“Where were you when your greatest failure took place? Like many people, you were probably nowhere to be found. No really–think about it. While failures occur with surprising regularity, few are recognized as such until long after the senior management team, Board of Directors, staff, or member has left the room.”
The natural distance between decision-making and the delivery of outcomes leaves room for all sorts of misdirection and mischief. More troubling, there is oftentimes a huge disconnect between our decision-making methods and the assessments we deploy in measuring outcomes. All too often we seek wisdom in hindsight and deploy rationalizations to fit the moment. How often have you heard people say, “I knew that would never work?”
For the purposes of illustration let’s take the example of a nonprofit whose Board decides to spend half its cash reserves for a fast-track 12 month effort to emulate their richest and most successful trade show competitor as a way to improve its fortunes. Their competitor is one of the world’s largest and most successful industry shows with over 700,000 attendees worldwide at eight different global locations. Its annual revenues are well north of $350 million per year.
What would convince the Board of a modest sized nonprofit with a small industry show they could compete or even emulate such a behemoth? It’s hard to say definitively, but the concepts of hindsight bias and competitive escalation offer some insight. While society often recognizes and awards competitive behavior in people, in a group setting a discussion that dissolves into competitiveness often triggers impulsive decision-making behavior using faulty decision-making frameworks fraught with danger. When discussions become centered on what the group “always” or “never” does alarm bells should be going off in your head. Calling for a timeout may be the most prudent decision of all.
Calls for action based on risk-seeking such as “we’ve never tried this before” or suggestions the organization is “always too cautious” warn of competitive escalation. Group discussions stuck in the “always/never” model of debate often miscalculate and escalate their commitments before realizing later on, the enormity of the risks they have created for their organization.
While such conversations often start out innocently enough within just a matter of minutes the agreed upon targets of selling say 100 new memberships has escalated to selling 500, because they have “never” tried to sell this many before and who knows what’s possible unless we try. The foolhardiness seems obvious, but surprisingly groups will come to consensus around outrageous goals with little regard for precedent especially in the absence of hard data.
Many nonprofits require exhaustive preparation of “fiscal notes” before any decision is taken. Doing so makes certain all known and potential risks and costs are fully explored and identified. While the fiscal note policy can create some lag on decision cycles, the process also serves to protect the decision-makers and the organization from catastrophic risk and failure. Competitive behavior often compels people to only acknowledge information that confirms their position while ignoring that which undermines it. Increasing one’s commitment to a previous course of action demonstrates predictability, which is often viewed as a favorable attribute by others. In truth it’s way closer to being a “rookie mistake”.
So how did competitive escalation play out for our nonprofit group With the wind of a $1 million investment decision at their back staff ran full speed toward the goal. New staff was hired, an advertising agency placed on retainer, contractors, event experts, a huge convention center commitment and even an in-house concierge service to ease pressure from the long work hours at headquarters were all put in place. But twelve months and a $1 million, the trade show that had been launched with such great expectations had resulted in a net gain of less than 50 new registrations. The effort was a colossal failure. Within weeks the ad agency, nonprofit CEO, and most of the newly hired staff were fired. The Chair of the Board stepped down due to the “pressures of business.” With the harsh lessons of unrestrained competitive escalation weighing on its financial future, the organization merged and disappeared.