Wednesday, February 22, 2017

Algorithm Aversion: How Can We Overcome It?

Algorithms can help us make better decisions in a variety of situations.  However, human beings tend to have an aversion to using algorithms.  They trust their gut more than the computer, even though the algorithms may lead to better decisions. Knowledge@Wharton reports on a stream of fascinating research by Cade Massey, Joseph Simmons, and Berkeley J. Dietvorst.  They found that you can persuade people to use algorithms if you give them a choice as to whether to use the algorithm or not.  In other words, don't force them to use it; make them feel a sense of control.  That will help convince them to choose the algorithm.  However, many people stop using the algorithm after some period of time, because they become frustrated with the mistakes that the computer makes.  Of course, the computer might make fewer mistakes than a human using intuition, but people don't recognize that possibility. Instead, they fixate on the mistakes and lose faith in the algorithm. Simmons points out, "People want algorithms to be perfect and expect them to be perfect, even though what we really want is for them to simply be a little better than the humans."

The scholars also found that you could persuade people to use the algorithms if you gave them an ability to adjust the computer's recommendation slightly.   Of course, the algorithm's predictions and recommendations become less accurate when humans intervene in this manner.  However, the researchers found that you only have to give people an ability to adjust the algorithm slightly to enhance adoption.   Providing them an ability to adjust more substantially does not increase adoption more than offering a slight adjustment possibility.  Thus, you might be willing to tolerate a bit of degradation in the algorithm's accuracy simply because giving people some sense of control increases adoption of the computer-assisted decision-making system.  For more on this research, see the video below in which Massey and Simmons are interviewed about the research.  



Tuesday, February 21, 2017

Should I Tell That Joke at Work?

The Wall Street Journal has a nice summary of recent research on humor in the workplace written by scholars Alison Wood Brooks and T. Bradford Bitterly.   The scholars point out some of the positive effects of humor in the workplace.  For instance, they cite one study by Nale Lehmann-Willenbrock.  Here is the summary of those findings:

Research led by Nale Lehmann-Willenbrock at VU University Amsterdam studied how patterns of humor in conversation—such as a joke followed by another joke or a joke followed by laughter—predicted other types of communication, as well as team performance, more broadly. The researchers found that teams that tell more jokes and laugh together also made more supportive and constructive statements to each other, things like “that’s a great idea” or “we could solve this problem by doing X.” That, in turn, led them to perform better on a number of measures, such as hitting goals and improving efficiency. The researchers surmised that humor could improve team interaction by triggering positive forms of communication.

Of course, one always worries about the inappropriate use of humor in the workplace. Will you offend someone?  Could you cross the line and face disciplinary action for something you say?  Could it even get you fired?   The problem, according to researchers, is that we are not very good predictors of what others will find to be funny.  In fact, we aren't good predictors even when we know the person quite well.  Here's one study that examined this situation:

In a recent study led by Michael Yeomans at Harvard University, pairs of museum-goers were asked to predict what their companion would find funny. Many of the pairs included married couples, or people who had known each other for years. Even with the close connection between people, Dr. Yeomans found that they weren’t very good at predicting what their partner would find funny. A statistical prediction model turned out to be much better at rating how funny their companion would rate a joke.

Friday, February 17, 2017

Why People Quit

Why do people quit their jobs?  Fast Company reported this week on a new analysis conducted by Glassdoor.   The firm studied approximately 5,000 workers who switched jobs over the past decade.   They found that three most important reasons for quitting are:
  • Company culture
  • Employee salary
  • Getting stuck in the same job for long periods of time
The firm discovered that, "On average, we find that a 10% higher base pay is associated with a 1.5% higher chance that a worker will stay at the company for their next role."  In addition, the probability of quitting rises by 1% for every 10 extra months someone stays in the same role at a company. 

What didn't matter as much with regard to quitting?  Interestingly, "they found that while work-life balance, liking their senior leadership, and benefits may matter for overall employee satisfaction, they don’t impact turnover."

Tuesday, February 14, 2017

Marketing Your Products as Designed by Users: Benefit or Hindrance?

The Boston Globe reported this weekend on the fascinating new research of Vienna University Professor Martin Schreier.   He studied the marketing of crowdsourced products.  Schreier found that marketing an item as user-designed tended to increase sales more than marketing a product as created by a firm's own designers.  Why this positive effect?  Schreier discovered that, "People believe their peers understand their needs better, and therefore, come up with better solutions."   Moroever, Schreier found that people tend to react more positively if informed that the user-designers had something in common with them.   For instance, female consumers tended to prefer user-designers who were women similar to them.  

