Waves of Optimism and Pessimism: Maximizing People’s Performance and Engagement Through Rational Expectations

Rational expectation is an economic theory that asserted that people make decisions (economic) by taking into consideration all available information, having in mind the future consequences of their choices. It further posited that people’s current expectations of the economy do influence what the future state of the economy will be. This contradicts the opinion that government policies influences people’s financial and economic decisions.

In summary, the theory believes that the past outcomes influence the future outcomes because people general based their decisions on human rationality (reasoning), the available information and their past experiences.

The combinations of the trio; human rationality, available information and past experiences, do create (consciously and unconsciously), waves of optimism and pessimism amongst people in a given area or organization. The combinations of the three variables are applied so that the past mistakes will not be repeated and as such people act in their best interest. People’s decisions are taken with the future in mind.

Beyond economics, this theory is applicable to leadership and people management, as people’s thoughts, behaviours, engagement and performance are influence by the information at their disposal, past experiences and general reasoning (human rationality). These variables are triggered, formed and used based on the following existing factors in an organization:

1.?????? Leadership and Leadership style

2.?????? Culture

3.?????? Strategy (Vision, Mission, Values, Objectives including KRA and KPI, Allocation of Resources and Strategic Tradeoffs or Goals Prioritization)

4.?????? Technology

5.?????? Government Policies and Social Economic Factors

People’s experience (EX), engagement and performance are influence by their past experiences, available information and reasoning.

The available information as per an organizational leadership, culture, and strategy, affect the outcomes of its talent management strategies. Organizations in the now of work, are just like products, that depends greatly on the users’ (stakeholders) reviews to drive the acceptances, sales (revenue) and sustainability of the product in the midst of other similar and highly competitive products.

In the current talent market, it is highly difficult to attract and retain quality talents, because of the complexity of the ‘rational expectations or waves of optimism and pessimism’ of the available talents. The complexity in the talent market increased with the high mobility and fluidity in the global labour market.

Unlike before, the level of information available to talents across the globe, coupled with the advancement in technology that promote virtual or remote work, the world of work had shifted from ‘Employers Game’ to ‘Employees’ Game’. The existing talent world subsist on concession whereby, potential employees laid their terms and conditions on the table just like a potential employer with the hope of coming to an agreeable term.

Where the wave of pessimism is higher than the wave of optimism for a recruiting organization, it will be highly difficult for the organization to attract the required talents and when they manage to hire one, the rate of attrition will be high. Sometimes, when few people stay back, the performance will be low because of the negative past experiences or unpleasant available information and this would affect the agility of the firm. In the now of work, just like the employers, employees also carry out background check on their potential employer and the quality of the available information will determine the ‘waive of pessimism or optimism’ of the potential talent which would influence his or her decisions with respect to the hiring company.

An existing employee would also form his or decision based on an information and the past/current experience of his or hers in the organization. Let’s assume that an existing talent is not sure of the career development or growth path for himself or herself having interacted with some people that have been in the organization before him or her, the employee rational expectation will come into play and that would influence how long the person is likely to stay or how soon they may leave. This is because, economist naturally believe that people are rational and they will make decisions in their best interest.

Having established the power of people’s rational expectations with respect to work place, it is important for an organization to improve its brand and employee experience so that the reviews of the past and present employees are always positive whilst they serve as the brand ambassadors. As people make career decisions with the future in mind, based on their past and present experiences, available data and information and rationality (reasoning), organizations and leadership, should commit to the improvement of people’s expectations. This can be done by coming up with a robust talent management strategy that could enhance the agility of firms as we approach the year 2025:

1.?????? Evaluate The Existing Strategic Priority of Your Organization: As organizations are preparing for either end-of-the-year or new year retreat, so talents are also reviewing their respective career goals and its alignments with their future expectations. Should the talents perceive or experience a disequilibrium or misalignment between their personal career goals and the organization’s strategic priority, the now talents are prone to ‘divorce’ the business sooner than expected. Hence, it important that as we are rounding up 2024, that business should start evaluating the current strategic priority in view of the future talent space demands. The evaluation is to help determine strategies that should be kept, improve, start or stop, so as to thrive in the future world of work and business.

