Of Rewards, OD and passing the buck

“Compensation decisions are based entirely on the market and business situations. Our objective is to achieve the right balance between ‘need to pay’ which is based on the market scenario and the ‘ability to pay’ which is based on the company scenario”, said the Rewards Manager. “Wouldn’t that make the Rewards function very transactional? Shouldn’t you look at the ‘want to pay’ aspect which is based on the overall people management philosophy of the organization, in addition to the ‘need to pay’ and ‘ability to pay’ aspects that you have mentioned?”, asked the Organization Development(OD) Manager. “We can’t create competitive advantage through compensation strategy as it can easily be copied. Hence, the compensation function has to be transactional and business oriented.While I agree that 'Total Rewards' is our approach, I am only the 'Rewards Manager'. Executing parts of the Total Rewards framework that are not related to compensation and benefits should be the job of the OD function as it is the mandate of the OD function to build a deeper engagement with the employees.”, replied the Rewards Manager. “OD function is also business aligned – it is not about charity and feel good initiatives. Creating deeper engagement with the organization requires a multi-pronged approach and that includes Rewards related dimensions also. Rewards is a very important tool to shape employee behavior. If our Rewards strategy is only about ‘paying the employees the lowest compensation that we can get away with’, we are not only not leveraging the full potential of Rewards, but also creating irreparable damage to the psychological contract between the employee and the employer. Managing the psychological contract is key to building deeper engagement with the employees”, said the OD Manager.

During the first few years of my career, I did a lot of HR consulting work related to Rewards – benchmarking, policies, benefits, compensation structuring, variable pay schemes, employee stock option plans, voluntary retirement schemes, job evaluation etc. Apart from developing functional expertise in the Rewards domain, I also developed an affinity/feel for compensation related numbers. When I look at a data sheet with a lot of compensation related information it (say the compensation data from various companies/units), the figures 'talk to me' (i.e. the patterns in the data and the actionable inferences based on the same automatically pop up in my mind). Later in my career, I gravitated towards OD, though I did get involved in Reward related matters when I have handled HR Business Partner roles. Anyway, Rewards has remained close to my heart though I have been making a living mostly out of OD for the last ten years. Of late, I have been making an attempt to stand at the intersection of Rewards and OD (Please see the six posts in the series on 'Salary negotiations and Psychological contract' for details). Also, I don’t miss any opportunity to interact with fellow Rewards and OD Managers. The conversation at the beginning of this post is derived from those interactions.

My opinion is that both the Rewards and OD Managers here are 'correct' - from the point of view of their respective sub-functions. They are just articulating the mandates given to them. However, while being 'technically correct' they are also missing the essential point here! Please note that one can be 'completely correct' and 'completely irrelevant' at the same time!

During the last 15 years, in the context of organizations that I am familiar with, I have seen ‘Compensation & Benefits’ evolving into ‘Rewards’ and then into ‘Total Rewards’. Similarly, I have seen OD evolving from ‘Process OD’, to ‘Process and Structural OD’ and then to ‘Organization Effectiveness’. That is where the 'trouble' begins. You see, when Reward Managers were just looking after compensation and benefits (providing 'money and goodies') and OD Managers were just doing OD interventions (the kind where you get people into a room and facilitate collaboration, better decision making or creation of a shared vision) these domains did not have much in common and they required very different skill sets. Now if we look at the ‘Total Reward Frameworks’ of many of the organizations, they will have dimensions like culture, learning opportunities, career development, empowerment, work environment etc. Similarly, Organization Effectiveness (OE) is essentially about enabling the organization to achieve its goals by ensuring alignment between the various dimensions/components of the organization and by facilitating positive change. This makes OE/OD more business aligned. This also calls for structural interventions (interventions at the structure, norms, policy & work process levels) in addition to interventions at the human process level. This creates an overlap between the Reward and OD domains, especially when it comes to policies and reinforcement mechanisms to encourage and institutionalize particular actions/behaviors/changes.

When there is an overlap, there are three basic possibilities. The first is that the parties find a way to work together effectively and help each other in the areas of overlap. Obviously, this leads to the best possible outcome. The second possibility is that there is a war over territory and the winning party captures some or all of the overlapping area. While this is often a wasteful process, things usually get done (i.e. they don’t fall through the cracks). The third possibility is that none of the parties take ownership for the overlapping area (and things fall through the cracks). Unfortunately, when it comes to the overlap between Rewards and OD, the third possibility is the one that often actualizes! May be, Rewards and OD Managers are basically ‘nice’ people who don’t want to step on the toes of others! So this creates a situation where the overlapping areas exist in the ‘Frameworks’ and Power Point Presentations of both the parties but nothing much gets done!!! This is what leads to the ‘passing the buck’ phenomenon that this post talks about.

