The following blog is a transcript of a Birkbeck Inspires: Conversations with Alumni Podcast. Listen to the full podcast here
Hello and welcome to the ‘Birkbeck Inspires: Conversations with Alumni’ series, where we hear from former students and find out more about their time at Birkbeck. Birkbeck Inspires is the college’s free online events, activities and resources program, which has been designed to inspire learning, provoke thought and entertain and excite curious minds.
Today we hear from Dr David Gamblin, Lecturer in Birkbeck’s Organizational Psychology department and alumnus, Rick Payne, who interview each other to find out more about their fields of expertise and what brought both of them to Birkbeck.
Rick works at the Chartered Institute of Accountants in England and Wales and is also a mentor on Birkbeck’s Mentoring Pathways program. If you are interested in mentoring a current student in the upcoming academic year (just like Rick), please visit www.bbk.ac.uk/alumni/mentoring
Dr David Gamblin (David):
Hello, I’m Dr David Gamblin, I’m a Lecturer in the department of Organizational Psychology at Birkbeck and Program Director for the MSc Management Consultancy and Organisational Change. Today I’m really, really pleased to be joined by Rick Payne, Birkbeck Alumni from the MSc Organisational Behaviour and current Manager of Finance Direction, a thought-leadership program from the ICAEW.
Rick Payne (Rick):
How are you doing today?
Good, thank you. Glad it’s Friday but very well, thank you.
Wonderful. So we’re going to do things slightly differently today in terms of some of the other alumni interviews. We’re going to start with me interviewing you and then flip it on its head and get into a bit of a discussion about decision making and uncertainty, which I’m very much looking forward to.
Wonderful. So to kick things off, Rick would you mind telling us a little bit about yourself and your current role.
I got my first degree in Economics from Manchester, trained as a chartered accountant with KPMG, then spent 17 years in wholesale banking. Towards the end of that I got involved in organizational development and that’s what took me into Birkbeck and studying the degree we’ll talk about a bit later.
Currently I work at the Institute of Chartered Accountants in England and Wales (ICAEW). I do practical applied Management Research, which involves talking to a lot of members and finding insights from them and putting it together in reports and presentations and getting those learnings out to other members. Hopefully through that we help people with their careers and we also help their businesses to be more successful.
Super. Sounds like a really varied role with a good balance of research and practice. It sounds a lot like the Birkbeck model in the department of Organisational Psychology, that science-practitioner role. I wonder if you could tell me a bit more about what you did at Birkbeck and when that was?
I did an MSc Organisational Behaviour, which is occupational psychology without the chartership at the end of it. And I studied at Birkbeck from 2004-2007. Organisation Behaviour covers topics like organizational change, training and development, selection and assessment, work and wellbeing – quite a broad range of anything to do with people and organisation.
A lot of people who will have been studying at Birkbeck, the people listening will be able to empathize with this, will be working, studying at the same time, come from busy backgrounds, busy lives – I’m just wondering, how did you find it?
It was quite strange for me as I was going through two changes at the same time so when I started studying I’d just left banking to start up as a coach and trainer. But I wanted a more rigorous training through the MSc. Trying to set up a business and do the readings and work with everything we had to through the course. They were complementary, they helped with both sides but it is quite a juggling act. I got really into the research side of the MSc and probably paid too much attention to that and too little attention to setting up as an independent consultant.
One of the things that is worth mentioning is at the time, there wasn’t a mentoring scheme at Birkbeck. I’m now involved with the Birkbeck Mentoring scheme and working with the people in the final years of their degrees. Some people really have to work hard to balance the two and set priorities and I think the mentoring program can help with that to make sure people stay focused on doing what they need to do and what’s most important for them. I’d highly recommend people make the most of the mentoring scheme. I’ve had a year off from doing it as I’ve already done four. I’ve applied again so hopefully I get accepted to take on another mentee.
That would be great. I really do recommend people get involved with that and I’m sure a lot of alumni and people listening definitely relate to that difficulty in balancing the workload. It’s really nice to hear the synergy you found between studying, research and what you were putting into practice as well.
