A decision is critical if it affects the operations or strategy of a business at an enterprise level. Mergers and acquisitions are clearly critical decisions, as are developing new lines of business, major reorganizations, and moving to new technology platforms. Critical decisions carry high stakes—when they go badly, they can damage brands, incur financial losses, and harm or ruin careers.
My book, Bending the Law of Unintended Consequences, describes a method for improving the quality of critical decisions and reducing the likelihood of such undesirable outcomes. This method uses simulations to test drive decisions before committing to them, much like consumers try out cars or trucks before buying them. Decision test drives reveal unintended consequences in a safe, virtual environment. Leaders can then avoid those risks by refining the flawed decision option or switching to another alternative.
Even the best decisions can run off the rails owing to execution errors or unanticipated events. The test drive method addresses these dangers as well. Once a decision is made, the test drive method functions as an early warning system that monitors decisions by looking ahead as they are being executed. It thereby helps executives detect emerging problems so they can make prompt mid-course corrections.
Critical decisions can also go awry because of disruptive change within a company. Many decisions at the enterprise level require modifications to a company’s organizational structure, business processes, infrastructure, and culture. Mergers and acquisitions necessitate most or all four types of change. The resulting “new order” tends to conflict with existing work practices and behavioral norms, requiring workers and managers to adapt to new roles, responsibilities, and ways of thinking. These transitions push employees out of their comfort zones, creating personal anxiety and organizational turbulence that can derail critical business decisions just as surely as poor planning or other overt mistakes in execution. Unintended psychological and social dislocations from disruptive decisions affect commercial, non-profit, academic, and government entities alike.
These problems are so widespread and harmful that a discipline called change management (CM) has emerged to help organizations anticipate and respond to them. US companies alone spend tens of billions of dollars annually on CM consulting services. However, roughly two-thirds of these businesses report that their CM efforts failed to dampen the anticipated turbulence! These statistics are particularly ominous because CM failures are generally irreversible; they erode employee trust and investor confidence, undermining managerial willingness and ability to rewind and try again. Thus, organizations must get CM right the first time to ensure success for their disruptive critical decisions.
Why is CM so often ineffectual? Consider a decision to introduce new enterprise software. A common CM strategy is to support this decision by means of communication and training activities. The communication activity announces the decision, explains its rationale, expectations, and schedule, and informs workers periodically about progress. The training activity prepares a curriculum to develop relevant new skills in the workforce. Awareness surveys and tests for functional proficiency are conducted to assess the effectiveness of these activities.
The work tasks in this conventional change plan clearly support the software implementation project, so at first glance, this approach to CM seems plausible. But employees are not simply assets to be managed (i.e., “human capital”). They are individuals who react to change (and to CM programs) with a complex mix of rational and emotional responses. These responses are driven by each person’s interests, goals, and agendas, and are influenced by peers, managers, and affiliations with groups such as unions. Positive responses by workers contribute to the project’s success, but our example change strategy doesn’t address personal feelings, allowing natural anxieties about change to intensify into fear, anger, and resistance. Such negative reactions reduce focus and performance, which undermines team cohesion and morale. Unfortunately, conventional change plans don’t track metrics that would afford visibility into such psychological and social dynamics.
CM strategies fail when they discount or ignore personal interests and social needs and simply dictate organizational changes by fiat. Feelings such as trust, acceptance, confidence, and enthusiasm can’t be produced on demand, much less on mandated timetables or budgets. CM interventions also fail when employees and groups appear to succeed in adapting to immediate changes, only to revert back to older beliefs, attitudes, and behavior patterns over time. Even assuming that a change strategy attends explicitly to inertia and other dynamics of change, it is likely to contain omissions or gaps. Cultivating smooth psychological and social change is a complex undertaking. Without analytical methods for testing change strategies, it is hard to uncover, much less correct these deficiencies.
Organizational change is perilous because it represents a critical decision in its own right, albeit one that derives from a critical business decision. Like other critical decisions, strategies to manage disruptive change carry high stakes at the enterprise level. They are also vulnerable to unintended consequences stemming from poor design and flawed execution. Part 2 explains how the decision test drive method helps to reduce the likelihood of CM failures.