By Ian J. Cook

Imagine if all your employees were involved in forecasting your organization’s annual revenue or service targets.

How would it impact the engagement of your employees if they were asked to predict sales volumes, cost savings or other key organizational outcomes on a quarterly or annual basis?. How would it impact the engagement of employees if there were a prize (a non-taxable item) for the people who were most accurate?

For some this idea will be exciting, for others it will be daunting and for others still it may be quite challenging. However, it is an approach that a few organizations are putting into practice and finding yields positive results for both the organization and the engagement of their employees.

The idea of predictive markets comes from the work of James Suroweicki, author of The Wisdom of Crowds. In this work, Suroweiocki demonstrates that under the right conditions the average answer of an independent, informed and interested group of people is more accurate than any single expert. In simple terms, the combined knowledge of the crowd is smarter than a single expert. Suroweicki’s book is filled with fascinating examples and is well worth a read.

Inspired by the book, organizations such as Best Buy and Google have used the wisdom of crowds to predict their sales of gift cards, their overall holiday sales or the uptake of their Gmail service. In all instances the “crowd” was accurate to within one per cent of the actual number achieved. The expert’s predictions were between five per cent and seven per cent out. Both organizations have gone on to set up prediction markets where people can use pretend money to price a particular outcome. These markets act like the stock market and enable the organization to keep a running score on the outcome the crowd thinks best. Both organizations noted that with the rewards for participation it was more about the kudos of being right than any big payouts. Both organizations keep the rewards small and focus on fun items like hats and t-shirts.

The accuracy of these aggregated answers is stunning and much of the advantage comes from the way the information is gathered and combined. This approach allows people to focus solely on what they know and allows people to use bad news that might not otherwise get up the chain of command. This approach can tap into highly informed individuals within the organization who are not part of any formal planning or management structure. It also gathers the information in a way that ensures organizational politics or position does not filter or adjust the information. All of these advantages lead to cleaner and more accurate outcomes. Over time these tools also allow the “crowd” to learn and both Google and Best Buy have noticed their participant group improving their individual accuracy over time.

There are challenges in how far these types of activities can go. Setting up a prediction market for your company’s own stock price would be likely to run into regulatory challenges or make everyone in your organization an inside trader. Certainly you should not look to replace your planning and forecasting experts and it may take some careful persuasion and light-hearted demonstration to show how the tool can support the overall planning and forecasting function.

Despite these challenges, when it comes to generation X and Y the wisdom of crowds tools offer significant engagement benefits. These generations are seeking greater involvement in the shaping of their work and their overall contribution to the organization. Using a prediction market or simple survey tool to gather and benefit from their collective knowledge will increase their engagement as well as improve the accuracy of your organizational forecasting.

Ian J. Cook is the director of HR knowledge and research at BC HRMA. Ian is using his global HR consulting experience and business knowledge to grow a function which delivers informative, relevant and timely comment.