It reminds me of a Professor at the time who was very interested in the word ‘stress’ and students would always say ‘it’s quite stressful juggling work and studying’ and he would say ‘what is stress? We need to be more precise with what it means’. He wanted students to be more specific about what it means. This was one of the good things about Birkbeck – having your ideas challenged.
We talk about an induction in our department, about the Birkbeck approach, critical thinking, viewing a lot of the theory through a critical eye. I think now more than ever that has really come into play with a lot of the theories and frameworks being challenged as we go through lockdown and the pandemic. How well do the theories stand up? Are they predicting how people are feeling? Are there gaps in the literature that we need filling at some point? So really good to hear that critical perspective was taken when you were studying at Birkbeck.
How did you find it? Did you really enjoy it? Was it something that was difficult, getting into that frame of mind? Sometimes it’s a mix – some people find it very challenging and some people take to it very quickly.
I think I did, it took a while. I remember being very disappointing with the mark I got for my first essay which I thought was fantastic. It got critique, constructive critique. It clicked in – I now sort of get it, what are the practical implications, what’s the rigor and the underlying thinking you need to put in, what is the academic side to this. I think that was quite difficult to get to grips with the importance of theory. Then you start to progress and realise you are using all sort of theories; we generalize about how the world works so it was difficult to start with but with the help of tutors you work through it and it becomes more natural. It’s certainly been helpful in my job. And I think it’s interesting just having this conversation, one of the things I really enjoyed studying is the different perspectives on organisations and ‘images of organisations’ which is a really good book. It looks at different metaphors and lenses we use. Do we view organisations as machines or cultures or political arenas? It’s just occurred to me that maybe I should use those metaphors again and go through the implications of the pandemic and take on those lenses and see what conclusions it leads to.
That’s a great point. My research background is around decision making so the number of metaphors that get used for the brain changes throughout time from the humors to more mechanical models and then famously the computer metaphor for the brain and now people are starting to challenge whether that is a particularly good metaphor or not. Is the brain really like a computer or is that leading us to make misconceptions about what the brain does and its purpose. So looking at metaphors is a really interesting one and trying not to get stuck in the same lens for a prolonged period of time without challenging it.
So that brings me on to the next question – what about studying organizational behavior has really helped you in your career, life, research and any of the roles you have taken since Birkbeck? Multiple-perspective and critical angle may be one – has it translated into what you do currently?
Very much so. I don’t think I would have gotten the job I currently have, which I really enjoy, without having that Master’s degree in Organisational Behaviour. I think it gave me a uniqueness – it’s unusual to be qualified accountant with a degree in Organisational Behaviour. I was able to bring together both my business knowledge with that people side of things. As our members go through their careers, the technical side becomes, for many of them, less and less important, it’s more about leadership, building teams, building systems, developing strategies and so on.
Being able to bring all of that knowledge from the MSc and the ability to research things – so how do you take a question, pull it apart and start to come up with something that is maybe a bit more interesting than the standard approaches to that can be reached by the general consulting approaches. By having the knowledge that there are many ways of looking at questions, certainly has helped me in my role and hopefully produced some outputs which are a bit different to the normal stuff that comes out of organisations on business. Definitely has been fundamental to me being able to do my role at the ICAEW.
Totally agree with the importance of conducting research properly – such an important skills and transferable skills to pick up on. It’s the reason our Research Methods module is one of the first one people do. It’s an important one to get into that frame of mind early on – how to conduct research and critique what other people have done to make sure it stands up to scrutiny, I think it is really important.
Really good and interesting to hear you are carrying on with the research in your current role. Are there any research projects you are working on at the moment or research findings you’d like to mention?
I’m looking at the CFO strategy – it’s been quite a long-term project for various reasons. It involved interviewing a number of CFOs from different backgrounds. What was interesting was the difference between emergent strategy and planned strategy. The idea that strategies emerge from patterns and post-rationalisations vs the traditional view that you sit down and discuss what your strategy is going to be, map it out and plan it. It’s clear to everyone now that strategies can go out the window very quickly.
It’s also been about exploring the different roles the CFO plays in strategy so anything from orchestrating the process, adjudicating and allocating resources and how they can be quite creative and come up with new ideas and strategies.
That’s really interesting. Where can we read any of this? Is it in-house to the ICAEW? Do you publish anywhere?
