People make dumb decisions.
Sometimes the decision isn’t really a decision at all, but simply a momentary loss of focus, like locking yourself out of the house when you take the dog for a walk. Sometimes what happens is more of an actual decision, but it’s impulsive, like deciding to pass a slow-moving truck on a two-lane road without first checking to see if there is oncoming traffic. Sometimes the dumb decision results from the stubborn refusal to recognize changing circumstances, like insisting on climbing to the summit of a mountain despite a blizzard, plummeting temperatures, and the approach of sunset.
Corporations make dumb decisions all the time, too. Coca Cola famously altered its 99-year-old recipe in 1985, introducing a sweeter “New Coke” – a decision they rescinded 71 days later. (Oops!) Some of the greatest business missteps involve corporate takeovers. One company absorbs a second, only to find out afterwards that it has also taken on ownership of toxic waste sites, or hopeless amounts of debt, or law suits relating to faulty products. In the heat of the moment, the advocates for the takeover ruled the day, while the possible negative outcomes seem not to have been seriously considered.
Nonprofits make decisions as well, of course, and a healthy share of them are ill-considered. Sometimes the driving factor is the sense that the organization should take decisive action for the sake of, well, seeming decisive. I’ve heard a series of business catch phrases in board rooms over the years along the lines of, “We have to grow, change, or die!” or, “We have to go big, or go home!” These sentiments ring true, sometimes, but often a more incremental pace of change is what the organization truly needs. At other times the bad decision is a non-decision: keeping a stale and unproductive CEO in place, for example, despite significant staff turnover and financial warning signs.
In short, organizations make moves when they don’t have to, and they fail to make moves when they should. And figuring out what to do (or not do) is a critical and never-quite-clear challenge.
So here’s a technique that may help, courtesy of Daniel Kahneman, a behavioral psychologist who won the 2002 Nobel Prize in Economics for his research into decision-making. Kahneman, in his fascinating book, Thinking, Fast and Slow, suggests a simple additional step to organizational decision-making: conducting a “pre-mortem.”
We all know about post-mortems: after an enterprise has failed terribly, whether a business product line, a political campaign, or a marriage, we sit around and point out the key factors that led to the disaster. “Of course his candidacy was doomed. He had no message!” “What were they thinking when they launched that car wax line? They knew nothing about car waxes, and the market was already dominated by companies with much deeper resources!” “The two of them were utterly incompatible. And then they thought having a baby would bring them together?! Crazy!”
A pre-mortem is similar to a post-mortem, but done in advance.
Here’s how it works:
The nonprofit board and staff leadership, after a process of research and discussion, have reached a tentative decision – let’s say, opening a new branch in a nearby city, in space donated by a church. Before taking a final vote, the board chair says, “Okay. Let’s imagine that in two years’ time it becomes clear that this decision was a disaster, an enormous mistake. Let’s think about why it proved to be the wrong move.”
At that point, each board and staff member spends ten minutes silently thinking about what will have gone wrong, and writes it down. “The community had never expressed a desire for our services.” “There was already a well-entrenched organization doing pretty much the same thing.” “The facility was free, but it cost far more than we had budgeted for fit-up.” “We were in a part of town without access to public transportation.” “The staff members we assigned to the new location were not at all savvy about building community ties.”
At the end of the ten minutes, the board members share their findings. Everyone shudders a bit. There is an honest discussion about risk and reward, about the likelihood of success, about whether this is the right move after all. The organization may still move forward with the expansion, but it will do so with its eyes open, and not because one board member or another had asserted some cliché about how if you’re not moving forward, you’re moving backwards. Or the board may, in fact, slam the brakes on the move.
Nonprofits that incorporate pre-mortems into their decision-making will be smarter, more aware, and less prone to blindly stepping off a cliff. And doing this exercise takes all of a half hour of the board’s time. I can promise you that you’ve spent thirty minutes in far less productive ways. Maybe even while drinking a bottle or two of New Coke.
Copyright Alan Cantor 2016. All rights reserved.