Strategy. Innovation. Brand.

decision theory

Managing Agreement: The Abilene Paradox.

I want to be a team player, but….

I used to think it was difficult to manage conflict. Now I wonder if it isn’t more difficult to manage agreement.

A conflicted organization is fairly easy to analyze. The signs are abundant. You can quickly identify the conflicting groups as well as the members of each. You can identify grievances simply by talking with people. You can figure out who is “us” and who is “them”. Solving the problem may prove challenging but, at the very least, you know two things: 1) there is a problem; 2) its general contours are easy to see.

When an organization is in agreement, on the other hand, you may not even know that a problem exists. Everything floats along smoothly. People may not quiver with enthusiasm but no one is throwing furniture or shouting obscenities. Employees work and things get done.

The problem with an organization in agreement is that many participants actually disagree. But the disagreement doesn’t bubble up and out. There are at least two scenarios in which this happens:

  1. The Abilene Paradox – in the original telling, four members of a family in Coleman, Texas drove 53 miles to Abilene in a car without air conditioning in 104-degree heat to have dinner at a crummy diner. After driving 53 miles back, they ‘fessed up: not one of them had wanted to go. Each person thought the others wanted to go. They agreed to be agreeable. (A variant of this is known as the risky shift).

Similar paradoxes arise in organizations all the time. Each employee wants to be seen as a team player. They may have reservations about a decision but — because everyone else agrees or seems to agree — they keep quiet. Perhaps nobody agrees to a given project but they believe that everyone else does. Perhaps nobody wants to work on Project X. Nevertheless, Project X persists. Unlike a conflicted organization, nobody realizes that a problem exists.

  1. Fear – in organizations where failure is not an option, employees work hard to salvage success even from doomed projects. Admitting that a project has failed invites punishment. Employees happily throw good money after bad, hoping to snatch victory from the jaws of defeat. Employees agree that failure must be delayed or hidden.

The second scenario is perhaps more dangerous but less common. A fear-based culture – if left untreated – will eventually corrupt the entire organization. Employees grow afraid of telling the truth. The remedy is easy to discern but hard to execute: the organization needs to replace executive management and create a new culture.

The Abilene paradox is perhaps less dangerous but far more common. Any organization that strives to “play as a team” or “hire team players” is at risk. Employees learn to go along with the team, even if they believe the team is wrong.

What can be done to overcome the Abilene paradox in an organization? Rosabeth Moss Kanter points out that there are two parts to the problem. First, employees make inaccurate assumptions about what others believe. Second, even though they disagree, they don’t feel comfortable speaking up. A good manager can work on both sides of the problem. Kanter suggests the following:

  • Debates – include an active debate in all decision processes. Choose sides and formally air out the pros and cons of a situation. (I’ve suggested something similar in the decision by trial process).
  • Assign devil’s advocates and give them the time and resources to develop a real position.
  • Encourage organizational graffiti – I think of this as the electronic equivalent of Hyde Park’s Speaker’s Corner – a place where people can get things off their chests.
  • Make confronters into heroes — even if you disagree with the message, reward the process.
  • Develop a culture of pride – build collective self-esteem, not just individual self-esteem. We’re proud of what we have, including the right (or even the obligation) to disagree.

The activities needed to ward off the Abilene paradox are not draconian. Indeed, they’re fairly easy to implement. But you can only implement them if you realize that a problem exists. That’s the hard part.

Three Decision Philosophies

I'll use the rational, logical approach for this one.

I’ll use the rational, logical approach for this one.

In my critical thinking classes, students get a good dose of heuristics and biases and how they affect the quality of our decisions. Daniel Kahneman and Amos Tversky popularized the notion that we should look at how people actually make decisions as opposed to how they should make decisions if they were perfectly rational.

Most of our decision-making heuristics (or rules of thumb) work most of the time but when they go wrong, they do so in predictable and consistent ways. For instance, we’re not naturally good at judging risk. We tend to overestimate the risk of vividly scary events and underestimate the risk of humdrum, everyday problems. If we’re aware of these biases, we can account for them in our thinking and, perhaps, correct them.

Finding that our economic decisions are often irrational rather than rational has created a whole new field, generally known as behavioral economics. The field ties together concepts as diverse as the availability bias, the endowment effect, the confirmation bias, overconfidence, and hedonic adaptation to explain how people actually make decisions. Though it’s called economics, the basis is psychology.

