Noise: How to Overcome the High, Hidden Cost of Inconsistent Decision Making

Harvard Business Review:

At a global financial services firm we worked with, a longtime customer accidentally submitted the same application file to two offices. Though the employees who reviewed the file were supposed to follow the same guidelines—and thus arrive at similar outcomes—the separate offices returned very different quotes. Taken aback, the customer gave the business to a competitor. From the point of view of the firm, employees in the same role should have been interchangeable, but in this case they were not. Unfortunately, this is a common problem.

Professionals in many organizations are assigned arbitrarily to cases: appraisers in credit-rating agencies, physicians in emergency rooms, underwriters of loans and insurance, and others. Organizations expect consistency from these professionals: Identical cases should be treated similarly, if not identically. The problem is that humans are unreliable decision makers; their judgments are strongly influenced by irrelevant factors, such as their current mood, the time since their last meal, and the weather. We call the chance variability of judgments noise. It is an invisible tax on the bottom line of many companies.

Read the whole story: Harvard Business Review