Tag Archives: decision-making

The Penalty of Miscalculation

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.

Escalating Into Oblivion

As many of you know, my latest research interest is the intersection of leadership decision-making and outcomes for associations.  It’s my longstanding hypothesis that associations often stumble (sometimes badly) because they rarely measure and test the quality and nature of their decision-making which results in poorer quality outcomes than might be expected.  Group input is good.  Group decision-making perhaps not so much.  While we often lament the glacial speed of decision making in associations, the flip side is that the veritable alphabet soup of characters able to exert influence on decision-making virtually assures a less than optimum outcome for associations and their members.

I’m happy to say that ASAE and the Center through Associations Now magazine has taken notice of my thinking in this regard and have chosen to publish my latest article Escalating Into Oblivion as part of their ongoing series Lessons From Failure.  The new developing literature on leadership decision-making and the mysteries of the brain offer all sorts on exciting insights into the possibilities that with a bit more focus, analysis and attention to the inherent biases around us, we can produce considerably better results for our members, our organizations and ourselves.  For me at least that’s a mystery worth diving into.  I hope you agree.

Say It Ain't So, Seth!

In a recent SpearTalks interview Seth Godin opined that “Trying to convince a CEO of anything is a little like trying to convince a cop not to give you a ticket. It’s possible, but rarely worth the effort, given the odds.”  Hmmm.

What truly caught my attention was his notion that it is “rarely worth the effort”.  I disagree.  While you may not win the day by pressing your point of view on the CEO, it is equally possible you will stir some sense of consciousness and at the very least spark some discomfort with those long held CEO notions of what works.

By the nature of my work, I engage with dozens of CEO’s on a regular basis.  While they are not easily persuadable, they are in my experience amenable to considering alternatives and with the leverage of solid information even likely to accept and adopt a new perspective.  A recent discussion with a CEO about the potential and value of social media illustrates the point.  Initially, she seemed to miss the value proposition of social media entirely.  Her basic position simplified was “who needs it!”  When I persisted by pointing out that the younger managers on her staff had likely been using Facebook to communicate with friends and colleagues since before their high school days, she seemed to grasp the idea.  Her questions flew fast and furious.  Who controls it?  Who operates these sites?  How much time does this require?  What resources do we need to implement it?  What are the risks?  Is there a measurable ROI? 

When I reminded her that that someone else could easily start up a company page if she didn’t, the lights went on and someone was now clearly at home in her decision tree.  Seth’s right in saying it doesn’t always work, but I’d argue given the right fight, it’s worth the rare effort still.