Dead before you know it…

Readers will be familiar with the concept of the post mortem, in both the literal bodily and the figurative business sense.

They may also be familiar with the somewhat modish “pre mortem”, now often used in a wide range of contexts to try to identify potentially unforeseen risks and flaws in a plan before a major, and potentially irreversible decision is made. The foundational text (building upon earlier research on the concept of “prospective hindsight” and his book The Power of Intuition) which brought the technique a wider business audience was published in 2007 in the HBR by Gary Klein.

Some 12 years later, Mr. Klein (together with two co-authors from Columbia University, Paul Sonkin and Paul Johnson) has published a draft paper (Rendering a Powerful Tool Flaccid: The Misuse of Premortems on Wall Street), in which an example of how not to conduct one is described, followed by a “how to” guide covering the right way to do so.

As with many concepts which become a ‘term of art’, intellectual sloppiness and shallow thinking can corrupt what should be a useful tool, rendering it dangerous in the hands of those who have not properly studied and assimilated the proper approach and the reasons for its effectiveness.

In the world of (re)insurance, as in many other industries, we suspect the use of the technique is fairly prevalent, particularly when it comes to reviews of potential M&A transactions.

So, it may be helpful (as set out in the recent paper) to re-visit the factors that make a pre mortem a valuable tool, as opposed to the potential precursor to a damaging mistake.

Firstly, problems and issues are reframed, because the purpose is to explain ex ante why the plan failed, forcing the participants in the process to identify the causes.

Secondly, one cannot have a pre mortem team of one! One needs to assemble as diverse a team as possible, not just in terms of background, but also in terms of experience and expertise. Youth and inexperience may well not be a hindrance in this case, as questions should be raised which others may have dismissed as irrelevant based upon their greater “experience”. Cognitive diversity is essential.

Thirdly, because every team member is supposed to participate (no exceptions!), it is absolutely critical that each member feels safe doing so, without being overwhelmed by fear of mockery or retribution because those perceived to be in a position of power may not like what they hear. Therefore, the usual approach to mitigating this is for the leader or most senior member of the group (perhaps the CEO) to go first- in effect explaining why what may well be his or her “pet” project has failed. It should be a salutary lesson in intellectual humility.

Fourthly, each member of the team has to be treated equally, without incorporating bias or hierarchy in terms of their opportunity to express the concerns they have. Applying a weighting ab initio negates the purpose of the exercise.

And, finally, a pre mortem is not intended to be a leisurely exercise or symposium. There has to be urgency and pace, to avoid the danger of “over-thinking” or “discussion unto death”.

If done properly, the pre mortem is valuable. However, the title of the paper hints at and mocks the fact that overuse and abuse of the technique have led to it becoming more part of a box-ticking exercise, rather than an attempt to produce an effective, executable decision, or even demonstrate the folly of proceeding with a particular course of action. One wonders if those underwriting the IPO of WeWork, made use of pre mortems. After all, what could possibly go wrong…?

As readers of this blog will know, at Awbury we are constantly exploring a diverse range of decision-making and risk-assessment tools. The pre mortem is part of our armoury- one approach to avoiding over-reach, ruin, or the destruction of value.

The Awbury Team

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