“Strategic direction is more important today. It's about providing a framework for managers to navigate through the fog of complex chokes. No company can avoid this."

– C.K. Prahalad –

PoS Dec 2014 | Actors, Observers & Lincoln’s Advice

Recently a couple of young men teased, harassed and attempted to molest two girls on a bus from Rohtak to Sonepat in Haryana (India). The girls successfully beat off their attackers. One recorded the events on his cellphone but did not lift a finger to help. No one on the bus did.

The actor observer problem

Social psychologists call it the bystander effect or bystander apathy. If you asked them – let’s call them actors – why they didn’t act, they are likely to say they couldn’t have done anything about it or that the situation was ambiguous. However we – observers – feel they were insensitive, irresponsible, or callous.

When they write about their lives, political and business leaders often describe their actions, especially errors and failures, as constrained by circumstances. They say they had little or no choice. The public sees the same acts and decisions as wise or unwise, good or poor, or as issues of capability.

Managers as actors and observers

Numerous experiments and studies have corroborated that actors believe causes of their actions were situational while observers see them as personal disposition. This phenomenon has significant bearing on performance appraisal if we consider the employee as the actor and manager (appraiser) the observer.

It becomes difficult to evaluate a person’s performance correctly and fairly. Poorly conducted appraisals ultimately affect business performance.

A solution is to conduct performance evaluation more frequently, say once a quarter. This usually overcomes the bias arising from ready recall of recent actions. Frequent appraisals however do not align divergent perceptions.


360-degree appraisals are another attempt at fairness and accuracy. They are helpful because different people see the actor differently. It helps build a more holistic view.

But all observers tend to judge actors’ dispositions in spite of their narrow and sometimes fuzzy views. This distorts perception and fails to overcome divergence.

The problem is acute when evaluating the work of senior managers. The nature of their roles makes it difficult for appraisers to closely examine much of what they do. Firms simplify the problem by assessing senior managers on results achieved rather than on decisions they made.

Results are impacted by a number of factors, some outside direct control and others difficult to foresee. Complexity and uncertainty weakens correlation between capability and results.

It is better to evaluate senior people on the quality of decisions they made. Their choices, after all, beget results. But this too does not wholly solve the actor-observer conundrum. Observers continue to see actors’ decisions as results of dispositions.

Who is right?

Clearly firms must do more to converge perspectives of employees and managers. Regular and engaged conversations help bridge this divide and align opinions. Leaders will point out that they discuss issues and carry out regular reviews.

Indeed they do but distance between subjective realities can be narrowed only through frequent and empathetic dialogue. The willingness to see the other person’s point of view, let go of ego, and be prepared to change one’s mind are essential for overcoming actor-observer bias.

A question of empathy

Abraham Lincoln once observed, “When I am getting ready to reason with a man, I spend one-third of my time thinking about what I am going to say and two-thirds thinking about him and what he is going to say”. Both parties need to heed Lincoln’s advice.