This is all published and freely available to everyone – google “ICAEW CFO Strategy’ and you should get to the report. We tend to keep our thought-leadership work open to everybody so it should be findable. Previous work on finance business partnering, which has some interesting parallels with human resource partnering, where the concept came from – that’s been one of our most successful pieces.
I’ll check this out after we wrap up today. It sounds really interesting; you hear about research done on people in leadership positions and about them acquiring new skills. From what you’re talking about in that people maybe shift onto soft skills; leadership, resource-allocation away from technical skills is also an element of stop doing certain things or even unlearning certain behaviors. I think that’s really, really interesting.
So I guess we’re going to turn the tables a little bit and ask you about your time at Birkbeck and what you’ve enjoyed most?
I’ve been at Birkbeck for just over a year and a half. I think Kate Mackenzie-Davey who’s just retired after 26 years at Birkbeck, you would have probably studied under Kate.
Yes, I did indeed. Politics and Change – I remember it well.
Super. So as Kate’s retiring this year, she said it best, ‘it’s the students that make it special’ and I wholeheartedly agreed with that. We get such a nice mix of students from different backgrounds, different work experience – it means they can bring all kinds of things to the table when we’re having discussions. We had a nice example over the summer in the module I taught with my colleague and co-convener, Dr Uracha Chatrakul Na Ayudhya on workplace health and safety. People from backgrounds such as the hospitality industry, greeting card companies, people in care homes, all of these different backgrounds bring different stories to the table, meant that we could have quite interesting discussions. Anything from an employee engagement program which can be a method of controlling your employees – is positivity part of professionalism? Should we have to force people to have to put on a happy face for example? Or where do discussions around diversity and equality fit into a subject like workplace health and safety?
I don’t think you get these kinds of discussions at other institutions whereas at Birkbeck it’s all of these backgrounds and experiences coming together which people can share with the group in a really critical and open-minded way. It’s the students that have made it such a special place to teach.
I definitely echo that. As students, one of the great things is that we start of in class discussing an issue with each other in working groups with lecturers and then we would end up going down the pub continuing those discussions quite often. It was really quite fascinating, as you say, to discuss things with people from lots of different backgrounds and I’m sure some of my fellow students would say they have made some of their best friends through studying at Birkbeck, and I certainly keep in touch with a number of them to this day.
So in that spirit we thought we would try to re-create a discussion of an issue to give people a feel for what it’s like. At the ICAEW we are particularly interested in decision making under uncertainty, which is one of David’s areas of expertise.
David, maybe you could start off by exploring the main way in which people make decisions.
In the 40s and 50s decision-making theory was in the hands of economists. They were responsible for a lot of normative decision-making models, which teach us how we should make decisions and optimum benchmarks. A lot of economists claimed that humans were rational beings, we evolved to be rational thinkers, the brain is essentially a machine for making rational judgements and that kind of thing.
One of the famous theories that stems from that is the expected value theory which tells us that to work out whether or not we go with an option we need to work out the expected value of that option; what it’s worth. To do that we would look at all of the different outcomes that could come about with a particular option, whether it’s investing in a new fund or it’s the decision to go for a picnic. You look at all the different outcomes that are possible and you take the probability of each one and multiple it by the value you’d get if that situation did occur and we sum all those products up and that gives us an expected value of each option. We then compare across each option to see which one will give us the highest value and in theory we go with that one. So it’s a very rational, very analytical process for decision making and it forms the basis for a lot of decisions made and trainings and workshops today to become a better decision maker, to become a better thinker. This is what you need to do, you need to structure your decision like this, generate a grid of possible decision outcomes.
That certainly underlies a lot of accounting approaches to decision making and indeed some of the things I’ve been reading are still pushing that approach.
