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Executive and professional education

 

Two heads are not better than one: a new study co-authored by Dr Vincent Mak of Cambridge Judge Business School questions whether committees make better decisions than individuals.

Hundreds of voting tokens.

Dr Vincent Mak
Dr Vincent Mak

There once was a time when committee
decisions were invariably taken in a physical group setting, usually a meeting
room. Committee members pored over documents and engaged in lengthy discussions
before finally reaching a decision – over competing suppliers or alternative job
candidates the panel had just interviewed, for example.

But in the Internet age, time-starved
committees often need to make snap decisions on each alternative as it comes
along, and members might only be able to email a one-word “yes” or “no”
to indicate what they think – a practice that can be called “sequential
search by committees”. Decisions taken in this manner can have multi-million-dollar
ramifications, as they might concern selecting big investment projects or renting
office space.

Conventional wisdom would assume
that even decisions taken in this modern manner by like-minded committee members
would be sounder than a decision taken by just one individual member – on the
basis that two heads are better than one.

Yet a study co-authored by Dr Vincent
Mak, Reader in
Marketing & Decision Sciences of
Cambridge Judge Business School, questions this assumption. The study published
in the journal Management Science
found that committees made smarter decisions than individuals only when
committee decisions required unanimity – and even then, there was no
significant improvement over decisions by individuals.

“We think the results are
driven by the fact that, at an individual level, each committee member tends to
rely on each other to make smart decisions – so everybody ends up cutting
corners with the mental effort they put into the decision. On the other hand, a
single individual, who has only himself or herself to rely on, cannot afford to
cut corners,” says Vincent. “Our findings caution against simplistic
assumptions about the quality of committee decision making over individual
decision making.”

The study is based on an experiment
involving 126 people, who were placed in three-person committees and divided
into groupings according to each of three voting rules: unanimity (requiring all
three committee members), majority (two members) and minority (one member).

Each committee played an online “sequential
search game” in which they were presented one fictional alternative after
another, each time voting whether to accept the current alternative. If the
voting rule was, for example, majority, the committee accepted the alternative if
at least two members voted to accept it – and the game stopped there and then. If
there were not enough votes to accept the alternative, the committee moved on
to the next alternative and would not be able to go back. When the committee was
presented an alternative, they could only compare it with all other alternatives
they had already seen, to obtain what the researchers call a “relative
rank”. However, each committee member’s payment from the game was higher based
on how much better the accepted alternative actually
was compared with all the alternatives seen or unseen – an “absolute rank”
that would only be revealed to them after they had made their decision.

“While sequential search is
now common in every aspect of life, including families deciding on a holiday
destination, the study’s findings are of special significance to senior
executives who need to make important decisions,” says Mak, who has
authored a series of studies on online search.

“In the case of talent
searches, if senior executives evaluate and interview candidates sequentially
this can take quite a bit of time and may lead to losing excellent prospects to
companies that can move faster.

“So the study’s finding that
committees don’t usually make significantly better decisions than individuals –
and may often make worse decisions – can hold important practical implications
for companies. Requiring unanimity in such situations might be best in
mitigating the shortcomings of committee decisions.”

The study – entitled “Voting Rules in Sequential Search by Committees: Theory and Experiments” – is co-authored by Vincent Mak of Cambridge Judge Business School, Darryl A. Seale of Lee Business School at the University of Nevada, and by Amnon Rapoport and Eyran J. Gisches of Eller College of Management at the University of Arizona.