Archive for June, 2010
L’Envers et l’endroit (Betwixt and Between) is a phrase coined by the French Algerian writer and philosopher Albert Camus in one of his essays. It captures our current dilemma in the Gulf with the forces at play, wrestling with a series of positions, all supportable from different perspectives, in a tug of war wherein winners will all become partial losers before it’s over. A federal judge in New Orleans (not a trivial point) has blocked the current moratorium on deep water offshore drilling in response to the economic damage that local drilling operators are experiencing. The relationships between economic forces and judicial behaviors are nothing new to any region, and the ethics of the action are not in question. It is an example of the power of the lens we put on an issue and the persuasiveness of a point of view. The lens can create a bias for what we consider or discount in the decisions we make.
Judge Feldman wrote that the Obama administration had failed to justify the need for such “a blanket, generic, indeed punitive, moratorium” on deep-water oil and gas drilling. “The blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger,” he wrote.
What would we decide if we had to make the call? Is the issue a deepwater drilling only? Is it about the safety of operating a deepwater well? Is the issue a life cycle one? Or is this pertinent to closures, perhaps similar to decommissioning industrial, nuclear or military facilities? How many deepwater wells have been successfully capped and decommissioned? Would we reach a different decision from a specific phase perspective? What is the risk profile of the cradle to grave operation? When is safety most at risk? What would the data collected say? Or, is the answer, “What data?” Are we deciding in the world of MS Word, of MS PowerPoint, or have we moved to the world of MS Excel?
We may be confronting a precipice that challenges our current processes for decision making in a sea of complexity. Who should answer the question of whether to enforce or block a moratorium? Who loses if we make the wrong call? Who wins? Who is accountable for the effects that will ensue from decision and will accept personal consequences? In times of crisis, what is the appropriate balance across the executive, judicial, and legislative branches of government?
Do the same issues surface in our enterprises? How are decisions made in the planning, execution and closure of programs, projects, and processes? What are our processes for crisis management? How are moratoriums decided in our enterprises? Do we create chaos and false starts from our decisions?
What are the consequences of innumeracy in decision making and decision makers?
I heard someone on the news use the term “oil tsunami” to describe the river of oil currently sweeping across the gulf and the devastation it is delivering to those in the water and on shores. It is an interesting analogy in imagery, but it misses the big point, this growing glob of pestilence was triggered by man, by many people making a whole bunch of choices and decisions. The complexities of how it began and the complexities on how it may one day end are still unraveling. The forces of nature that have been unleashed still defy our technology, techniques, and even our collective confidence. Sadly, it does illuminate a darker side, not new, about the economics of the process. Responsible economists articulate the importance of incorporating the impacts of externalities into decision making. What that means is that what we do can have an adverse impact that transfers the burden, costs, and consequences of dealing with the mess to someone else. In the broadest sense, the total costs of what we do are bigger than our accounted costs and subsequent prices we charge.
This is not only about oil, it is about lots of stuff, including many of the apparent bargains we grab at the supermarket and the fast food chain; or other apparent benefits from subsidized markets . In retrospect, the people that are responsible for perpetuating the calamities like the oil spill can appear as sinister, sometimes a true characterization, but they are seldom so in isolation. To a great extent, the engines we put into play, as consumers demanding lower prices, and as investors expecting greater returns, create value systems with biases, meaning skewed or unbalanced. The levels of bias or balance are important dimensions of good or poor decision making. My oversimplification is that historically we are rewarded by one system, economic, and are constrained and sometimes punished by another, societal and public. These systems are not equal and have never been balanced, primarily because of one set of these consequences is pretty immediate and the second set is improbable and if so, in the distant future.
We, as individuals and as enterprises, are very cognizant of these consequences. Our perception and expectations of these consequences are big, really big drivers of behaviors. Lots of research by very capable people has validated this relationship between consequences and behaviors. Let’s not expect balanced behaviors from unbalanced consequences.
We, when in pain, will exercise economic consequences, but often as a reaction to harm done. On the flip side, our efforts to regulate and control some of these “big” behaviors are sadly oversimplified, undernourished, and in systems that are unattractive to the clever, talented, and ambitious among us. When we overlay on this system the behaviors of those focused on reelection and keeping their local economies well fed, we already know what happens.
Interestingly, this week, squeals are emanating from across the big “pond” about the economic impact that pensioners (investors in BP) are feeling from the precipitous drop in the value of, and anticipated dividends from BP. Posturing and deflected blame, insinuated bias on the part of the US press, public, and politicians as a cause for the externalities. Consequences are driving these behaviors as well.
Messy and complex, isn’t it? Thoughts?
A blown call costs a pitcher a perfect game. This week, it really happened and everybody felt terrible, apologies ensued and the guilty umpire felt genuine remorse and accepted full responsibility for the failed measurement. A poor measurement did not change the perfection of the real performance, a better gage, instant replay validated that, but rather the record of what happened. Those that missed this story and are evaluating the statistics of pitching performance will only have the historic data to evaluate, data that is a false witness of events. Imagine the effects of all the poor measurements in one year of major sports events. Do they change important outcomes? Do they steer rewards or punishments? How about all the stuff that goes on with gamblers in or out of Las Vegas?
Bad measurement in sports evokes big emotions, outrage, indignation and a score of aftereffects that include bragging rights. Does bad measurement in our enterprises conjure similar reactions? What are the chances that we are making decisions as a result of poor measurement, the wrong lens, an obstacle in the way, poor technology, get the picture? If so, the issue is ubiquitous. In over two decades of helping organizations with performance gaps, poor measurements have always been at play, sometimes with disastrous consequences.
The issue is not a simple one. For example:
• Do we use the data that we have and try to conjure meaning from it? Or do we start with what we want to know and then measure accordingly?
• Are we sure that the movement in the data is representative of what is actually happening within the process?
• Do different individuals or functions measure differently? Would they come up with the same value when measuring the same process?
• Does the data just not make any sense?
• How about our “calls” on what we evaluate? Do two managers reach the same conclusion about someone’s performance? If not, who is right? What are the consequences to the individual?
• Do we introduce our own bias into the measurement and evaluation?
• Do we have folks who are easier graders and those that are more demanding? Do they evoke similar or different performance?
• How much of our decision process rely on a subjective call (an opinion) versus an objective measurement (an actual number)? Do we know how often our calls are wrong?
• Do compliance requirements change how we measure performance?
• What happens when lab results are wrong? What if wrong results bring really bad news or they mask the bad news and bring good news?
• Are we ever surprised by events that would have been very visible had we measured differently?
• Does a part of the organization hide or hoard data?
• Do our customers measure our deliverables and call about problems that we should have prevented them from experiencing? What did our data say?
• Do we have our vision checked from time to time? Why is that?
• Do we ever catch how some advertisers deceive with clever use of statistics? How about in our enterprises?
• Is it safer for ourselves to call someone “safe” rather than “out” when we’re not sure, just in case? Consequences are often more severe in one direction versus the other.
• Have we ever spent a lot of money and resources on a decision made with poor data?
So, how’s our data today?
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