Yeah, I think so. It’s a very popular and tempting one to use in a workshop or decision aid. I guess no surprises it’s still being taught. I suppose rightly or wrongly because stemming from that came Daniel Kahneman and his colleague Amos Tversky and they brought the heuristics and biases approach. And someone like Richard Taylor is seen as the father of behavioural economics, then Daniel Kahneman is probably seen as the Godfather of that movement. He really challenged that normative approach by economists such as expected value theory and said is that really how people make decisions? Are we really rational thinkers? Is the brain a rational machine? Their line of research exposed a number of systemic errors or predictably patterns in error that people make in decisions. From that Kahneman proposed two different types of decision making – type 1 is intuitive, quick, fast, low-cost kind of decision making and type 2 is the analytical, effortful, more rule-based, process-based decision making that is more similar to normative theories proposed by economists.
So he split it down the middle and said we’ve got a lot of these areas that people make when their decision-making and their line of research has identified a lot of heuristics and biases that people had and as well as dual process theory that might be two different systems Kahneman called it, the intuitive and analytical. There is some debate about whether there’s actually two systems or where it’s like a continuum with analytical and intuition at either end of the scale.
Probably a big thing coming from that line of work is this idea that intuition shouldn’t be trusted because it leads to a lot of errors in contrast to that Gary Klein came along with a naturalistic decision making program of research that said we’ve got a lot of experts out there, we’ve got a lot of people in the military, doctors, we got firefighters, people that work in incredibly challenging situations that have to make snap judgements under pressure and they are able to do a really good job of it actually. How do they do that if Kahneman said people make lots of intuitive errors. So Klein research challenged that notion but also the way Kahneman’s heuristics and biases approach was quite lab-based starting to look at people in the real world bringing in a bit more observational data and saying want are people actually? How come they’re so good at decision-making? So those would be the three or four big stereotypes of decision-making. You’ve got the very very rational economic model, you’ve got Kahneman’s type of biases that intuition that leads to a lot of errors, and you’ve got Klein’s version which lead to a very very accurate and amazing insights a lot of the time.
Yeah, I think it’s really interesting to reflect on the different ways and think about ourselves and how we how we make decisions. And given these different approaches maybe you could talk a bit about the pros and cons of the different approaches and what you do to make the most of things?
Yeah so I’ll go through each one as they’ve each got lots of pros and cons, sometimes which can be the opposite of each other. Starting with the normative approach which is the economic model, the idea of expected value theory, this very very process driven, working with probabilities – the pros is it provides optimum benchmarks for outcomes. So if you can do it and you’ve got the data and you can get these probability judgements from, I guess, a lot of historical data that you can use, then it should be providing you the optimum outcome, that should be the correct solution as economists would say.
The con is people don’t really think like this, this is very difficult for people to do and as a result a lot of trainings around expected value theory and economic model end up failing in the long term. People walk away thinking that they’ve learnt this and they can do it but in the end it becomes very unnatural, very difficult for people to do and they end up falling back on things like intuition and sometimes they do that without even realizing they’re not doing the economic solution anymore.
Does that relate to the idea of you know what decision you want to make based on your heuristic and then you back it up by some spurious numbers and rational expected value calculation.
Yeah, definitely it’s absolutely true people will think they’re doing something like an expected value theory. They are plotting the grid, collecting the data but little biases sneak in there all the time, so things like confirmation bias and you see people find and tweak the probability and the values in this grid to make sure the solution churns out the thing they wanted it to in the first place. So it’s not a silver bullet getting people to make decisions in this way. There is still a lot of heuristics and biases, sort of ghosts in the machine that are very hard to get rid of.
Yeah and there’s a whole host of research that people really struggle with putting it into practice. People are not particularly good at following probability rules so you’ll find circumstances where people’s probability don’t sum up to one, when there can’t be more outcomes from there are in terms of probability – it should all add up to 100%.
We get things in the research like errors of transitivity and preference reversals. One of my favourites is the idea that a credit surcharge and a cash discount are essentially the same thing. There are different prices for using cash and/or your card but when you describe a transaction using these different frames, it can have different results. People find it more persuasive if you can say there’s a credit surcharge on this transaction. They then avoid it and pay cash. If you tell people there is a cash discount on this, they are not as convinced and might just be happy enough going along with the card. People are quite happy to forego a discount but they are not happy if they think they are going to be penalised for something.
It’s little things like that, which when you plot it out in a rational economic model like expected value theory it shouldn’t make a difference. They are basically saying the same thing. But when you find people doing it in the real world you get these little little reversals.
