Tuesday, September 25, 2007

Your Annual Review

Last week I started about the interactions of psychology and statistics to mass human behaviour, and hence to economic policy and organisational management.

Whether as an officer in the army or as a captain of a sports team or as a manager in a corporation, when reviewing the performance of others, you need to decide whether to concentrate on the positives or on areas for improvement.

Think of the likely effect on future performance. As a famous economist has stated:
I understood an important truth about the world: 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.

That was not obvious. But that was common sense.

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