So, what should be done? The important thing here (apart from seeing to it that things don’t fall through the cracks) is to ensure that there is alignment between what Rewards is driving and what OD is driving.

For example, if OD is working on creating an emotional connect between the employer and the employee (that goes beyond rational commitment) and the Rewards approach is that ‘compensation is purely a matter of supply and demand’, then it will send conflicting signals to the employees and also create a violation of the ‘psychological contract’.

Let us look at this in a bit more detail. The situation here can be traced back to fundamentals of the compensation philosophy of the organization – does the organization pay the employees based on what they deserve (within the constraints of what the organization can afford) or does the organization pay the employees as little as it can get away with? This comes into play in a situation where there is an industry downturn (making it difficult for the employees to change jobs) but the particular organization is doing well (growing reasonably fast with healthy profits). In such a scenario, the organization can afford to give the employees good salary hikes. But it can choose not to do so (or choose to give a very low salary hike) because even without the salary hike it can retain the employees. This certainly provides short term gains. It can also be explained away in terms of salaries being market benchmarked. However, this will violate the psychological contract and will lead to a situation in which the employees (especially very valuable employees) leave the organization as soon as the job market improves (Going by the same logic that the organization had used, the employees should leave the organization when the market will pay more!!). A similar situation occurs in the case of hiring also. When the company hires a person (internal or external hire) into a job what salary will be offered? Will the company offer the lowest salary that the candidate will accept or will it offer the salary corresponding to the worth of the job in the company? These are the situations where the 'want to pay' aspect comes in. If the company drives a hard bargain because the employee was not in position to negotiate at that time, no amount of talk later about ‘employees being the biggest asset’ and ‘building a great organization together’ will undo the damage that happened earlier because of the  loss of trust. Some of the IT organizations in India have learned this lesson the hard way!

At the core, people management (of which Rewards and OD are parts) is about understanding, predicting and influencing human behavior. Now, 'human motivation' is a complex phenomenon (See 'The power of carrot and stick' for a detailed discussion). Complex phenomena are usually 'over determined' - that is they have multiple (interrelated) causal/input factors. Some of these factors are in the OD domain and some of the factors are in the Rewards domain. Hence an integrated approach combining Rewards and OD is required. For example, the recent research findings in behavioral economics have created serious doubts on whether many of the performance linked pay schemes have any positive impact on performance. Hence, a combined effort from Rewards and OD is required to ensure a positive return on investment (in monetary and non-monetary terms) from such schemes. Otherwise, such schemes will just be 'tools to match the payout with the ability to pay' - without any useful impact on performance levels. In a way, our problem (Rewards and OD working in silos) has similarities with ‘Multiple Personality Disorder’ (see ‘HR Professionals and Multiple Personality Disorder’ for details). The most important thing in such a scenario is to get the two parts of the personality (Rewards and OD in this case) to talk to each other. This is not something that can be accomplished in one big meeting. This involves a different way of looking at things and joint exploration and solution design.

One approach to make this happen is to get the Rewards and OD teams to work together in crystallizing, articulating and delivering (in terms of specific HR processes and initiatives) the ‘Employee Value Proposition’ (EVP) of the organization. EVPs (that specifies the total employee deal offered by the organization) usually have both Rewards and OD related components and the EVP should inform both the OD and Rewards strategy of the organization. Also, jointly thinking through the implementation details of the various initiatives to deliver the EVP will help professionals in the Rewards and OD sub-functions to develop a better appreciation of challenges the other sub-function is facing. For example, it is very easy for OD managers to talk about 'correcting the salaries' or about 'standardizing benefits'. Similarly, it is very easy for Rewards managers to talk about 'changing the culture' or about 'creating intrinsic motivation by providing employees opportunities for self-actualization'. However, to make these happen in a reasonably short time period within the constraints of the organization is incredibly difficult.

May be, it would also be a good idea to integrate Rewards and OD domains more tightly in terms of the structure of the HR function.

