01 Nov 2004  What Do YOU Think?

Should the Wisdom of Crowds Influence Our Thinking About Leadership?

New research suggests that large groups of people are better than a few experts at everything from estimating the true magnitude of things to diagnosing causes of problems to predicting outcomes. If this is correct, what does it say about the true nature of effective leadership?

 

Summing Up

Whether or not this month's respondents represent a self-selected sample of enthusiasts for the book, The Wisdom of Crowds, they agree that the findings it presents have strong implications for leaders, particularly those in large, compartmentalized organizations.

Several expressed the view that the term "crowd" might be a bit extreme in describing effective management processes. For example, John Baxter suggests that "a group of knowledgeable 'veterans' ... in conjunction with others from the external world ...can make more well-informed judgments than a crowd…." As Dean Robb put it, "... the use of the term 'crowd' is inappropriate, because crowds generally fail the test of independence from each other's decisions."

Others saw the findings strongly affirming the role of leadership. D. Prescott Andersen commented, " ... it does not take away the need for strong leadership. Without leadership there would be no questions to answer and no problems to solve." John Dmohowski echoed this view in his comment:"I don't believe groups would be as useful in establishing agendas, developing alternatives, or setting priorities—things for which leaders are required ... And I certainly would not want large groups involved in developing vision, innovation, or strategy ...." Joe Violette added, " ... getting those ideas and solutions to surface, particularly in group discussions, takes a very effective leader."

But the nature of leadership affirmed by the "wisdom of crowds" is clearly circumscribed, according to others. Jack Hughes, for example, says, "The Wisdom of Crowds has effectively shattered the narrow view that the right leader can consistently make the right decisions. The right decisions are based on the best information, information offered by your employees, customers, vendors, and investors." Ian Cook points out that "leadership is more about involving people in understanding, interpreting, and shaping their reality than it is about telling them their reality." Mary Ann Ulrich describes what may be one of the most important challenges in leading the crowd when she comments that "... trusting the result will be the greatest challenge for most leaders and the greatest area for learning."

These comments raise several additional questions. Do these ideas apply in all situations begging for wisdom? For example, David Physick opines that "Different situations require different leadership: sometimes single-minded dogmatism and other times much more collegiate or crowd-based leadership. The good leaders learn where to set the dial along this continuum according to the situation." Do you agree? Does unleashing the "wisdom of crowds" work well in situations where rapid-fire decision-making is called for? Or is it a luxury available only when the pace of the organization's business permits it? What do you think?

Original Article

Are large groups of reasonably informed and motivated people able to make better decisions than a small group of experts? James Surowiecki, in his recent book, The Wisdom of Crowds, reports on a diverse body of work that suggests that they are. If the researchers whose work he chronicles are right, it could have profound implications for the role of leadership in organizations. And it should provide some comfort to all who, like Americans this month, vote to elect their leaders.

In addition to being reasonably informed and motivated, the "crowds" in Surowiecki's title, to be most effective, have to have three characteristics: diversity of points of view, independence from each other's opinions, and decentralization (with access to and the ability to draw on "local knowledge"). And they have to have some kind of mechanism for aggregating "private judgments into a collective decision." In a variety of situations researchers have found that the median view of members of a crowd is more accurate than all but a handful of individuals, and that no individual is able consistently to make decisions superior to those of the crowd. Large groups of people have been found to be better than a few experts at everything from estimating the true magnitude of things (as in guessing the number of jelly beans in a jar) to diagnosing causes of problems (as in determining that the O-ring seals were the primary cause of the Challenger disaster) to predicting outcomes (through, for example, market-mediated trading systems, so-called "decision markets," for predicting the outcomes of things such as presidential elections and even potential success in war).

Taken as a body, it may be possible that the findings of these studies could help us understand why some organizations are more successful than others, why organization size can matter, why decentralization and diversity works, and why lines of communication that enable members at all levels of an organization to make their views heard are so important. If this is the case, why is so little attention paid to this kind of research by corporate leaders? And what does it say about the true nature of effective leadership?

If the essence of leadership is, as my colleague John Kotter maintains, the ability to achieve "extremely useful" change, just what does this research say about how such change is best achieved? Does it suggest one more reason why we should put aside the concept of the imperial leader whose wisdom is questioned only at one's risk? What does it say about the need for leadership behaviors that foster learning, communication, and involvement from the bottom to the top of an organization? Is it the best argument yet for the idea of diversity, broadly defined, in organizations? Or is it a utopian dream forged in the laboratory by organization theorists in support of the mantra of decentralized management and its effectiveness—one which flies in the face of the often-expressed need to have everyone in the organization "on the same page?" What do you think?

