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Future Proof Thinking

 In Insights, Realizer Blog

Future Proof thinking

The construction of the Sydney Opera House went 14 times over budget and was 10 years late. It is a classic example of the planning fallacya very common problem affecting our ability to predict how long a project will take, how much it will cost, and how successful it will be.

We are essentially over confident, thinking that our current project will be easier and quicker than comparable ones we’ve done in the past.

The link between thinking about the future and making decisions (X or Y’s speciality) is very strong. All decision-making requires us to imagine different futures and try and pick between them. If your predictions are poor, so will be your decisions.

How not to predict the future

And yet the planning fallacy is just one demonstration of how hard it is to make accurate predictions about the future. Another classic demonstration of this was a comprehensive study of expert predictions by Philip Tetlock who found that experts are no better than chance at predicting the future outcomes of upcoming events like elections. And, the more confident experts were in their predictions, the less accurate they turned out to be. People over rely on the confidence of the speaker when listening to evidences, there is a reward for confident predictions, but there isn’t a punishment, in fact no one even notices, when their predictions don’t come true.

Coming out of these two phenomena are some clues to how to think about the future with less bias. We’re not saying you can pick the winning lotto numbers, but you can certainly reduce the systematic errors and make sure you see the big picture. In the case of the planning fallacy, it can be offset by explicitly comparing the project to others to establish base rates for times, costs and benefits. In the case of expert predictions, the experts you want to listen to are ones that avoid dogmatism and view situations from multiple angles. They’ll be more accurate.

Example: hiring decisions

A very common case of poor quality thinking about the future is when we hire people. Asking hypothetical questions, “what would you do if…” and even simple give-me-an-example questions, “give me an example of a time when you…” are poor predictors of future success and yet we continue to use them. What’s more, our judgements of an interviewee’s suitability and future success are heavily influenced by cognitive biases, such as our fear of not finding someone to fill the empty seat, our liking for the interviewee (often based on how similar they are to us) and other factors which have limited or zero predictive value. The solution in the case of hiring is what’s called behavioural interviewing, based on a supercharged version of the give-me-an-example question, it looks to find all possible evidence from previous roles that could shed light on future performance: “give me an example from each of your last 3 roles of a time when…” is a much better question with less wiggle room for the interviewee. Likewise, reference checking shouldn’t be limited to just the interviewee’s top 2 choices for references; it should be clearly specified that you need to talk to their last 3 direct line managers.

Failure to predict knock-on effects

One of the problems we see time and time again with corporate decisions is the failure to spend time mapping out the possible consequences of decisions. We call this failing to plan. A typical outcome of this is that our teams become disengaged when we don’t think how our decisions at a leadership level can affect them. Hence the case of a change management project I was involved in where the department leader was made redundant without really thinking through the knock on effects on staff engagement. The decision itself may or may not have been right, but a consideration of the consequences should have led at least to better communication of it to affected parties.

The pre-mortem

Luckily for you and me, there is a brilliant and simple technique for managing risk and predicting knock on effects. It’s called the pre-mortem technique and it works like this. Let’s say you’re in a meeting deciding whether to send your admin functions offshore. Once we have a draft decision in  mind, to send functions offshore, we can run a pre-mortem which requires us to imagine that it’s a year hence and the offshoring was a bad decision, a disaster. Each team member should spend 3-4 minutes writing down all the reasons why it failed. This allows us all to put our “black hat” on, to be creative with all the possible reasons.

Despite being an apparently negative process, it never fails to produce positive energy because it is proven to identify 30% more risks than just sitting around discussing the business case, and in turn that allows us to offset any key risks and proceed with more confidence. Or in some cases, we can change the decision and thank goodness we identified these significant risks up front rather than after the fact at a project post mortem.

Face your fears

The final challenge for decision-makers trying to plot a course into the future is that every single decision we make has an emotional element (see Antonio Damasio’s work) and fear can be one of those emotions which affects our decision-making at a subconscious level. This is very evident in personal decisions (such as whether to leave a relationship and go back on the singles market) but also can be a factor in some organisational cultures where there is low trust, finger pointing and a blame culture – most evident in public service and government where most people do all they can to avoid being the one making the decision in case it comes back to bite them later.

Watch your ego

Different emotions may apply at other organisations, such as the CEO’s ego and pride, wanting to make a landmark acquisition may lead to too little fear and too much overconfidence. This is one of the reasons why mergers and acquisitions fail 70-90% of the time: essentially it’s back to the planning fallacy where emotions like pride drive our overconfidence in the likely cost savings, the ability to cross sell products, and other supposed economies of scale.

Put on your red hat

To isolate your emotions from your decisions, I recommend heightening your awareness of people’s emotions and gut feel through de Bono’s 6 hats techniques, specifically his proven approach to problem solving asks team members to put on their “red hat” (red for heart and emotions), go round the table and state their gut feel about each solution, with no rational reasoning. This is a radical and effective solution because it allows people to own up to their emotional reactions, and separate it from their rational thinking. Whereas in normal meetings, executives hide their emotions, even from themselves, behind post rationalisations. “I hate that idea from the bottom of my soul, but I can’t say that, so I’ll just say that it won’t work from a cash flow and operational perspective…”

Use your values

A final technique to improve decision-making about the future is actually to use your values. Too often in business senior executives commission the creation of values, missions and purposes and then leave them in the drawer when big decisions get made, or when crises happen. And yet one of the best ways of future proofing your decisions is to be clear about your criteria for making the decision and how it fits with your values. So you build consistency in decision-making which makes it easier and more effective in the long run. It also makes your decisions defensible in the future.

Using corporate values in decision-making pays off. Companies that practice conscious capitalism, which includes a strong sense of values, have exhibited long term growth far in excess of the stock market. A representative sample of conscious capitalist firms outperformed the overall stock market by a 10:1 over 15 years, delivering more than 1600% total returns, when the market was up just over 150% during the same period.

 

Future Proof Thinking in summary

All decisions are made with the future in mind. So making better decisions will lead to a better future.  You can do this by planning to fail, by taking heed of emotional biases, and by having a clear decision-making process that sticks to your values.

For more on decision-making, see the post 10 questions every leader should ask their team.