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Home » Blog » Information Asymmetry and Decision making in Hiring & Sucession Planning
Information Asymmetry and Decision making in Hiring & Sucession Planning
Published: Feb-01-2016

Middle & Senior management hiring & succession planning is always a challenge and its made tougher by most firms not having institutionalized mechanisms to identify and treat  information asymmetry between internal and external prospects .If you have ever bought a used car- information asymmetry is the difference between what the seller tells you and what you discover 3 months later ;)

If you think the above statement is a bit extreme- take a look at the churn in management and the reasons given by folks in exit interviews that their company did not recognize their potential but gave someone else the "benefit of the doubt". And if you are looking for a scientific basis- look no further than Nobel prize winning Psychologist- Daniel Kahenman  who gave the concept of WYSIATI -"What you see is all there is"  which  means that we take a decision based on information presented to us - our mind does not compare the depth and quality of information available. The result is that folks who are hired from outside are actually hired on potential but folks who are  not promoted from inside are done so on basis of the in-depth information available or sadly the/ biases that form because of knowing them so long. But no one questions the quality of information available to make the comparison. 

 

But the information was not taken and provided in a proper manner to the decision makers and Candidate X was left in the lurch, he soon left and joined a competitor and so did most of his team and is on track to be a CEO.

 

The only way to rectify this is to make a level playing field in terms of quality of data available for both internal and external candidates

  • Information needs to be captured and displayed in a structured manner -Table B is a representative template we use while advising clients

  • Weightage needs to be given to information source as well

  • Get Panel discussions done- they help in reducing the Halo effect

  • Invite Outside experts who are immune to internal politics and biased

  • When someone starts saying " my gut instinct says"- hit them with a bat - okay don't but this is your cue you are not talking to an expert or someone who has anything credible to say

  • Do 360 degree discussions, involve - allied departments as well as folks who might report to the role involved.

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