So does this mean that traditional, rational, statistical, academic decision-making is dead? Well, not so fast. According Justin Fox’s article in a recent issue of Harvard Business Review, there are at least three philosophies of decision-making and each has its place.

Fox acknowledges that, “The Kahneman-Tversky heuristics-and-biases approach has the upper hand right now, both in academia and in the public mind.” But that doesn’t mean that it’s the only game in town.

The traditional, rational, tree-structured logic of formal decision analysis hasn’t gone away. Created by Ronald Howard, Howard Raiffa, and Ward Edwards, Fox argues that the classic approach is best suited to making “Big decisions with long investment horizons and reliable data [as in] oil, gas, and pharma.” Fox notes that Chevron is a major practitioner of the art and that Nate Silver, famous for accurately predicting the elections of 2012, was using a Bayesian variant of the basic approach.

And what about non-rational heuristics that actually do work well? Let’s say, for instance, that you want to rationally allocate your retirement savings across N different investment options. Investing evenly in each of the N funds is typically just as good as any other approach. Know as the 1/N approach, it’s a simple heuristic that leads to good results. Similarly, in choosing between two options, selecting the one you’re more familiar with usually creates results that are no worse than any other approach – and does so more quickly and at much lower cost.

Fox calls this the “effective heuristics” approach or, more simply, the gut-feel approach. Fox suggests that this is most effective, “In predictable situations with opportunities for learning, [such as] firefighting, flying, and sports.” When you have plenty of practice in a predictable situation, your intuition can serve you well. In fact, I’d suggest that the famous (or infamous) interception at the goal line in this year’s Super Bowl resulted from exactly this kind of thinking.

And where does the heuristics-and-biases model fit best? According to Fox, it helps us to “Design better institutions, warn ourselves away from dumb mistakes, and better understand the priorities of others.”

So, we have three philosophies of decision-making and each has its place in the sun. I like the heuristics-and-biases approach because I like to understand how people actually behave. Having read Fox, though, I’ll be sure to add more on the other two philosophies in upcoming classes.

Arguments and Sunk Costs

Why would I ever argue with her?

Why would I ever argue with her?

Let’s say that Suellen and I have an argument about something that happened yesterday. And, let’s say that I actually win the argument. (This is highly theoretical).

The Greek philosophers who invented rhetoric classified arguments according to the tenses of the verbs used. Arguments in the past tense are about blame; we’re seeking to identify the guilty party. Arguments in the present tense are about values – we’re debating your values against mine. (These are often known as religious arguments). Arguments in the future tense are about choices and actions; we can decide something and take action on it. (Click here for more detail).

In our hypothetical situation, Suellen and I argue about something in the past. The purpose of the argument is to assign blame. I win the argument, so Suellen must be to blame. She’s at fault.

I win the argument so, bully for me. Since I’ve won, clearly I’m not to blame. I’m not the one at fault. I’m innocent. Maybe I do a little victory dance.

Let’s look at it from Suellen’s perspective. She lost the argument and, therefore, has to accept the blame. How does she feel? Probably not great. She may be annoyed or irritated. Or she might feel humiliated and ashamed. If I try to rub it in, she might get angry or even vengeful.

Now, Suellen is the woman I love … so why would I want her to feel that way? If someone else made her feel annoyed, humiliated, or angry, I would be very upset. I would seek to right the wrong. So why would I do it myself?

Winning an argument with someone I love means that I’ve won on a small scale but lost on a larger scale. I’ve come to realize that arguing in the past tense is useless. Winning one round simply initiates the next round. We can blame each other forever. What’s the point?

In the corporate world, the analogue to arguing in the past tense is known as sunk costs. Any good management textbook will tell you to ignore sunk costs when making a decision. Sunk costs are just that – they’re sunk. You can’t recover them. You can’t redeem them. You can’t do anything with them. Therefore, they should have no influence on the future.

Despite the warnings, we often factor sunk costs into our decisions. We don’t want to lose the money or time that we’ve already invested. And, as Roch Parayre points out in this video, corporations often create perverse incentives that lead us to make bad decisions about sunk costs.

Our decisions are about the future. Sunk costs and arguments about blame are about the past. As we’ve learned over and over again, past performance does not guarantee future results. We can’t change the past; we can change the future. So let’s argue less about the past and more about the future. When it comes to blame or sunk costs, the answer is simple: Don’t cry over spilt milk. Don’t argue about it either.

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