To learn more:

James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economics, Societies, and Nations (New York: Doubleday, 2004)

John P. Kotter, A Force for Change: How Leadership Differs from Management (New York: The Free Press, 1990)

Comments

    • Charu
    • Assistant Manager, PFC, India

    The wisdom of crowds could also apply to teamwork. Teams bring to the table knowledge and skills in different functional areas. In my experience, the combination of people in a team has not generally resulted in wisdom.

     
     
     
    • David Physick
    • Partner Associate, Glowinkowski Internationa

    Different situations require different leadership: sometimes single-minded dogmatism and other times much more collegiate or crowd-based leadership. The good leaders learn where to set the dial along this continuum according to the situation. One correspondent has mentioned "swarm theory." Perhaps another analogy from the world of animals is bird formations, e.g., migrating geese, where the geese take turns to be at the head of the V shape—honking from the front, I recall someone calling it!

    Leadership is tiring. Let others take charge from time to time but, critically, retain your accountability and integrity, i.e., no carping as in "It wasn't on my watch" in the event that things go awry.

    Throughout this debate, perhaps what is really needed is a new measure of calibration of successful leadership outcomes other than return on equity. Leadership, wherever it occurs, be it in business, education, health, social services, even government, is about creating climates that allow people to achieve their potential, be fulfilled, safe, supported, creative, truthful, fair, stimulated … and, oh, be happy: Why not?

     
     
     
    • Joanne Celens
    • Director

    I have read the book and I can only confirm that page after page I felt more comfortable with the theory. From my experience as a Shell manager and now entrepreneur, "listening" to the crowds is crucial for capturing their wisdom (in the form of alarm bells or solutions). But the listening has to be an effective and authentic interaction with the crowd.

     
     
     
    • Florence Boupda
    • MBA candidate, class of 2005, Harvard Business School

    I have read Mr. Surowiecki's book, and I have to say his theory makes too much sense to be considered a "utopian dream." If you think about his chapter on the stock market, where he argues that bubbles form precisely because people behave like "a herd" and crowds of investors stop being "diverse, independent and decentralized," it makes sense! Short funds, which tend to be bearish when markets are bullish, only represent about $20 billion of assets (but this figure might have grown over the past few months as hedge funds became more popular)—which is a drop in the ocean in a stock market worth $14 trillion. I am on board with Mr. Surowiecki and, as a future leader, I hope to use his ideas in my career.

     
     
     
    • Roy Bhikharie
    • Managing Director, Papaya Media Counseling

    Not allowing crowds to influence our thinking about leadership likens this attitude to that of a dictatorship. To optimize the input of coworkers one must reward their involvement intrinsically. Considering that behavior is by nature intangible and multi-dimensional, it's best to involve people from different backgrounds, ages, and cultures in the decision-making process.

     
     
     
    • Joe Violette
    • Project Manager (retired), Bechtel Corporation

    I am convinced that large groups have better ideas and solutions than individuals because of their diverse experience. And group discussions trigger other people to share their experiences. However, getting those ideas and solutions to surface, particularly in group discussions, takes a very effective leader. In discussions, sometimes the more aggressive people in the group suppress the best ideas. Jack Welch comes to mind as someone who effectively lobbied to bring out the new ideas and solutions. He cut through the "not-invented-here" syndrome. Not many managers do that today.

    My experience is to allow for some one-on-one discussions, but in group discussions to call on the "quiet types" while trying to keep the "loud mouths" quiet.

     
     
     
    • Pallavi Marathe
    • Patni Computer Systems

    Leadership is an art. One cannot lead by imposing their preferences on the crowd. That would be akin to dictatorship. A true leader is one who is able to mingle with the masses, learn their viewpoints, assimilate their ideas with his or her own, and come up with a plan of action to lead people to success.

     
     
     
    • Bob Likins
    • Director of Pharmacy, Daniel Freeman Memorial Hospital

    I believe effective leaders articulate a vision (although my vision for our pharmacy is drawn from the larger paradigm of the American Society of Health-Systems Pharmacists). But they also lead with the assent of the led (i.e., participatively). So, yes, larger groups of informed, motivated people make better decisions.

     
     
     
    • Steve Hunder
    • Founder & CTO, StrategyLogic

    Applying "the wisdom of crowds" is a relevant concept. Think of an individual's experience and expertise as a powerful computer that receives countless pieces of information and forms a judgment from them. Linking these "computers" together in an efficient way that communicates a collective knowledge allows for a more powerful decision-making process.

