Francis Galton, a psychologist and statistician, once visited a fair. At one stall there was contest on guessing weight of ox, which was slaughtered and dressed. Person who would correctly guess the weight got prize.
Francis made everyone write their guess on piece of paper, he got estimate from 800 people, and did statistical analysis of data. The crowd at a fair accurately guessed the weight of an ox when their individual guesses were averaged – the average was closer to the ox’s true butchered weight than the estimates of most crowd members, and also closer than any of the separate estimates made by cattle experts.
This example inspired American journalist James Surowiecki to write book called “The wisdom of crowds”.
The wisdom of the crowd is the process of taking into account the collective opinion of a group of individuals rather than a single expert to answer a question. A large group’s aggregated answers to questions are generally found to be as good as, and often better than, the answer given by any of the individuals within the group.
For correct estimation, each member of crowd should have independent information and their opinion should not be influenced by those around them.
“Diversity and independence are important because the best collective decisions are the product of disagreement and contest, not consensus or compromise.”
― James Surowiecki, The Wisdom of Crowds
But if the members of the crowd were too conscious of the opinions of others and began to emulate each other and conform rather than think differently, then it will result in failure of crowd’s wisdom, ex. people investing in stock market, who blindly imitate others end up losing money.
Eric Mosley decided to apply this concept to performance appraisal system. He feels that employees, as a group, are smarter than any single manager. They see what managers do not. And when they are inspired to recognize, those observations can play a significant and positive role in performance management.
Instead of a one-time annual evaluation of performance, managers and employees receive collective feedback from everyone across their company. It’s all achieved through crowdsourcing, and it generates more accurate, actionable results than traditional methods.
Purpose is not to replace reporting manager’s opinion, instead manager can use this additional information for better decision making.
“We’re finding that none of us is as smart as all of us. Crowdsourcing, with its multiplicity of viewpoints, is revolutionizing various aspects of business and commerce—and there’s no reason it can’t revolutionize the processes for employee performance evaluations and employee rewards…Employees who are hidden gems and hidden influencers can be discovered through the data that only the crowd can provide.”
– Eric Mosley