Intuition in Kahneman’s mind is very fast, it’s very low cost. Some researchers say it has no cost whatsoever, it cost absolutely nothing in terms of cognitive resource. We should be able to do it no matter how busy we are. Others will say not nothing, but a low low cost.
A lot of the time it is good enough. It gets us from A to B. We’re using these intuitions, these heuristics to get by. And we make a lot of our decision based on it. Things like opting for the default a lot of the time would be a kind of low-cost intuitive rule which a lot of the time works. We take our default route home, we don’t sit there and analyse every single possible coffee and what the probability is that it give us a certain level of satisfaction. We go with that default, that gut feel.
The con is that it leads to a lot of biases which I guess we’ll talk about in a bit. Things like overconfidence in anchoring biases, framing effects. So although it’s low cost and a lot of the time it’s good enough, it is the one that leads biases and errors.
In terms of analytical thinking, it would just be the reverse of the type one really. Analytical thinking can be more accurate, it tends to give us a good benchmarks but the con is it slow, it’s effortful and it’s a very very costly in terms of cognitive resource. There is not a lot that you can do while doing a complex bit of analysis, it takes a lot of a lot of brain power.
And then the other side of that would be the Gary Klein approach talking about expertise and expert intuition. It’s like reversing again in that the pro is that it can result in incredibly accurate decisions in very very difficult situations like emergency room or under fire from an enemy in a military scenario. People can come up with amazing solutions to problems using their intuition.
The downside of it, the con, is that requires extensive experience in order to get to that point where you can rely on your expert intuition. And it’s not just experience in terms of time in the role but it needs to be a kind environment. So it can’t be too noisy, you can’t have too many confounding variables at play, you can’t have a lot of spurious correlation. You need to be quite kind and quite clean and you’re getting nice good timely feedback.
So those would be the pros and cons of the different ones. I suppose quite similar.
Given those, what advice arises out of that to help people to make better decisions?
Its’s the big question again. I’ve tried to stick to a few here but this is a huge field of work but it’s still ongoing to how do we conquer this because in some aspects the heuristics and biases are fairly new.
I’ve got a few points I will mention. The first would be awareness is really really important. Awareness of the different types of biases, the different types of heuristics we use, the different traps and pitfalls that we might fall into. So I suppose everyone listening, go and have a read of Daniel Kahneman’s ‘Thinking Fast and Slow’ would be a good start.
That’s a really good example of a lifetime’s amount of research that has gone into the pitfall and traps people fall into and what to be aware of. I think it’s a good starting point because it may not make you a perfect decision maker but what it’s going to do is highlight areas where you need to be extra careful, for you exercise a little bit of extra caution. So little things that you can do if you feel like you’re falling into an area where a bias could sneak in.
So you can do things like reframing the information. For example, the credit surcharge, if someone’s telling you that there’s a credit surcharge you can reframe that question and say would I reach the same decision if I thought of this as a cash discount? The same thing if you are in a supermarket and see sausages marked-up 80% meat, think in your head, ok what if that sticker said 20% non-meat? Would that change your mind about how delicious those sausages are going to be? If so you might be falling into a trap of a bias.
So try reframing information, trying to take the outside view. We’re very good at making decisions based on information is presented to us, so we can see right in front of us. We are very good at making decisions based on what’s right in front of our eyes but not so good at making decisions or drawing illusions from what’s missing. So trying to take a step back, trying to look at the outside view and finding useful reference classes so people who’ve been in similar situations – what did they do? Did they succeed? Did they fail? How similar are they to me? How similar is their situation to what I’m going through at the minute?
We should do this automatically in novel situations, for example things that are very very new to us. We can almost feel ourselves slipping back into that analytical mode of thinking. So imagine driving your car and you’re on a bit of unfamiliar road, an unfamiliar junction. You find yourself going into analytic mode and any conversation that you’re holding with a passenger sort of pauses and you draw that extra attention or resources into figuring out where you are. But what about routine ones, routes that you always take? You tend not to think too much, tend not to process too much about what’s going on and you can happily hold a conversation with other people in the car because you’re not using up too much energy and effort on the drive.
