|Anthony Haynes writes: Chengwei Liu is a business researcher whose work has direct implications for management — especially in the talent sector. He has already won more than ten teaching awards and is listed by Thinkers50 as a next-generation business guru. This week Chengwei kindly agreed to being interviewed for our blog…
Q: Chengwei, what’s your story?
A: I’m an associate professor of strategy and behavioural Science, as well as course director of EMBA Programmes at Warwick Business School’s London base at The Shard. Trained as an economist in Taiwan, I obtained my PhD at University of Cambridge and taught at University of Oxford, the National University of Singapore, Peking University, and Boston University. I teach the EMBAs the core strategy course and an elective course on the applications of behavioural sciences in management and organisations.
Q. You are a renowned researcher in the fields of business and management. What is your research about?
|A. I study decision-making processes. Decades of studies have shown how people are often not rational – we make all sorts of biased decisions that lead to various sub-optimal outcomes. My research builds on this approach and elaborates the causes and consequences of biases in executive decision-making.
I also create a new agenda by turning decision biases on their head. That is, predictable biases can imply an alternative source of competitive advantage for the more informed. This framing also changes the motivations of students.
For example, instead of telling my executive students that they are the biased ones (which is rarely well received), I motivate them by emphasising how knowledge about biases can help them gain advantages by exploiting “others’” predictable biases and mistakes.
Q. And what have you discovered?
|A. My main research program addresses a fundamental question in strategy: should we attribute performance differences to skill or to luck?
For example, the most successful are often perceived to be the most skilled and therefore receive the highest rewards and are imitated.
I show that the belief that the exceptional performers are the most skilled is flawed because exceptional performance is more likely to occur in exceptional circumstances and top performers are often the luckiest people who have benefited from rich-get-richer dynamics that boost their initial fortune.
My experiments show, however, that people usually rely on the heuristic of learning from the most successful despite clear evidence that they were the luckier ones. This assumption is likely to lead to disappointment — even if you can imitate everything Bill Gates did, you will not be able to replicate the context he was in and his initial fortune which contributed to his exceptional success.
Q. What implications do your findings have for entrepreneurs or managers?
|A, The misattributions of luck can imply opportunities for informed entrepreneurs and strategists because these mistakes can lead to systematic mispricing of talents. For example, most firms pursue the top performers, i.e., “stars”, believing that they have the highest talents or skills. My research empirically shows that this practice is flawed because the top are likely the luckiest while the “second best” are in fact the most skilled.
The bias that favours the top leads to the second best being seriously underestimated. This provides an opportunity for the more informed — through the acquisituion of superior talents with a price lower than their actual worth.
I’m now writing a book to elaborate these ideas — such as how leaders can maximize the return on luck by avoiding being fooled by randomness and taking advantage of the ways others mistake luck for skill.
Q. More particularly, what do you suggest are the implications for talent acquisition and talent management?
|A. In addition to taking advantage other’ biases, I study the concept of “nudging”, which is about engineering choice contexts to “engage a bias” to overcome a more damaging bias.
This is important, so important that Richard Thaler won the 2017 Nobel Prize in Economics for his contribution on nudging, because recent studies show that “working with biases” is more effective than conventional approach of “de-biasing”.
One of my current projects studies how to apply nudge theory to engineer diversity in talent management. I recently published an article for the California Management Review, introducing a “Mindspace” framework that consists of nine effective behavioural interventions for managers to utilise when designing their nudges.
One of the nine components in the Mindspace framework is “S” or “Salience” . Our attention is drawn to what is novel and relevant to us, yet “Salience” can sometimes hurt diversity in talent management. For example, elite law firms in the UK are over-represented by graduates from Oxbridge. One possible reason is that Oxbridge degrees are so salient that CVs with this cue are more likely to receive further consideration.
Graduates from other schools could prove to be better than (at least some) Oxbridge graduates, but law firms cannot uncover these “hidden gems” unless the recruiters are made to ignore this salient cue. Leading law firm Clifford Chance adopted a “CV blind” policy in an attempt to break this Oxbridge recruitment bias, and the firm managed to find many hidden gems in the under-exploited pool of graduates from non-elite universities.
I am working with several large corporations to implement variations of CV blind policy to improve talent management. The results are fairly encouraging: the number of women, minorities and disabled applicants getting through to the next round of interviews increase significantly.
The message is clear – these “atypical” applicants are competent but unfortunately underestimated due to various conscious and subconscious biases the recruiters had. The approach of nudging can effectively expose these biases and help fix them.