Luck often separates the good and the great in business, finds new study urging shift in management focus.
Management books and business school case studies have long focused on the top performers in business and how to move from “good to great” – per the title of one of those bestselling books.
Yet a new study co-authored by Cambridge Judge Business School and Warwick Business School finds that luck is often the determining factor in business success or failure, so management research and education should focus not on a “limited number of stars” but instead on more realistic performance goals.
The study, published in The Academy of Management Annals journal, was based on a review of hundreds of papers on management topics in six leading management journals from the 1950s to 2015 that mention “luck” or similar terms.
“Misperceptions of luck, particularly when evaluating exceptional successes, have important implications for how we educate the next generation of managers,” says the new study. “As these perspectives on luck suggest, there are no rules for becoming the richest and luck dominates the outcome beyond a certain level. This implies that preaching how to move from good to great is likely to lead to disappointment or even encourage excessive risk taking, fraud even, because exceptional performances are unlikely to be achieved otherwise.”
The paper – “Good night, and good luck: perspectives on luck in management scholarship” – is co-authored by Mark de Rond, Reader in Strategy & Organisation at Cambridge Judge Business School, and Chengwei Liu of Warwick Business School. The title is drawn from the way legendary US journalist Edward R. Murrow signed off his 1950s television broadcasts.
“Why is it that we wish each other good luck?” the authors ask. “Is it because however rational we may be, we remain firm in the belief that good intentions and hard work may not suffice to bring about a desired result?”
The paper examined studies on management that looked at five perspectives on luck – luck as attribution, luck as randomness, luck as counterfactual, luck as undeserved and luck as serendipity, and added a sixth dimension – luck as “leveler,” which explores recent research on how random selection can outperform more sophisticated mechanisms.
Regarding management research and education, the authors suggest a greater focus on “less extreme performance” rather than superstars, a “strive to increase learning from failures, where skill and effort matter more in determining outcomes.” The paper suggests that offering lessons on “how people can move from incompetent to okay” may be more useful than focusing on the achievements of elite stars.
“Our review suggests that managers and their stakeholders tend to develop illusions that the world is more controllable and predictable than it actually is, and these illusions can entail costly errors in modern society,” the study says. “That is the bad news. The good news is that we have the conceptual tools to help us to better understand the role of luck in organisational life, and thus to counter these illusions.”