Strategy. Innovation. Brand.

decision failures

Eighteen Debacles

Debacles happen.

Debacles happen.

We have two old sayings that directly contradict each other. On the one hand, we say, “Look before you leap.” On the other hand, “He who hesitates is lost.” So which is it?

I wasn’t thinking about this conundrum when I assigned the debacles paper in my critical thinking class. Even so, I got a pretty good answer.

The critical thinking class has two fundamental streams. First, we study how we think and make decisions as individuals, including all the ways we trick ourselves. Second, we study how we think and make decisions as organizations, including all the ways we trick each other.

For organizational decision making, students write a paper analyzing a debacle. For our purposes, a debacle is defined by Paul Nutt in his book Why Decisions Fail: “… a decision riddled with poor practices producing big losses that becomes public.” I ask students to choose a debacle, use Nutt’s framework to analyze the mistakes made, and propose how the debacle might have been prevented.

Students can choose “public” debacles as reported in the press or debacles that they have personally observed in their work. In general, students split about half and half. Popular public debacles include Boston’s Big Dig, the University of California’s logo fiasco, Lululemon’s see-through pants, the Netflix rebranding effort, JC Penney’s makeover, and the Gap logo meltdown. (What is it with logos?)

This quarter, students analyzed 18 different debacles. As I read the papers, I kept track of the different problems the students identified and how frequently they occurred. I was looking specifically for the “blunders, traps, and failure-prone practices” that Nutt identifies in his book.

Five of Nutt’s issues were reported in 50% or more of the papers. Here’s how they cropped up along with Nutt’s definition of each.

Premature commitment – identified in 13 papers or 72.2% of the sample. Nutt writes that “Decision makers often jump on the first idea that comes along and then spend years trying to make it work. …When answers are not readily available grabbing onto the first thing that seems to offer relief is a natural impulse.” (I’ve also written about this here).

Ambiguous direction – 11 papers or 61.1%. Nutt writes, “Direction indicates a decision’s expected result. In the debacles [that Nutt studied], directions were either misleading, assumed but never agreed to, or unknown.”

Limited search, no innovation – ten papers or 55.5%. According to Nutt, “The first seemingly workable idea … [gets] adopted. Having an ‘answer’ eliminates ambiguity about what to do but stops others from looking for ideas that could be better.”

Failure to address key stakeholders claims – ten papers or 55.5%. Stakeholders make claims based on opportunities or problems. The claims may be legitimate or they may be politically motivated. They may be accurate or inaccurate. Decision makers need to understand the claims as thoroughly as possible. Failure to do so can alienate the stakeholders and produce greater contention in the process.

Issuing edicts – nine papers or 50%. Nutt: “Using an edict to implement … is high risk and prone to failure. People who have no interest in the decision resist it because they do not like being forced and they worry about the precedent that yielding to force sets.”

As you make your management decisions, keep these Big Five in mind. They occur regularly, they’re inter-related, and they seem to cut deeply. The biggest issue is premature commitment. If you jump on an idea before its time, you’re more likely to fail than succeed. So, perhaps we’ve shown that look before you leap is better wisdom than he who hesitates is lost.

Deciding Decisively

I want more options.

I want more options.

Last week. I wrote about Chip Heath’s presentation skills. Today, let’s talk about his cognitive skills. Chip, with his brother Dan, has written three books: Switch, Made to Stick, and Decisive.

I’ve written about Decisive before and I expect to write about it again. Today, I’ll give an overview of the four major parts of the Decisive paradigm. I hope this will be useful in itself and it should also serve to introduce future articles that delve more deeply into each of the four elements.

Heath suggests that the path to better decision making is summarized in a simple acronym: WRAP. Here’s a thumbnail description of each.

Widen Your Options – too often, our decisions come in the form of “whether or not”. For instance: “We need to decide whether or not we’re going to acquire Company Z.” Much better to say, “What’s the best way to invest our capital to increase our market share?” Heath reports on one study that suggests that multiple-choice decisions are six times more likely to result in good decisions than are whether-or-not decisions. (This is very similar to Paul Nutt’s concept of premature commitment or to a doctor’s narrow framing based on your medical record.)

Reality-test Your Assumptions – I’ve written about confirmation bias before; Heath says that it’s much more pervasive in business than we might realize. The boss wants to do something, so all of us underlings look for evidence that she’s right. Moral: don’t surround yourself with yes-people. Before making a big decision, hold a trial with two well-prepared groups arguing the pros and cons. Also, remember the base rates. If nine out of ten start-ups fail, there’s a 90% chance that your start-up will fail. Really, there is – you can learn more here.

Attain Distance Before Deciding – My Mom used to say, “It’s easier to avoid temptation than to resist it.” In essence, that’s Heath’s advice, too. Making a big decision stirs up emotions ranging from fear to greed and most everything in between. So, get some distance. Time can be a form of distance; putting off a decision may help you think more clearly. (But not always). You can also ask yourself a simple question: “If my best friend asked for my advice in a similar situation, what would I say?”

Prepare to Be Wrong – when I climbed in the Andes, my buddies and I would often create a go/no go decision like this: “If we don’t reach such-and-such point by such-and-such time, we need to abandon the climb and return to camp.” Heath calls these tripwires. They’re agreed upon milestones or events that will jolt us out of autopilot. Without tripwires, we may just go merrily on our way, assuming that our original decision was correct. Tripwires help us focus on unfolding events and take corrective action.