     
     
     
    • Jack Hughes
    • Senior Consultant, Rogen Internationa

    The Wisdom of Crowds shatters the narrow view that the right leader can consistently make the right decisions. The right decisions involve the best information, information offered by your employees, customers, vendors, and investors.

     
     
     
    • Mohit Garg
    • IT Analyst, TATA Consultancy Services

    At first take, the example of guesstimating jelly beans (increasing the sample size) and identifying the cause of the Challenger disaster (groups of specialist experts) seem poles apart. At the surface, both cases look like one-shot, highly task-oriented examples in "controlled environments." Nevertheless, the underlying message is that the level of information available to each individual or independent group allows them to converge toward an effective solution.

    The examples also point toward a means of getting people, as groups and individuals, to aim for a common goal. Leading, and ensuring everyone is on the same page, requires getting buy-in from individuals and groups. "Too many cooks spoil the broth" becomes reality when there is no motivation or buy-in.

     
     
     
    • Deepak Alse
    • System Design Engineer-VNGN, Wipro Technologies

    The relevance of personal leadership does not diminish. Decision-seeking and decision making can be a distributed effort. However, excellence in execution demands personal leadership and accountability—which are rarely abundant. Imperial leadership is not a feasible mechanism for building an organization that sustains excellence and innovation. Nor can crowds build an organization! The tradeoff lies in making leaders more capable listeners, talent-oriented coaches, and pragmatic execution warriors.

     
     
     
    • Ian Cook
    • Senior Consultant, SAGE

    Many ancient cultures can relate to these ideas on the decision-making process. If it changes the paradigm of leadership away from a great individual who is all-knowing and all-powerful, then it will do a service in helping us understand the true nature of leadership in organizations.

    It also proves the idea that leadership requires the involvement of people in understanding, interpreting, and shaping their reality rather than dictating that reality. This shift in thinking is supported by many other strands of theories such as learning organizations and emotional intelligence. The sooner it becomes a dominant paradigm the more we will become capable of building sustainably successful organizations.

     
     
     
    • John Baxter
    • CEO, Compass Associates, Inc.

    I have read and taught from The Wisdom of Crowds. My students—and I—believe that a group of knowledgeable "veterans" of a particular organization, in conjunction with others from the external world, i.e., the world outside the corporation, can make more well-informed judgments than a crowd—whether independent of the organization or within it. It is the blending of the external and internal that provides the best array of choices.

     
     
     
    • Michael Bressler (HBS MBA '04)
    • Analyst, Alson Capital LLC

    I found this book informative, but I think Dr. Heskett should remind readers that Surowiecki also pointed out that crowds make very bad decisions when the three criteria are NOT present. Therefore, when depending on groups for good decisions, it is essential to ensure that the information can be aggregated and utilized in a format consistent with the author's framework. The alternative is groupthink and the potential for some very bad outcomes.

     
     
     
    • Anonymous

    The experience I have had in my company is a good case in point. I work for a start-up product company in the wireless space. When operations began and we were smaller in size, almost everyone contributed to the ideation process. For example, engineers would do competitor and market analysis. This resulted in several product features that became the backbone of our business strategy.

    However, since the company has grown in size, we have compartmentalized, and requirements and product feature generation belongs to a smaller group (product marketing and management) who report directly to one of the founders. This has led to the complete death of innovation in the company and new ideas have not come forth in over a year. Ironically, we were once considered to be the thought leaders in our space and now we are merely playing catch-up with other companies.

     
     
     
    • Anonymous

    The structure and institutions of corporate leadership are holdovers from the command and control style of leadership of the industrial revolution. You cannot merely overlay the concepts from The Wisdom of Crowds on this structure. You have to fundamentally change the structure and institutions of corporate control to take advantage of the wisdom of crowds. The leader's task is to create this change.

     
     
     
    • Paul Gilbert
    • Co-Founder, EVP Marketing, MedAvante

    The Wisdom of the Crowds was quite interesting. I'm a big believer that a decision-making body must ensure a culture where disparate views are not only considered but expected. That allows the decision maker to benefit from the diversity of views voiced across the company. At the end of the day the decision maker should be held responsible and accountable for the quality of the deliverables, but at the very least know that in the process they have gained as many angles of the situation as possible. (That's different from decision making by committee.)

