When It’s Better When Employees Disagree With You

Research shows that when individuals argue over a decision, it achieves better outcomes. Learn from Lehman Brothers.If making critical business decisions is what you do for a living, there is a book that I can highly recommend: James Surowiecki’s The Wisdom of Crowds.

Surowiecki is interested in how groups make great decisions, and the corollary, how they end up with disasters, whether it happens to be about a deal or an election. In many cases when decisions are disastrous, the group hasn’t represented the feelings of the individuals who form the group.

How can that be?

When the small bits don’t add up to the whole, it is a warning that something is amiss with the decision dynamics, and you saw this in cases like Lehman Brothers and its board, where collectivism was neither wise nor prudent. Management and the board arrived at a tortured consensus to double down on the mortgage market that reflected the sensitivities of the CEO who brooked no interference against his ‘gut instinct’ about the market.

Yet, the group was made up of stellar thinkers with exceptional resumes who should have known better, so how did it fail? It did when people stopped thinking like the individuals they were and thought like the group they had become.

To understand where they went wrong, start with the word “they.” That’s where The Wisdom of Crowds leads us, when in 1906, British scientist Francis Galton was watching the ‘they’ at the annual West of England Fat Stock and Poultry Exhibition, “a regional fair where the local farmers and townspeople gathered to appraise the quality of each other’s cattle, sheep, chickens, horses, and pigs.” Galton was a highly respected 85-year-old researcher in the field of statistics and heredity.

As Galton strolled the fairgrounds, he noticed a crowd placing bets on the weight of an ox standing by a scale. A hallmark of ‘crowd wisdom’ is that the group has skin in the game, just as investing in the stock market does. When the contest was about to end, each person lined up and put money on the ox’s weight and handed in the ticket like it was an election card at a voting booth. In fact, Galton wrote, “the average competitor was probably as well fitted for making a just estimate of the dressed weight of the ox as an average voter is of judging the merits of most political issues.”

Individually, 800 people guessed the ox’s weight. Some had expertise from working with livestock, whereas others were non-agrarians two generations into the industrial revolution and knew nothing about the animal. Galton compiled the 787 guesses (13 were illegible) and graphed them “from highest to lowest to see if they would form a bell curve.” The average of the estimates formed what Surowiecki calls “the collective wisdom of the Plymouth crowd.”

Galton presumed the average would be wrong by a landslide. When he looked at his graph, it showed “the crowd had guessed that the ox weighed 1,197 pounds” whereas the actual weight was 1,198 pounds. The crowd was one pound off.

Galton’s lesson to business leaders running even the smallest of startups to Jeff Bezos at Amazon is that “under the right circumstances, groups are remarkably intelligent and can be smarter than the smartest people in them. Even if most of the people within a group are not especially well-informed or even rational, it can still reach a collectively wise decision.”

But groups can be dangerously poor decision-makers, as Lehman Brothers shows us. When that happens, Surowiecki says they are lacking in “diversity and independence” because the group is unwilling to enter vigorous debate and hammer out the challenges. They become harmony-seeking, which leads to the worst outcomes of all.

Better to have a group that feels so strongly about a decision they must claw their way towards consensus even at the risk of insulting a powerful chief. The folks at Lehman Brothers wish someone had.

Read more: Critically Important (But Less Obvious) Elements Of Leadership Team Diversity