Friday, July 20, 2012

Errors, Misjudgments and Dishonesty-"No one sets out to take wild risks"

A few days after the Deepwater Horizon oil spill began, I had a conversation with a friend at NASA.  All of us in the oil and gas business were eager to not only understand the technical flaws that led to the accident, but also understand some of the human factors that can result in errors in large scale, complex engineering accidents.  Since NASA has had a couple of those accidents with disastrous consequences and my colleague was in a senior position, I explored the subject with him.

One comment he made that day has stuck with me.  "No one sets out to take wild risks in these ventures", he said.  "You are talking about capable, experienced professionals who know the consequences of their mistakes.  I think errors in decisions are made when there is some combination of time pressure, money pressure, political pressure and previous success."

The time pressure issue seems obvious to me.  If I reflect on my own behavior, I'm most likely to take risks when time is a factor...I'm more likely to speed when driving.  I'm more likely to enter a crosswalk after the "red hand" light has come on...gambling a little on the time lag between when that hand lights up and when the traffic light actually changes.  Time pressure equally effects our decision making in more complex business activities.

Most interesting to me among these is the role of confidence that comes from previous success.  Basically the inner voice of the leader is saying "I've taken this risk before and nothing happened"  or the self referential "I've got a long track record of decision making  under pressure and I'm usually right".  Another way I've explained this it is unlikely the person who has an accident or is arrested while driving drunk, is driving drunk for the first time.  I've driven after drinking like this before and nothing happened.

Here are couple of tips for leaders who have to make complex decisions under pressure.   First, recognize that how data are presented makes a difference...are you looking at performance data or failure data...or both?.  Second, recognize that under pressure we tend to make go/no go decisions.....are there options other than go/no go?  Is it feasible to gather more data?  Third, have you framed the decision properly?  What assumptions am I making?  What mental models am I using?  What biases might be in play(see Kahneman again.)

Most importantly be aware that in spite of your previous success when time, money, or political pressures are high, your risk of making a poor decision are greatest.  You can't let it paralyze you, but in Kahneman's terms, it's time to Think Slow. 

2 comments:

  1. Great post, Scott. I really enjoyed reading it and the others you have. I believe it's about leadership through values, systematic operating and building enduring capability in people. The systematic approach is the "what" and people are the "who and how". Capability is making sure there are ways to close gaps in people and systems. Systematic operating doesn't just define those processes but it's about embedding consistently and rewarding for them time and time again.

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  2. Thanks. Appreciate the feedback. More on this subject this week.

    Scott

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