There is also a larger issue here. As I had mentioned in ‘Paradox of business orientation of HR’, while there is no doubt that the HR function (and hence the Rewards and OD sub-functions) exists to support the business, the exact nature of the ‘business orientation’ that is required to support the business most effectively is a complex one. This becomes especially important, if HRM has to mean something more than ‘making people do more work without paying them too much and without risking disruptions to the business operations’. Please note that this problem is not confined to the Rewards domain. For example, if the OD/OE function goes about actively deskilling the jobs so as to manage the process risk and to reduce skill requirement (and hence the time and investment required in hiring/training and of course the salaries that need to be paid), it would take away from the richness and hence the motivation and learning potential of the jobs. In the specialist functions like Rewards and OD we should also be careful to ensure that in our obsession with tools and techniques (see 'Daydreams of an OD mechanic') we don’t miss the broader picture – that is alignment with the core values and the basic people management philosophy (see ‘Towards a philosophy of HR') of the organization.

Any comments/thoughts?

Performance ratings and the ‘above average effect’

“Performance ratings will be shared with the employees next week. We expect employee attrition to go up significantly in the next few months”, said the HR Manager.

It is a fact that in many organizations the attrition percentage goes up in the months after the annual performance ratings are announced. Some of this is because of the process linkages. Salary hikes and bonuses (that are linked to the performance ratings) usually follow soon after (or along with) the announcement of the performance ratings and it might make logical sense for employees to receive the bonus (after all one has worked for an entire year to get that) and the higher salary and then negotiate a better salary (with a  new company) based that. But some of the resignations are a direct emotional reaction to the performance ratings. Based on my experience across multiple companies (as an employee and as a consultant), I have often wondered why the sharing of performance ratings is such an unpleasant experience – both for the employees and for the Managers of the employees.

There could be many reasons for this. The performance objectives and targets might not have been properly defined or agreed upon. There might have been changes in the context or factors outside the employee’s control that made the targets unreasonable/impossible to achieve. The performance feedback might not have been given regularly and accurately (managers often try to ‘soften’ negative feedback) and hence the rating might have come as a surprise for the employee. But I feel that most of the unpleasantness of the situation is related to a psychological phenomenon known as ‘superiority illusion’ or the ‘above average effect’.

'Illusory superiority' is a cognitive bias that causes people to overestimate their positive qualities and abilities and to underestimate their negative qualities, relative to others. This manifests in a wide range of areas including intelligence, possession of desirable characteristics/personality traits, performance on tests and of course ‘on the job performance’ (for which performance rating is an indicator). While the exact percentages can vary based on the social/economic/cultural context, typically in a group at least 75-90% of the members rate themselves as 'above average'.

This fact (that at least 75% of the people rate themselves as 'above average') creates trouble when it comes to performance ratings. These days companies are keen on ‘differentiating based on performance’ (say ‘to build a performance driven culture’) and this would mean that when it comes to performance ratings, the relative performance of the employees becomes a critical factor apart from the absolute performance (performance against agreed upon targets). Whether or not a fixed percentage distribution of ratings are prescribed, some sort of a ‘normal curve’ emerges. Typically, the positively differentiated performance ratings (i.e. if we have a 1 to 5 scale with 1 being the lowest and 5 being the highest; ratings of 4 and 5 ) form about 25%. Thus only about 25% of the employees will get ‘above average’ performance ratings. The arithmetic is simple and the conclusion is inevitable. If at least 75% of the employees consider their performance to be ‘above average’ and only 25% of the employees will get ‘above average performance ratings’, then at least 50% of the employees will be disappointed with their performance ratings. Thus, sharing of performance ratings is likely to be an unpleasant experience – both for the employee and for the Manager.

Now let us look at this from the Manager’s point of view. Experienced people managers know that the problem described above will happen (though they might not be aware of the exact percentages/degree of the problem). But they can’t do much about it as the two critical factors (employee’s tendency to rate their performance as 'above average' and the maximum percentage/number of the ‘above average performance ratings’ that the Managers can give) are largely outside their control. Managers do what they can. This can range from ‘expectation management’ to ‘pushing for a higher percentage of above average ratings for their team’ to ‘providing other rewards and recognition to compensate for the unpleasantness created by lower than expected performance ratings’ to disowning the performance ratings (blaming it on HR and/or senior leadership). But these are of limited utility as they are not addressing the core problem. Also, this can lead to a situation where the employees lose confidence - in the Manager and in the Performance Management System. Another option for the Manager is to staff his/her team with people who have a low self-image (masochists are welcome!). But if the Manager wants the employees to have high self-belief/confidence when dealing with customers and low self-belief/confidence when interacting with the Manager, then it calls for a Janus-faced personality. While such personalities can be found in abundance in extremely hierarchical organizations (see Followership behaviors of leaders), it might not be a viable strategy for ‘normal’ organizations!