2.?????? Constantly Diagnose Your Culture: As they say, change is the only constant phenomenon. The work and business environment in the recent times change at the speed of light and only the flexible and proactive organizations survive the outcomes of the dynamism that come with it. No matter how brilliant the strategy is, if the culture is static or rigid, the people wave of optimism in the organization will switch to pessimism and this will affect the level of engagement, satisfaction and overall performance of the organization. It is therefore instructive for business leaders to constantly examine the state of health of their organization’s culture to improve their business outcome both in the short-run and in the long-run. No matter how well a culture is window-dressed, the real thing will manifest and people can only be fool once. Afterwards, the news will spread and the developing wave of expectations would affect the success of the organization’s talent and business strategy. A healthy culture, improve the overall expectations of talents and thus attracts, retain, breed and improve healthy talents who contributes immensely to the general welfare of all the business stakeholders.

3.?????? Embrace Data to Determine Your Past and Current Talents Trends and Strategy Outcomes: One of the assumptions of Rational Expectations is that people make decision based on the available information and data. Consequently, it is important that People and Culture leaders should embrace the usage of data to improve talent related decisions and strategies to improve the expected business outcomes. Data would reveal the actual talents trend in an organization, outcome of the executed strategies and the possible outcome of proposed strategies. Data provides the necessary information, analysis, and forecast that guides future decisions and outcomes. With data, recruitment, development, compensation, diversity, inclusion, equity and wellness strategies can be improved upon which will improve potential talents expectations with respect to an organization. Simple data such as attendance, medicals, attrition, cost/revenue per employee can help to improve the general performance of an organization. Just like finance, I also believe that data is the blood of a business because finance could be miss-used without the availability and application of valid and relevant data; all other things being equal.

4.?????? Improve Communication and Encourage a Conducive Environment for Talents to Express Themselves: People expectations are positively managed when there is openness and effective communication in an organization. People feel safe and connected where they are allowed to make their contributions without been victimized. Talents are more attracted to places where they are psychologically safe. This is also important in improving talent inclusion, diversity and equity.

5.?????? Encourage Personalized Organizational Learning and Development: To improve talent expectations in an organization, personalized learning and development must be established and encouraged in an organization. Given the level of technology in the current world of work, organization should embrace all the necessary learning technology that could allow people to access learning on demand, wherever, whenever and however a talent so desired.

6.?????? Embrace Technology: Technology is a great way to enhance talents effectiveness and efficiency as it enables them to achieve more without expending much energy. Technology is important in giving employee a pleasant experience, engagement and the overall performance improvement. Many talents make their career decisions right from the moment they are to apply for a job. The level of expectations is gauged from the ease of application, the seamlessness of the recruitment process, to onboarding, the organization website structure and content, training and development applications etc. ?

7.?????? Get The Leadership Right: Just like attitude, leadership is everything because the destiny of any organization or nation is significantly determine by the existing leadership. Whilst I would like to describe the above factors as necessary conditions for a thriving organization, the most sufficient condition is leadership and leadership. Leadership influences the culture, the strategy and every other thing that drive the success of an organization. Consequently, every organization must deliberately invest in their leadership and the leadership pipeline to achieving seamless succession. Leadership influences, talents engagement, experience, development, and performance. All these influence people expectations of an organization and the attending decisions which could be positive or negative to the organization. People generally make their career decisions based on the pedigree of the leadership of an organization.

8.?????? Practice Gratitude: People expectations of an organization are influenced by the way and manner they recognize and reward their people. Human being by nature love to be appreciated and valued. People add more value to an organization when they are valued; when their efforts or contributions is being recognized and they are appropriately rewarded. This act influences the wave of optimism or pessimism within an organization. As 2024 wind down, let’s appreciate everyone that has contributed to the organization success in one way or the other. As an individual be grateful for people that have being part of your journey this year and let your expectations for 2025 be positive and high. Note, gratitude is a potent seed for greatness. It is an investment with a massive return.

Everybody generally have an expectation of the organization or people they come in contact with and this is determined by the available information, experience and their reasoning at any given time. The status of their expectations can either be shattered, met, exceeded, sustained (positively or negatively) or changed for the better depending on the current outcomes.

As we approach 2025 gradually, organization should examine the existing ‘People Expectations’ and the ‘Business Outcome’ and midwife necessary strategies and actions to improving the two variables for the mutual wellbeing of all stakeholders of the business.

Note, the bedrock of all human expectations and outcomes is openness, fairness, empowerment, respect, love and trust.

? Femi Oshagbami 2024