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Does your business need ‘pre-mortems’?

Posted by Tim Cummins, President of IACCM, Professor, Leeds University School of Law; Chair, International Commercial & Contract Management | Oct 22, 2018 9:09:04 AM

A recent item on LinkedIn introduced the concept of a “pre-mortem” in decision-making. It suggested the need to explore the impact of an idea in advance – “one set of thinking is to explore if the project is a complete success, the other to explore the impact if the change made is a total failure. Imagine if Volkswagen had done a “pre-mortem” on their “cheat device” engineering? If Facebook had explored failure scenarios with sharing data with third party apps? If Wells Fargo had examined the operational impact of bonuses for new accounts? What if the moon mission in the 1960s had explored failure? Oh wait…they did. In fact, NASA is probably one of the more principled decision making bodies to examine countless “failure scenarios” and adjusting processes to reduce probability of negative events.”

As the examples cited above illustrate, organizations certainly should undertake thorough risk analysis. So what is stopping them?

Among the interesting points to consider are:

1) why is it that NASA has been so successful?

2) why is it that commercial staff are often not invited to contribute to key business decisions?

In the case of NASA, it’s important to note that the risks being assessed and managed are predominantly technical in nature. In fact, most organizations seem relatively good at technical risk assessment. IACCM research – and examples such as Wells Fargo, Carillion, Volkswagen and Facebook – indicate that failure to adequately evaluate commercial risks is more frequently the cause of major failures.

So does this suggest that commercial experts are incompetent, or is it that they simply aren’t included in the decision-making process? The answer is probably a mix of both. First, it is certainly the case that many executives consider themselves ‘commercial experts’ and therefore don’t always grasp the need for ‘commercial challenge’, whereas they would rarely undertake major programs without expert technical advice. But there are also issues of competence among commercial staff. Far too many commercial teams are much better at problem identification than they are at problem solving. This indicates a frequent failure to grasp the executive psyche, which by nature is optimistic and welcomes creative solutions, not obstacles. (And in this spirit, I suggest the term ‘pre-mortem’ may not be the most compelling!)

So if you are a commercial executive whose advice is not being sought on a timely basis, look first not at the fault of others, but rather at what you need to be doing differently.

Topics: contracting excellence, performance management, contract management

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