Logically speaking, grappling with this problem for an extended period of time and gaining insights and wisdom from the struggle should help the Manager to be more reasonable when estimating his/her own relative performance (and hence the performance rating he/she deserves) and to be more understanding when the Manager’s Manager tries to share and explain the Manager’s performance rating. But, as the studies in ‘Behavioral Economics’ have demonstrated, being aware of a ‘bias’ need not necessarily help one to overcome the bias! No wonder managers often dread the entire business of performance ratings – giving the performance ratings to their team and receiving their own performance ratings!!!!

The research done on the ‘above average effect’ has thrown up some interesting findings that might help us (at least to some extent) in dealing with this problem in the context of performance ratings. It has been found that the individuals who were worst at performing the tasks were also worst at estimating their relative performance/degree of skill in those tasks. It has also been found that given training, the worst subjects improved the accuracy of their estimate of their relative performance apart from getting better at the tasks.

Another possibility here is to make the performance ratings less dependent on relative performance and more dependent on absolute performance (performance against agreed upon targets) or to increase the percentage of 'above average ratings'. But these kind of steps can go against the performance management philosophy of the organization (of differentiation based on performance) and hence impractical. If the context so permits, standardization of performance objectives/targets for a particular role and making the information on the performance of employees on the objectives/targets available to all can also be looked at. Research shows that self-evaluation (especially in comparative contexts) is driven primarily by an intuitive ‘heuristic process’ as opposed to a logical/effortful ‘evidence-based process’. However, by making valid & reliable data on relative performance available and by encouraging the employees to look at it (and may be even participate in an open discussion about it) before they do the self-evaluation (and evaluation of their relative performance), the influence of the ‘evidence-based’ part on the decision making-process might increase.

Again, we can make discussions on the challenges related to the 'above average effect' part of the performance management related communication and training  for employees and Managers. May be, we can even build in some 'nudges' (like asking the employees to write down three things that their peers have done better than them - as part of the self  assessment) that will prompt them to deal with their cognitive bias (of superiority illusion) in a more rational manner.

Apart from this, ensuring that basics of performance management - performance planning, coaching, feedback and review - are done well also helps, though they don’t directly address the problem we are discussing. It is similar to ‘taking antibiotics for dealing with a viral infection’. While they don’t solve the core problem (virus) they do help in preventing secondary infections and hence has some utility in some cases (especially when effective anti-viral drugs are not available and the possibility of secondary infections are high)! The problem we are dealing with here is too 'human' to be completely solved by 'performance management techniques' and we have to live with it to some extent as the price for being human!

Any ideas/comments?

The power of ‘carrot and stick’

It seems rather ‘regressive’ for someone who calls himself an ‘Organization Development Professional’ to write a post on ‘the power of carrot and stick’. Haven’t we transcended the ‘carrot and stick’ method of motivating employees a long time ago (at least after Frederick Herzberg came up with the ‘two-factor'/'motivation - hygiene’ theory almost 50 years ago)?

The objective of this post is not to recommend or to praise the ‘carrot and stick method’. It is just to examine the actual situation in this domain (in terms of both theory and practice) and to explore the possible reasons for the 'power of carrot and stick'. We will also look at possible responses to this situation - from both the employee's and the employer's points of view.

While today's organizations are unlikely to talk about the 'carrot and stick method', if we analyze the methods that are actually being used by organizations to 'motivate' their employees, we are likely to find a high amount of ‘carrot and stick’ element in them. Of course, the ‘carrots’ and ‘sticks’ have become more sophisticated. But, in time of ‘organization stress’ (e.g. the recent economic downturn) some of this sophistication often disappears and more crude forms of ‘carrot and stick’ (that were thought to have become extinct) reappear!

Let us come back to Herzberg. Technically speaking, the ‘two factor’ theory of Herzberg is primarily about ‘satisfaction and dissatisfaction’ – and not exactly about motivation (as job satisfaction might not necessarily lead to motivation or productivity). So it seems possible that the ‘carrot and stick’ method of 'motivation' might be very much alive – both ‘in theory' (more about this later in this post) and ‘in practice'.

Now, let us examine why the 'carrot and stick method' works so well. I think that the power of ‘carrot and stick’ emanates mainly from the fact that it takes advantage of two of the most basic human emotions -‘desire’ and ‘fear’. To be more explicit, ‘carrot’ scores a direct hit on ‘desire’ and ‘stick’ does the same on ‘fear’. It can be argued that if we use the terms ‘desire’ and ‘fear’ in a broad sense, most of the human emotions (and hence most of the human behavior and motivation!) can be ‘modeled’ in terms of these two (and the human responses to them).

