The Normal Distribution – Call BS on It?

Sometimes you get something in your reader or your inbox that sets the neurons on fire.  Today is one of those days.  Not sure where this line of thinking will end up – not even sure if it has any validity – but something in me says it does.  I’m sure it will be one of those pieces of information that hang around in the fringes of my puny brain until it connects with something else and we have a whole greater than the sum of its parts.

The thing I’m thinking is this....

The entire motivation industry is based on the fact that people in your organization and in your distribution channel follow a “normal” distribution.  Many (if not all) incentive companies talk about “moving the middle.”  They design programs that focus on the middle 60% of your employees.  The logic is that the bottom 20% or worthless and should either be fired, retrained or assigned to your Alaska Division.  The top 20% are self-starters and they work for pride, bragging rights, Maslow’s Self-Actualization.  So the incentive you want to run should ignore the tails of the distribution and focus on the middle.

But... what if your organization doesn’t follow a normal distribution?  Then everything following that assumption is just wrong. I’m thinking that the “normal” distribution is the wrong thing to look at when designing influence, reward and recognition programs.  I’m thinking we’ve been looking at this all wrong for 100 years.  

What makes me think that?  

This...

The blog “Noopl.com” has a post up that talks about complex systems and normal distributions.  If you’re like me you KNOW that people and organizations are complex systems.  There is nothing “simple” about them.  

To pull from the post:

In complex systems there are many occurrences of small events. Like tiny earthquakes, low wages, small blog posts, microscopic organisms, and slightly erroneous books on systems thinking. But there are also few occurrences of big events. Like catastrophic earthquakes, excessive salaries, gigantic blog posts, huge organisms, and complete idiots among systems thinkers. In complex systems this is all normal. It is a pity that mathematicians named the Bell curve the “normal” distribution, because, in the real world, the Pareto distribution is more ubiquitous and normal than the normal distribution.

I am convinced that the needs of your customers also follow the Pareto distribution. Most customers have only small needs. Few of them have big needs. Most of them have small budgets. Few of them are excessively rich. Most are quite reasonable. A few are minions from hell.

Of course, you can calculate the average of a number of specific occurrences that happened in the past. But your “average” has only little predictive value. With limited experience, your “average” is likely to include only the very common events, not the uncommon ones. Yet, in a complex environment, all events are normal. Both the common ones and the uncommon ones.

Employee And Channel Activities

I took that previous few paragraphs and paraphrased it...

In organizations, there are many occurrences of small events. Like tiny efforts, daily tasks, small departments.  But there are also few occurrences of big events. Like huge sales, excessive salaries, big presentations, and damaging lawsuits. In organizations, this is all normal. It is a pity that mathematicians named the Bell curve the “normal” distribution, because, in the real world, the Pareto distribution is more ubiquitous and normal than the normal distribution.

I am convinced that the needs of your employees also follow the Pareto distribution. Most employees have only small needs. Few of them have big needs. Most of your customers have small budgets. Few of them are excessively big. Most customers and employees are quite reasonable. A few are minions and clients from hell.

Of course, you can calculate the average of a number of specific occurrences that happened in the past. But your “average” has only little predictive value. With limited experience, your “average” is likely to include only the very common events, not the uncommon ones. Yet, in a complex environment, all events are normal. Both the common ones and the uncommon ones.

What does this mean?

I’m thinking it means we need to look at how we distribute rewards and recognition differently.  Instead of looking at the “average” and the tails, we need to design for the many very small occurrences versus programs that combine the large and small.  In other words... more small awards to more small activities.  More small incentives focused on smaller objectives.  

More, more, more – smaller, smaller, smaller.

I’m thinking that the goal for incentive and reward programs should be to focus on the “long tail” of behaviors – not the head of the power curve.  If you think about it most sales incentive programs and reward/recognition programs reward a big award to a few people at the top (think “grand travel” type awards.)  However, many of the newer employee recognition programs are focusing on Peer-2-Peer rewards and talking about smaller awards more often.  I think that is the way to go.

Next Steps

Now, do I know how to use this information?  Nope.  Not yet.  

But, like the little boy said when asked why he was so enthusiastically shoveling a big pile of manure,

“With this much crap – there has to be a pony in there somewhere.”

I think there’s a pony in here.  Just not sure what breed, size, color, etc.  Maybe a normal one?  Maybe a unicorn?

Comments

[Drew Hawkins]

I definitely follow you on this. The big events are the ones that get attention. What a lot of folks seem to miss out on is how some big events or large successes are a culmination of several small behaviors that went well. They're the root of overall performance. It'd be a shame to miss rewarding the small things.

[Elad Sherf]

Great post (even for your very high standards.
I have written a few times about the very important notion of equality has penetrated into areas where it shouldn't be in at all. I think your post is another twist of the same idea! I think that not only in business but also in society we don't invest enough at the high performers who could become even greater and better. Just because somebody is doing fine it does not mean he does not need help, support or motivation. On the contrary, it means that the regular things might not work on him/her and we might need to tailorize a program for him/her!
The whole idea of average is powerful but very dangerous. When it comes to people I think we should be careful when talking about an "average" person. This thinking is a relic of times when we treated employees like cogs in a big factory. Do we really think this kind of approach can enable superb performance. In other words, If you plan for the average person, you get average results.
Thanks for sharing!
Elad

[Paul Hebert]

Thanks for engaging here Elad. Your point about cogs is interesting. Averages and standard deviations are the tools of six sigma and minimizing variability. I've preached that those types of tools don't apply in the human world - we are infinitely variable - and that is where our value is. It's not in getting everyone to be the same, act the same and perform the same - it's getting people to act, perform differently - and the power law curve is the perfect idea in that instance.

I just now have to figure out how to use that in design of the program (or more aptly - the process).

Cheers.

[Scott Crandall]

Paul --- I think pretty much the whole world (with the exception of politics in a democracy) is ruled by 80/20. Why? Don't know -- it just "is" (or seems to be).

Labor policy (another case of unintended side-effects) is one of the major contributors to "cog thinking" and actions. Not an excuse, but a reason. And the better organizations, and leaders, figure out how to do the right thing in the right way, and I think that brings us back to Pareto.

Again, like you, not sure about where we go from here -- but I think 80/20 is the start. And maybe the first step is finding out "Why?" Why do 20% account for 80% of the profit? Why does another 20% account for disciplinary actions and firings?

I think digging into the "Whys?", and learning how to replicate talents, skills, and behaviors -- and avoid the downsides of others -- would go a long way toward fixing most organizations.

[Paul Hebert]

Scott - thanks for commenting. A pretty good book on the power law curve was "The Long Tail" - written a few years back. It discusses the why's of it all. But the key point (at least for me) in the book is that when money or resources are scarce it makes sense to attack the 20% where the 80% is being done. But as technology removes friction and cost - it makes it easier - and more profitable to find the niches in the 80% that makes up the 20% - and that applies to employees and channel partners too.

My gut is saying we should be able to cost-effectively design for infinite variability - eliminating the need to worry about the normal distribution - or even the Pareto distribution - we end up worrying about the individual. That's where I'm thinking this has application.

[Scott Crandall]

Paul --- As you well know ("It's Not About You"), my belief is that if we can find a cost- (and effort-)effective way to address the individual, that's the way I think we should approach it.

I'll be VERY interested to see where this goes. As always, you ARE the Man!