insights and direct contributions have taken business leaders to elevated dimensions in performance. He can be reached through his websites at www.andros.org and www.polarisprogram.comSource: The effect of ethics on labor market success: Evidence from MBAs

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