If we push the above argument a little further, it can be deduced that the so called ‘content theories’ of motivation (especially those that talk about fulfillment of ‘needs’ – e.g. Maslow’s hierarchy of needs, ERG theory, McClelland’s theory of needs etc.) can’t distance themselves too much from ‘desire’ element (and hence from ‘carrot and stick’). Similarly, if we take a close look at some of the ‘process theories’ of motivation (e.g. Expectancy theory) we might be able to detect elements of ‘carrot and stick' in them also (e.g. especially in the 'valance' part of the 'expectancy - instrumentality - valance' chain/of the cognitive process that leads to motivation, as per the Expectancy theory).

If we consider motivation as a 'state of mind' (i.e. something that happens in the mind of a person), 'carrot and stick' (or anything external to that person, like what the manager/ employer does) can't directly cause motivation to occur - it can only create a situation where motivation is likely to be 'triggered'. Again, the method for applying carrots and/or sticks for maximum effectiveness (especially if we take the sustainability of the effectiveness account), can become quite complex. There have been quite a few studies on the effectiveness of various types of positive and/or negative reinforcement strategies to elicit desired responses. So the 'power' of 'carrot and stick' does not imply that the application (of 'carrot and stick') is always easy!

Now, let us look at this situation from the other side – from the point of view of the employee who is at the ‘receiving end’ of these motivation strategies. From the above discussion, it can be seen that if an employee wants to be immune from the power of ‘carrot and stick’, he/she should develop immunity from ‘desire and fear’ – at least those types of desires and fears that can be leveraged/manipulated by the employer. Easier said than done – I must admit - for most of the 'real' people in 'real' organizations! By the way, in the novel 'Siddartha' by Hermann Hesse, there is a beautiful description of how this method of motivation (implemented through an incentive scheme - with a significant upside and downside for the employee) attempted by an employer (Kamaswami, the rich merchant) fails to have any impact on an employee (Siddartha) who had transcended 'desire and fear' ("Siddartha can think, Siddartha can wait, Siddartha can fast"). It is also interesting to note that this novel was first published in 1922 - much before 'HRD' (in the current sense of the term) came into existence.

My point is not that most of the human beings are nothing more than bundles of ‘desires and fears’. We are capable of other emotions (like love, sense of pride, sense of duty, quest for purpose/meaning etc.) that might go beyond ‘fear and desire’. So it should be possible to find ways of motivation based on these 'higher' emotions. However, these higher emotions might not be very easy to ‘manipulate’ in an organization setting. Please see 'Passion for work and anasakti' for a more detailed discussion on this.

Now, let me tell you a little bit about incident that triggered the thought process that resulted in this post. One of my friends asked me to comment on an article which argued that ‘Leaders should inspire people as opposed to motivating them’. When I thought about this, I felt that the situation was a bit more complex than what it appeared to be – when we look at what really happens in many organizations. Most of the organizations have an essentially top-down goal setting/goal cascade process. While individuals might have some degree of freedom to shape their roles/deliverables, individual goals must add up to the corporate goals. Also, organizations usually hire people to do a particular job (which might even have a formal job description that details the job responsibilities). These factors can lead to a situation where a large part of what needs to be done by a particular employee has been 'fixed'/‘mandated’ or even 'imposed'. If what you need to do is fixed, then whether the leader ‘inspires you’ or ‘motivates you’ to get the same thing done can become essentially a matter of semantics!

I also feel that ‘inspiring someone’ (creating a situation where someone might become inspired- to be precise) is a more unpredictable process (in terms of outcomes) as compared to 'motivating someone' (to do a particular task – say through carefully applied positive and/or negative reinforcement - including the promise/threat of applying/withdrawing positive and negative reinforcement or ‘carrots and sticks’ !). No, I am not endorsing the 'morality' of these 'motivation' techniques. I am just saying that they are possible. I must also mention that there could be situations where these techniques might fail. For example, it is easy to create 'incentives' (financial and non financial) for someone to write a book. But, whether this can result in a 'great book' (if the author is not really inspired to write the book) is debatable. However, the fact still remains that 'inspiration' is often a complex (and elusive!) phenomenon.