     
     
     
    • Nishant Miglani
    • Student, University of Waterloo, Canada

    With respect to organizational behavior, I feel that the "imperial leader" concept of governance is a direct route to leadership shortcomings over the long-term. However, I don't see a better substitute to a decentralized system of governance within organizations, e.g., the traditional "Panchayat" system of social governance in India. Therefore, in my opinion, the "wisdom of crowds" or, more specifically, the "wisdom of diverse, decentralized teams" should strongly influence our thinking in terms of organizational structure. With respect to individual behavior and decision making, I believe that people with deep knowledge in a specific subject domain are far better than a thousand people with mediocre knowledge in the same domain.

     
     
     
    • Harry Tucci
    • Senior New Business Analyst, Aegon USA

    I think the book's author may have some premise but it seems almost like Alice in Wonderland. You need an informed, decentralized, autonomous group with a mechanism for aggregating their individual judgments. Great in theory, but where do those groups truly exist?

     
     
     
    • Anonymous

    This discussion brings to the mind the biological paradigm of swarm theory. Swarm theory uses the concept of a swarm of bees selecting a new hive. There is no leader in this swarm, it is essentially benevolent, and a few members of the swarm are left behind to search for a new hive location. Rarely is this new location a poor choice. It appears that many operational and computer systems are adopting biological paradigms and processes. This sounds like another thread of that trend.

     
     
     
    • Mary Ann Ulrich
    • Managing Partner and Co-Founder, Convivium Partners, LLC

    One of the most valuable lessons from leveraging the "wisdom of the crowd" is the realization that, no matter what level or role an individual plays within an organization, each possesses "the genius within waiting to be illuminated." All we need to do to move toward win-win results is to participate, collaborate, and cooperate together and then, most importantly, trust the result—the "wisdom of the crowd." Perhaps trusting the result will be the greatest challenge for most leaders and the greatest area for learning.

     
     
     
    • Dean Robb, Ph.D.
    • President, Robb Consulting, LLC

    Framing the issue as one of centralized versus decentralized management is inaccurate.The issue is whether a single individual, or a small team (generally, senior management), should make decisions in isolation or in a broader social and informational context. The latter case might be envisioned in terms of a "catalytic," "facilitative," or "lightening rod" leader. I am attempting to describe a leader who is accountable for certain critical decisions, but who, in discharging that responsibility, seeks to draw out the collective intelligence and wisdom of the total organizational body. This kind of leadership would be paradoxical: tremendous technical and social competence alloyed with tremendous personal humility. This is offered as a contrast to the kind of leader who views his or her job as one of 1) personally coming up with all the right answers, and 2) unilaterally imposing his or her will on others.

    Another key point: I think the use of the term "crowd" is inappropriate, because crowds generally fail the test of independence from each other's decisions. Independence of thought is a sign of psychological differentiation; i.e., of psychological independence. And generally, a crowd is the antithesis of differentiation; in fact, a crowd is just one step removed from a mob. The social context being described as the most effective basis for the emergence of collective wisdom sounds more like a community of genuine individuals—the antithesis of a crowd.

     
     
     
    • Anonymous

    "Are large groups of reasonably informed and motivated people able to make better decisions than a small group of experts?" The general concept is correct with a critical assumption: "reasonably informed and motivated."

    Democracy also works better in a society which has a large pool of well-educated people. The collective decision, despite debates and different opinions, would elect a better leader for the country. On the other hand, voters are easily being corrupted and influenced by deceptive campaign slogans. So the question is not whether this theory is right or not—it has long since been proven to be right. Rather, it's how we determine when and if the people in the organization are well-informed and motivated.

     
     
     
    • D. Prescott Andersen
    • Student, USC Marshall School of Business

    While this emphasizes the need for broad perspectives in decision making, it does not take away from the need for strong leadership. Without leadership there would be no questions to answer and no problems to solve. A larger group will yield a higher quality answer to a question, but the value of that answer is based entirely upon the question asked. What is more important than these answers is the desired direction of the organization and the issues questioned as a result.

     
     
     
    • John Dmohowski
    • Managing Director, Drake Associates

    I do believe that a large, well-informed, and motivated group will make good decisions when selecting from alternatives. And groups are usually better at making accurate decisions consistently than individuals who are not well-informed about competing alternatives. I don't believe groups would be as useful in establishing agendas, developing alternatives, or setting priorities—things for which leaders are required—or in situations where reliable information does not exist. And I certainly would not want large groups involved in developing vision, innovation, or strategy, where collective reasoning usually proves to be wrong.