February 2010                                                                                            Issue 1

BoardWorks International

 

 
 
 
 
TopBook Review 
Are Surprises Predictable?
 
 Book- Predicable Surprises 
Authors Max Bazerman and Michael Watkins think so. Their book 'Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them' [1] is a cautionary and convincing tale about unnecessary and avoidable failures of leadership. The terrorist attacks on the World Trade Centre in New York and the demise of Enron and its auditor Arthur Andersen. These examples are both used in the opening chapters to illustrate how corporate and governmental leaders had all the necessary information to anticipate (and prevent) those catastrophic failures. Many more, similarly compelling examples are sprinkled throughout the book. In a sense, however, these are used simply to attract (and hold) the reader's attention. Notwithstanding the novel concept reflected in its title, at its heart this is a book about the various organisational decision making vulnerabilities to which our boards and executive teams (and for that matter our families) are all potentially susceptible. It is a book about how to recognise and hopefully avoid the acting out of these vulnerabilities and the consequences that 'predictably' follow.
 
The concepts about decision making deficiencies outlined in this book are not new. For example, many will be familiar to anyone who has studied the phenomenon of 'group think'. However, the way they are packaged here will be valuable to anyone who seeks a better understanding of how vulnerable their organisation might be to common decision making problems.
 
Bazerman and Watkins divide the causes of predictable surprises into three categories.
 
 

1.      Cognitive causes. These explain why we ignore or discount the threat of predictable surprises. Bazerman and Watkins argue, for example, that we tend to hold positive illusions that lead us to interpret events in an ego-centric (self-centred/self satisfied) manner and to undervalue risks. They say this is compounded by other natural tendencies, for example:

 

·         to prefer (and protect) the status quo and thus to create barriers to the changes needed (often on a large-scale) to head off major problems;

·         to run the risk of incurring a large but low-probability loss in the future rather than accepting a smaller but more certain loss (cost) now;

·         to be reluctant to invest in risk avoidance/risk management measures until we have directly experienced significant harm; and

·         to discount the future - we are comparatively unwilling to invest now to prevent a disaster that may be quite vague and distant.

 

2.      Organisational causes. The authors argue that organisations frequently fail to take a range of active steps that would probably avoid predictable surprises. For example:

 

·         scanning the environment for information about possible threats;

·         taking and integrating information from multiple sources;

·         responding (to potential threats) in a timely manner;

·         observing the results of the response; and

·         incorporating the lessons learned into the institutional memory of the organisation

 

Unfortunately, as Bazerman and Watkins acknowledge, organisational structures and processes often stand in the way of such steps being taken. For example, organisational 'silos' can impede the flow of information and reward systems can encourage people to seek personal benefit at the expense of the collective good.

 

3.      Political causes. Bazerman and Watkins demonstrate that "...there are often a small number of individuals and organisations that are highly skilled at corrupting the political system for their own benefit" (p.10). In the US system, they say, it is far too easy for special interests to influence the political process and to increase the probability of predictable surprises. In part this is because there is an unfortunate nexus between two things. The first is the pressure on politicians from powerful constituencies to avoid imposing on those constituencies the costs needed to prevent predictable surprises. The second factor is the likelihood that the benefits, if these costs were incurred, would not be enjoyed until after the politicians who imposed them have left office. Interestingly, in the light of similar concerns in this part of the world, another of the 'political' causes of predictable surprises mentioned by the authors is the failure to enact meaningful reform of electoral campaign finance in the US.

 
 
Having highlighted these three categories of decision making vulnerability Bazerman and Watkins show that, by establishing robust systems for overcoming problems in 'recognising', 'prioritising' and 'mobilising', it is possible for leaders to prevent predictable surprises. To assist in recognising emerging threats they provide readers with some specific tools. These tools are not new (e.g. scenario planning, post-problem evaluation) but reference to them in the book makes for completeness and it is helpful to re-emphasise the value of such strategic thinking and organisational learning processes. The same is true in chapters on improving prioritisation and mobilising resources. For example, to help organisational leaders become more effective at prioritisation, Bazerman and Watkins highlight various barriers and propose further tools. Again these tools are not new (e.g. structured dialogue, decision analysis, and incentive systems redesign are all matters we have explored over many years in our previous publication Good Governance) but reference to them in this book is nevertheless useful.
 
There is some sensitivity that Bazerman and Watkins might be accused of being 'wise after the event' by the examples they use throughout the book. It is to their credit, therefore, that in the final chapter they go out on a limb to identify predictable surprises that might still lie in the future. Relying on publicly available information they suggest as possible examples the depletion of global fish stocks, global warming, 'exploding' medical costs and retirement commitments, and the unsustainability of both government farming subsidies and airlines' frequent flyer programs. There is surely something in that list that will be of potential personal impact on everyone reading this review. However, my purpose here is not to cause you to worry unduly about those rather broad risks that probably lie beyond your direct influence. It is to invite you to think carefully about the organisations that you are responsible for. What might be the predictable surprises that await you and your stakeholders because your board or management team is susceptible to one or more of the decision making vulnerabilities described so cogently in this book?
 
 

Footnote [1]Max H Bazerman and Michael D Watkins (2004) Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them. Boston, Harvard Business School Press.  
 
 
 
Book- Predicable SurprisesBookPredictable Surprises: The Disasters You Should Have Seen Coming, and How to Prevent Them (Center for Public Leadership) by Max H. Bazerman by Harvard Business School Press
 BoardWorks International is a specialist governance effectiveness consultancy dedicated to assisting governing boards to provide effective strategic leadership to their enterprises and to fulfil their fiduciary and stewardship responsibilities to their stakeholders. It is also our aim to make 'board work' a satisfying and enjoyable experience for all who serve on or provide support to, governing boards.