Is that all there is to decision making? Not at all, Heath tells some great stories along the way and I’ll write about them in the future. For today, however, that about WRAPs it up.

Want a Good Decision? Go to Trial.

We all know what the decision should be.

We all know what the decision should be.

Let’s say that you’re arrested for a terrible crime. After a few months in jail, you’re taken to court for a trial. In the courtroom, you meet your lawyer for the first time. The judge selects a jury. You notice that all the jurors are white males and that they all went to the same business school.

As the trial begins the judge tells the jurors – very directly – that she believes you’re guilty. The prosecutor then uses Power Point to present the evidence against you. The presentation consists of over 200 slides.

Your lawyer is not allowed to present any evidence – he can only respond to the prosecutor’s slides. He raises a number of objections but the prosecutor handles each one smoothly. You notice that the prosecutor doesn’t refute the objections but merely brushes them aside. The slides are complicated and hard to follow. You notice that some of the jurors are glassy-eyed. Others are checking their BlackBerries.

When the prosecutor’s presentation concludes, the jurors don’t adjourn to a separate room to discuss the case. Rather, the judge simply asks them, “So, do you agree with me?” Most of the jurors nod their heads and you’re whisked off to jail.

Could that really happen? Let’s hope not in a court of law. But, as Chip and Dan Heath point out in their book, Decisive, that’s exactly how corporations make bazillion dollar decisions. Echoing Paul Nutt’s book, Why Decisions Fail, the Heaths point out that most business decisions really are one sided.

Here’s how it goes. An executive gets an idea that just might be brilliant – or not. Then a process begins to justify the idea and convince top management to support it. Most of the members of top management recognize that a justification process is going on. They don’t really object to it because 1) they don’t have a forum to present their ideas; and 2) they don’t have the resources to develop the other side of the story or to investigate alternatives.

The justification process grinds on. As the Heaths point out, the process usually results in a “whether or not” decision. Executives don’t consider a range of alternatives but simply vote up or down, yes or no.

The process usually includes a top management meeting with a barrage of Power Point slides. I’ve participated in dozens of them. Usually someone in the meeting says, “Well, let me play devil’s advocate for a moment ….” No matter what that person says, the objection is somehow handled and brushed aside. The devil’s advocate may have a good point but he doesn’t have the data to back it up. The result is that the group feels “better” about the decision … “after all, we did consider both sides.”

Paul Nutt writes that business “…decisions fail half of the time. Vast sums are spent without realizing any benefits for the organization.” In other words, we could flip a coin and do just as well – and save a bundle on consulting fees.

We often complain about our judicial system. But the trial by jury – with evenly matched sides presenting evidence – is probably the best system ever developed for discerning the truth when the evidence is murky. In business, the evidence is often murky; we’re trying to predict the future with incomplete data. You want the best decision? Put it on trial.



The Anatomy of Debacles

I was satisficing. If only I had known.

What’s a debacle? According to Paul Nutt, it’s “…merely a botched decision that attracts attention and gets a public airing.” Nutt goes on to write that his “…research shows that half of the decisions made in business and related organizations fail.” Actually, it may be higher because, “failed decisions that avoid a public airing are apt to be covered up.”

Remember that I wrote not long ago (click here) that perhaps 70% of change management efforts fail? Now we learn that half — or more — of all business decisions fail. We’re not doing so well. Nutt has studied over 400 debacles — botched decisions that became public disasters — and has created an anatomy of why and how they happen. Nutt’s book, Why Decisions Fail, is a sobering look at how we manage our organizations and, more specifically, our decisions.

Critical thinking should help us avoid botched decisions and public debacles. I’ll be writing about critical thinking over the next several months and, from time to time, will pull ideas from Nutt’s book. Today, let’s set the stage by looking at the basics. Nutt writes that blunders happen because of three broad reasons:

  1. Failure-prone practices — Nutt claims that two-thirds of business decisions are arrived at via common practices that are known to fail. One of our problems is that we typically don’t analyze the decision-making process itself. We tend to ask, “how can we correct the problem?” rather than “how did our decision-making process lead us astray?” As an example, Nutt notes that “Nearly everyone knows that participation prompts acceptance, but participation is rarely used.”
  2. Premature commitments — Nutt writes that “Decision makers often jump at the first idea that comes along and then spend years trying to make it work.” In the vocabulary of critical thinking, this is known as satisficing or temporizing — two heuristics that can lead us astray. Nutt concludes that, “A rush to judgment is seductive and deadly and can be headed off.” I’ll write more on how to head it off in future articles.
  3. Wrong-headed investments — the basic problem here is that we spends lots of time, energy, and money to demonstrate that our decision is correct and the ideas behind it are sound. We call it an evaluation but really, it’s a justification. It’s better to invest our energy in clarifying objectives, discovering issues (and opportunities), and identifying measures of risk and benefit.

Nutt also criticizes contingency theory — the idea that your situation dictates your tactics. For instance, if you’re faced with a community boycott, you should do X; if you’re faced with cost overruns, you should do Y. Nutt concludes that, “Best practices can be followed regardless of the decision to be made or the circumstances surrounding it.” The bulk of his book outlines what those best practices are.

Of course, there’s a lot more to it. I’ll outline the highlights in future posts and put Nutt’s findings in the general context of critical thinking. I hope you’ll follow along. In the meantime, don’t make any premature commitments.

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