So it’s those kind of novel situations where people are reverting back to intuition whereby accidents can occur, just being extra careful that we’re not falling into a trap of one of these heuristics and biases. Ok – maybe I can analyse this a little bit more, reframe the question, take the outside view.
That’s really helpful. I think we can take a lot about like the idea of the sausages in particular, and practicing one things like that.
Finally, people are currently making lots of decisions under uncertainty but also a lot of pressure. I know that’s another area you’ve looked at – taking decisions when you’re under a lot of pressure. Is there anything in particular you’d mentioned there just to wrap up with?
I would say I’ll go back to your professor from earlier you were talking about who maybe didn’t like the word stress. I think we can be maybe specific and try and challenge what we’re thinking about stress because sometimes pressure is a good thing and sometimes adding pressure helps.
So adding pressure can increase the effort we put. For example, increasing accountability, transparency or incentives can add pressure and it can increase effort. There are certain scenarios where increased effort can result in better decision making and performance, but not always. Because when we talk about stress and anxiety, it’s a different matter. As I mentioned when driving the car, we’ve got this limited pool of potential resource we can either spend it analysing the route or we can hold a conversation. Trying to separate that attention on different tasks is quite an important thing because if we start drawing attention away from the tasks we’re trying to complete we end up making mistakes.
So there are a lot of downsides to this. We can fall into the trap of making lapses and slips, forgetting things, applying the wrong rule. A lot of the time this is unintentional, there can be times when it is intentional. These are known as violations in the taxonomy of human error. Increasing the pressure and making a very pressurised situation can increase a number of violations people make as well. Trying to do things sneakily, take shortcuts, flaunt the rules in order to maybe get home on time. If you’re an auditor, maybe we’re not going to check that final invoice back to the debtor’s ledger. So that’s the kind of violation people might be making on purpose.
What do we do about it?
There are two general approaches. One would be an individual approach and one would be a systems approach. I guess the ICAEW’s exams is a useful example. I didn’t do all of mine but I got through to the professional stage and I’ll tell you it’s a very difficult set of questions and it’s a very strict time limit under a fair bit of pressure. I suppose there’s a reason why the pass mark is 55% not 90% or 95% to pass. It’s a highly pressurised environment, you’ve got to expect errors with a lot of stress, difficult questions and a time limit. People are going to make errors.
So the systems approaches is all about that. We are human, we’ve got to expect error. So if there’s anything that we can do to focus on the system rather than the individual and say can we engineer things in the environment to make it a bit easier for people. An exam example would be reducing the difficulty of the question, removing the time limit, adding people that can help or adding resources and machines to help us.
The individual approach on the other hand would focus on the individual and would say what can we do with this person to reduce their stress. We can do things like mindfulness to reduce the impact of stress or we can reduce the demand tasks have through repetition and practice. The more and more you do something, the easier it becomes.
For a comprehensive answer, you have to do a bit of both. Focusing only on the individual is a little bit unfair as it puts the blame on them. There are skills we can equip them with to reduce the demand of what they are doing. Overall I think we need to look at the systems approach, which I think a lot of auditors would appreciate.
The final tip would be in terms of decision making and the systems approach would be not just focussing on outcomes when we’re looking at our decision making. We are living in a very uncertain world, a very noisy world, there are a lot of times when outcomes are positive but have resulted from chance and sometimes a very system and decision-making process went into it. And vice versa a lot of good decision-making might go on in the background which leads to a bad outcome, which could be chance. So I need to tell the auditors out there the importance of controls testing and focusing on assistant not just the outcome as there is a lot of chance and a lot of noise going on.
Thank you, that’s really helpful and we do urge people to review their processes because we sometimes, we’re just on to the next problem, on to the next issue without reviewing how can we do things better, what have we learnt.
So David from my perspective and what we’re doing at ICAEW that’s been really helpful and I’m sure our members and audience will get some valuable tips and hopefully will follow up on some of those ideas.
Thank you very much.
My pleasure. It’s been really enjoyable to have someone to talk to about that all of these different bits of theory and research.
Thank you very much.
That’s the end of today’s podcast. We hope you enjoyed listening. Make sure you check out what else Birkbeck Inspires has in store at the website www.bbk.ac.uk/birkbeck-inspires