Emerging Markets Business Summer 2016 | Page 77

EMB happens, having diversity training programs was unrelated to “the share of white women, black women, and black men in management”. The authors concluded that diversity training did not affect minority hiring. But just a moment. Having diversity training vs. not having it is a self-selected variable. Corporations that hire diversity trainers may be less interested in hiring women and minorities than corporations who find more effective ways to increase hiring. In fact, they may simply be using such programs as protective cover for their real hiring policies. Corporations that don’t have diversity training may be effective in hiring minorities by techniques such as setting up diversity taskforces or making success in minority advancement a part of the evaluation of senior managers. In another corporate scenario, imagine your company’s department stores are doing better in Southeast Asia than in South Asia or the Middle East. Before you try to get all your managers to imitate practices of managers in Southeast Asia, consider what else might distinguish the region from other parts of the world: perhaps general economic conditions or strength of online sales. 6.  Control Testing The self-selection issue is particularly important where health is concerned. Men who take vitamin E are less likely to have prostate cancer. So if you’re a man getting along in years, you might be tempted to start taking vitamin E. The problem here is that men who take vitamins are also likely to be doing everything else they think is good for their health. For example, they probably already exercise regularly; watch their cholesterol, blood pressure and weight; drink alcohol in moderation and don’t smoke. It could be any of those factors or a combination that is causing the lower cancer rate. People in public health call this the “healthy user bias”. The only way we’re going to find out whether vitamin E is a good idea is to turn to what’s called the “gold standard” in scientific research. That’s the randomized control experiment. Recruit a large number of men to test vitamin E effects. Flip a coin to see who gets a placebo and who gets the real thing. Wait a few years, checking morbidity and mortality rates periodically. That’s been done, as it happens, and the men who took vitamin E were found to be more likely to get prostate cancer than those who didn’t. Most of the health findings, and many of the scientific findings you read, fail to inform us whether the study that produced them was based on a randomized control experiment or mere observational data. Outside of the health realm, the corporate world is also increasingly beginning to rely on randomized control experiments. At Google there is a derisory expression describing what most people in business do when they have to make a decision: they get the HiPPO – the Highest Paid Person’s Opinion. Google does an experiment instead, by assessing, for example, which gets more clicks, the webpage with the red border or the page with the blue border. Experimentation of this kind is called A/B testing—a randomized test with two variants. Researchers in a city adjacent to Juarez, Mexico, conducted A/B tests on a number of tactics for increasing sales of fruits and vegetables. According to the research, signs telling customers that the average shopper in the store purchases X number of certain items can boost sales for the produce in question. Meanwhile, putting a divider in the shopping cart with a sign saying, “Please place fruits and vegetables in the front of the cart” can actually double sales of such produce. The signs also turn out to have a massive effect on the purchases of the group with the most to gain by an increase, namely low income people from both sides of the border, many of whom are ordinarily likely to purchase processed rather than fresh foods. From randomized control experiments to weighing up opportunity costs, by harnessing tools for reasoning and applying them to the business world, leaders can vastly improve their people-decision skills and fill the human capital gap that plagues many companies across the emerging market world. This means not only hiring the right people in the first place, but making the right managerial decisions that will keep both workforce and company performance on track. Richard Nisbett. Distinguished Professor of Social Psychology and Co-Director of the Culture and Cognition program at the University of Michigan at Ann Arbor. With multiple seminal works to his name, he is one of the most respected authorities in his field. His most recent book is Mindware: Tools for Smart Thinking. EMBreview.org  75