While, your manager can 'inspire' you, what you will end up doing based on (triggered by) that inspiration can’t always be predicted accurately. So, if the objective is to get you to do a particular task, I am not sure if the pure inspiration route will always work. Any attempt to make the inspiration more controlled, will bring in the element of manipulation that this inspiration approach is trying to avoid. Of course, if we are talking about a community with no predefined goals (as opposed to organizations that usually have predefined/ mandated goals) then this inspiration approach might work – though no one can predict what will exactly will the outcome be (at the individual and at the community level – considering ‘interaction effects’ and ‘emergence’)!!

Well, it can be seen that the post that I ended up writing (based on the above trigger) went much beyond a response to the immediate ‘provocation’. May be I was inspired (as opposed to just being motivated)!!!

Now, over to you for your comments!

Note 1: It might be possible to make a distinction between actions that we take because of some sort of compulsion and those we take because we really want to do so (e.g. between compliance and commitment). The problem here is that compulsion does not necessarily mean coercion (at least not in the usual meaning of the term 'coercion') - any sort of 'inducement' can also imply compulsion. In a way, all we can observe is the action and the reason behind the action is some thing that we infer - especially in the case of other people. Even if we are talking about our own actions and the reasons for those actions there is the problem of rationalization (e.g. we can attribute the 'good' actions to intrinsic motivation and the 'not so good' actions to external compulsions). Hence the distinction between the two types of actions can get blurred.

Note 2: In this post, the term 'desire' has been used in a broad sense. This makes it easy to link 'needs' and 'carrots' to this term. But it can also be argued that if we use broad definitions for fear and desire, even the 'higher order' emotions mentioned above (like love, sense of pride/ duty/ purpose/ meaning etc.) can be mapped to/'reduced to' (at least, in the 'factor analysis' sense) the core emotions of fear and desire. To deal with this, we need to define these terms (terms like desire, fear, love, sense of purpose and of course the terms action/ motion/ movement, motivation, and inspiration) more precisely and in a manner that has internally consistency/ coherence (at least 'arbitrary coherence' -as Dan Ariely says in his book 'Predictably Irrational') . But that involves too much work (may be even a lifetime of work!) which is beyond the scope of this post.

Note 3: Now, that I have mentioned the name of Dan Ariely, I must also say that I am fascinated by the work that behavioral economists (like Daniel Kahneman, Richard Thaler & Dan Ariely) have done in exploring the domain of human motivation and decision-making - and the predictable irrationalities in the same. Their studies have also shown that 'relational rewards' work better than 'monetary rewards' in many circumstances, though relational rewards have the disadvantage of raising relational expectations. Please note that this does not negate the 'power of carrot and stick' . We can always say that while relational rewards ('relational carrots') and different from 'monetary/transactional rewards' ('transactional carrots') - they are still 'carrots' - carrots that appeal to higher order needs (say in Maslow's hierarchy of needs). Again, it has been suggested that monetary incentives work best in the case of simple tasks (tasks involving straight forward physical or mental activity; i.e. tasks that don't require creativity) where higher performance is just a matter of trying harder and where the performance can be measured accurately. This also need not necessarily create problems for the 'power of carrot and stick theory' as this is more about the relative effectiveness of carrots. We must also note that there is an intense debate going in between 'rational choice economists' and 'behavioral economists' - regarding the applicability of the findings from behavioral economics experiments. It has been argued that we are quite rational in most circumstances (i.e. in our natural habitat/ in familiar situations) and these predictable irrationalities surface mainly in in unfamiliar circumstances and that the conditions created in some of the behavioral economics experiments are quite unnatural (i.e. not representative of the conditions faced by most people most of time in the real world). Even the very definition of rationality is open to debate (e.g. rationality can be defined narrowly - just as a consistent system of preferences/consistent response to incentives - even if these preferences might not be 'good' for the decision maker - as judged by the society)!

Note 4: It can be argued that all the leadership/management actions involve influencing and hence some element of manipulation (as it involves getting a person to do something that he/she would not have done otherwise). Now, whether this manipulation is for a ‘good’ cause (and for whose ‘good’) will bring us close to the domain of ethics (and the tricky terrains of situational ethics vs. code ethics, individual good vs. collective good, good of one collective vs. good of another collective etc.). For example, if my manager gives me some information that opens my mind (e.g. by enabling me to see some possibilities that I was not able to see before), I might get inspired (and do something that I might not have done otherwise). But if my manger gives me the additional information selectively, so that I will see only those new possibilities that he/she wants me to see (e.g. so that I will take some particular action) then the element of manipulation creeps in. Yes, the line between 'management and manipulation' or that between 'influencing and manipulation' can be a very fuzzy one!