Data-Driven Decision Making: Beware Of The HIPPO Effect!


Source: Forbes Technology

Beware of the HiPPO in the room. When a HiPPO (highest paid person’s opinion) is in play, your organization is most likely not relying on data to inform decision-making. In fact, I believe the HiPPO effect is one of the biggest barriers to more evidence-based and data-driven decision-making. With the quantity and quality of data available today, it is just poor business for organizations to ignore data in favor of making decisions solely based on what the HiPPO wants done.


What is the HiPPO Effect?

Avinash Kaushik was the first to coin the term HiPPO in his book Web Analytics: An Hour a Day. When a HiPPO is in the room and a difficult decision needs to be made but there’s not data or data analysis to determine the right course of action one way or another, the group will often defer to the judgement of the HiPPO. HiPPOs usually have the most experience and power in the room. Once their opinion is out, voices of dissent are usually shut out and in some cases, based on the culture, others fear speaking out against the HiPPO’s direction even if they disagree with it.

Why is the HiPPO Effect dangerous?

First, humans have a tendency for an authority bias as illustrated in the Milgram experiment conducted in 1963 and reaffirmed in subsequent studies. This experiment focused on the conflict between obedience to an authority figure versus adhering to our personal conscience. Turns out we tend to believe those we perceive as “experts” and do what they tell us to do. Of course, this tendency serves us well in many instances, but in business it can shut down dissenting—and valuable—opinions.

study from the Rotterdam School of Management found that projects led by senior leaders failed more often while projects led by junior managers were more likely to be successful. The junior managers had the benefit of critiques to their project plans from others that helped them build a stronger plan, while employees didn’t feel as able to give critical feedback to high-status leaders.

When a leader has lost touch with customers or fails to remember that the team has valuable insight, the HiPPO effect is in full force. Since the highest paid person experienced success, promotions and typically consensus from others in the organization, they can run the risk of believing they are always the one in the room with the best idea. Hey, they have a track record of success, why would that change? When others in the room acquiesce to the highest paid person’s opinion without a challenge, it just adds to the highest paid person’s confidence and sense of superiority. Alas, a vicious cycle begins and it is hard to stop.

When Ron Johnson, former head of retail at Apple who was responsible for the highly profitable Apple Stores, took over as CEO at J.C. Penney, he suffered from the HiPPO Effect. Without reviewing the existing data or investing in new data about the very different retail store he was now leading, he went full throttle ahead on his strategy for the department store chain. When his strategy was launched and he checked in to see if it was working, few had the courage to give him the unvarnished truth and be labeled as a resistor. Needless to say, his strategy wasn’t succeeding with J.C. Penney’s customers.

Once the highest paid person articulates their opinion, it’s difficult, without data, for organizations to go against that opinion. The HiPPO will be weighted more than any other voice involved in the decision-making process. Well-meaning leaders who wish to engage with the team and be present in the conversation don’t necessarily want their opinion to have more weight, but employees are eager to please and do what the leader wants done.

HiPPO’s opinions are presented as fact, but they are subjective. This can be incredibly problematic when other plans are derailed to focus on what the highest paid person wants done, even if there is no research or data to back it up. Not only does this change of direction increase costs, waste time and jeopardize confidence, it may simply be the wrong action to take.