Managerial Delusions and Complex Decision-Making

Just caught up on my McKinsey reading and came across this interesting read on the halo effect in organizations and other managerial delusions. Described as the tendency to make inferences based on a general impressions, the halo effect with its inherent flaws including that of mistaking attributions for contributions, could lead to 2 specific delusions for managers - absolute performance and lasting success.

The delusion of absolute performance is that when managers believe following a set of formulas would lead to successful outcomes. My sense is that this is very much the thinking coming out of management disciplines such as BPR, Six Sigma, project management or even some other process-driven KM activities like knowledge audits and taxonomies. They have their places in the scheme of things and important ones too but are not the end and be alls for success. Having attended the conference by Dave Snowden last month on the Cynefin Framework and gradually internalizing the principles of complexity theory, it appears that the recognising that there are other domains in this “scheme” is just as important. In fact, despite being a strong proponent of these structured thinking applications, I now believe any raining on these should be accompanied by some insights on the “Limitations of Process Thinking” to help people understand applications of both process and complexity management (yes, I know the latter is an oxymoron). So, I think I get the delusion of absolute performance.

The other delusion is that of lasting success. Simply, it says that there is no such thing, well almost. With the free-market economy, profits tend to decline as a result of imitation and competition, which to me is like the “bloody red ocean” that Chan Kim and Mauborgne warned about. They suggest looking for blue ocean strategies through value innovation as the brand goes, based on assumptions and judgements on various factors of competition, including interestingly emotion (know how an umbrella means more than just its function).

So, back to McKinsey, three suggestions offered by them folks
-recognize the role of uncertainty which means accepting that strategic action is inevitably an exercise in decision making under uncertainty. This is where I nicely think of Gary Klein and his work on critical decision-making and recognizing the power of intuition which also nicely supports these complex activities.
-See the world through probabilities which suggests improving the odds rather than betting on absolute success. Again, Dave Snowden on managing complexity through various little fail-safe (or was it safe-fail?) activities
-Separate inputs from outcomes (contributions from attributions). A given choice didn’t turn out well doesn’t always mean it was a mistake. We need to look at the decision process itself and not just the outcome. Were the assumptions reasonable or were they flawed? Were calculations accurate or had there been errors? Had the full set of eventualities been identified and their impact estimated? Had the company’s strategic position and risk preference been considered properly?

And while on the subject of risk, both Dave Snowden and Gary Klein will be sharing on managing this at the iKMS evening next week.

4 Comments so far

shift from Fail-safe to design to safe-fail experimental

Posted on March 16, 2007 at 01:28 AM | Comment permalink

Paolina Martin

Got it - thanks Dave.

In some instances, they are like prototyping, right? Small investments to test feasibility, effectiveness, market sentiments or some other objective before launching into large-scale development or roll-out. Is a safe-fail experiment and a prototyping activity the same thing?

Posted on March 16, 2007 at 01:53 AM | Comment permalink

not really, unless you do multiple prototypes in parallel
Will blog this next ween

Posted on March 16, 2007 at 02:51 AM | Comment permalink

Paolina Martin

Thanks Dave.  Looking forward to it.

Posted on March 19, 2007 at 10:49 AM | Comment permalink

Page 1 of 1 pages

Commenting is not available in this weblog entry.

Comment Guidelines: Basic XHTML is allowed (<strong>, <em>, <a>) Line breaks and paragraphs are automatically generated. URLs are automatically converted into links.