Is there a potential downside to marketing a product as "user-designed"?  Schreier found that the effect does not appear to be positive for luxury items or high tech goods.  Why?  For technologically sophisticated products, the consumer trusts experts with high levels of knowledge and expertise more so than fellow users.  As for luxury items, the explanation is quite different.  In those cases, consumers "want to set themselves apart."  Thus, they tend not to prefer something sourced from the crowd.  

Friday, February 10, 2017

Shorter Lines at Starbucks and Dunkin' Donuts

Several weeks ago, The Street reported the following news regarding Starbucks: " Starbucks also seems to be having trouble dealing with the rapid rise and popularity of its mobile order and pay technology.  On a conference call with analysts, executives said there has been significant uptick in the usage of mobile order and pay. The jump created operational challenges, especially at its highest volume stores at peak traffic hours. The congestion at the beverage hand-off counter resulted in some customers who entered stores or considered visiting a location, but decided not to complete a transaction, the company said."  

Meanwhile, this week The Street reported that Dunkin' Donuts would be trimming its menu to improve wait times:  "We have thousands of combinations of drinks and sandwiches on our menu, in some cases more than McDonald's (MCD) and other competitors -- we have perhaps gotten too complex," acknowledged Dunkin' Brands Chairman and CEO Nigel Travis in an interview with TheStreet. Travis believes simplifying the menu will help speed up lines both in stores and via drive-thrus."  

The issues facing both Starbucks and Dunkin' are not unique.  As retail chains mature, they face formidable challenges regarding same-store sales increases.  How can they continue to increase comps year after year, even as their industry and their chain matures?   Many restaurants resort to "menu innovation" as a means of jumpstarting growth.   However, menu innovation inevitably means menu expansion at many restaurant chains.   Therefore, operations become substantially more complex.  Operating efficiencies diminish, and wait times increase.  Customer service begins to suffer.  The best chains prune their menus from time to time, so as to regain efficiencies and reduce wait times.  Of course, some customers will miss certain items that they have grown to love.  Chains need to be prepared for such complaints and train their staff members as to how to handle this pushback appropriately.   The chains that are most successful are ready and able to discuss the changes with customers, and they provide a consistent and effective response to customer questions across all locations.  


Wednesday, February 01, 2017

How Successful Leaders Make Decisions

Lydia Dishman has written a column for Fast Company titled, "How Leaders at Google, Buzzfeed, and More Make Decisions."   She has a number of interesting tidbits from various leaders.   A few key themes emerged:

The Value of Seeking Small Wins:

In a recent report for Fast Company, Harry McCracken asked staffers of Facebook how their leader has pulled off some of the company’s recent major achievements.  "I don’t hear a lot of anecdotes about him swooping in and personally making genius-level decisions that suddenly changed everything. Instead, they praise his inquisitiveness, persistence, ability to deploy resources, and devotion to improving Facebook and himself. He has a knack for carving up grand plans into small, doable victories."  

Ask Good Questions

Mark Parker, CEO of Nike: "You can’t always predict the winners. I end up asking a lot of questions, so the team thinks things through. I don’t say, ‘Do this, do that.’ I’m not a micromanager. I don’t believe in that. My father, when I was growing up, would say to me when I had to make a decision, ‘Well, what do you think?’ And I’d say, ‘Well, I think this.’ And he’d say, ‘That seems like a good idea.’ And over time, I started picking for myself. I didn’t need to go to him. At Nike, we have incredibly strong people. They know what to do."

Step Out of Your Functional Shoes:

Ursula Burns, CEO of Xerox:  We don’t want to compartmentalize people’s expertise based on their internal organization alone. We try to give individuals parity–-equality-–in the discussion. In our leadership team, I expect all of them to check at the door their function as the primary thought process by which they give me input. I expect them to think more about the customer, competitors, employees, and shareholders. So, I give everyone parity to speak about an issue.

Test Your Hypotheses: 
Dao Nguyen, Publisher of Buzzfeed:  Publishing volume is actually really important. It's not that we want to crank stuff out there for no reason at all. The more you publish, the more opportunities you have to look at things that are happening, read comments, have a new hypothesis, test a hypothesis. And if you can do that relatively quickly, then you remember what you were testing.