Where were you when your organization’s greatest failure took place? Like many leaders, you were probably nowhere to be found. While failures occur with surprising regularity in our line of work, few are recognized as such until long after the board, committee, staff, or executives have left the room. The warping nature of hindsight often prevails.
The inherent distance between the point where a decision is made and the final outcome leaves room for all means of miscalculation, and our approach to measuring outcomes rarely takes into consideration the quality of the original decisions. When things go awry, we deploy the wisdom of hindsight and rationalizations to fit the circumstances. “I knew that would never work!” people will say. Why are we so much wiser in hindsight? Research suggests that when outcomes are known, we interpret our prior judgments to support those outcomes. In hindsight, we often think we are smarter than we really were.
How else to explain the decision of an organization’s board to spend half its reserves over 12 months to emulate the richest and most successful tradeshow as a way to improve its own fortunes? COMDEX was the world’s largest computer show on the planet with more than 700,000 attendees worldwide at eight different annual venues. Its annual gathering in Las Vegas attracted more than 200,000 attendees, pouring $341 million into the local economy.
What convinced a Board with a much smaller industry tradeshow to attempt to emulate such a behemoth? It’s hard to say definitively, but the behavioral concepts of hindsight bias and competitive escalation offer some insight. While society often rewards competitive behavior in individuals, competitiveness in a group setting can give rise to faulty decision-making frameworks fraught with danger. When discussion becomes centered on “always” or “never,” calling a timeout may be the most prudent decision of all. Calls for action based on risk-seeking behaviors such as “we have never tried to do this before” or suggestions that 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 without realizing the enormity of the risks created by their choices. How do you fend off such folly?
Some organizations require the preparation of a “fiscal note” before any decision is carried out to be certain all known and potential risks and costs are fully explored and identified. The process allows decision making while creating an objective measure before execution, thus protecting the group from potential catastrophic risks. Competitive behavior often compels people to only acknowledge information that confirms their position while ignoring that which otherwise undermines it. Increasing one’s commitment to a previous course of action demonstrates consistency, which is often viewed as a favorable attribute by others.
So how did competitive escalation play out for our group? With the wind of the board’s investment decision at their back, executives and staff ran full speed toward the goal. Additional staff were hired and an Advertising/PR agency placed on retainer; contractors, limousines, event services, and a convention center contract were all put in place. Twelve months and buckets of money later, the tradeshow that had been launched with such great expectations resulted in a net gain of less than fifty additional delegates. The effort was a colossal failure.
Within weeks, the ad agency, the organization’s chairman and its president, and virtually all of the newly hired staff were gone. The excess office space was sublet and the remaining demoralized staff were left to clean-up the now upside finances of the organization. With the harsh lessons of unrestrained competitive escalation weighing on its financial future the organization was acquired and quietly disappeared.