Respondents to the December column produced such a lengthy list of reasons why managers fail to act on their predictions that it is a wonder that organizations are ever able to respond with the foresight needed to avert potential life-threatening future occurrences. Diagnoses were many; prescriptions were few.
The diagnoses ranged from "blatant procrastination and fear" (Nishant Miglani) to the triumph of "wishful thinking" (Edward Hare) to "the bias of hope over experience" and the belief of the leader that "I know it will happen, but not to me, or not on my watch anyhow." (Jamal Barghouti). A dominant theme concerned the bias in the market toward addressing short-term challenges, caused in large part by what Robin Chacko described as the "impatient" investor. As Sarang Kulkarni put it, "Short-term incentives are...a major factor in neglecting distant possibilities, because addressing such surprises inevitably involves a costly, multi-pronged solution strategy."
Carole Muller advances a more formal hypothesis: "Could it be that the bias towards immediate-but-less-threatening matters reflect what micro-theorists in economics call biased risk-evaluation?...[It's one in which the bias prevails that you] attach ‘gain' to a probabilistic assessment and you trigger action; attach ‘loss' to it, you get inaction." Pallavi Marathe elaborates on this thought pattern: "It takes a little foresight to be able to tell what may come, but it takes a whole lot of confidence and conviction to be able to act upon the vision and take preventive action." That confidence and conviction presumably has to be supplied by real leaders willing to bear the heat if predictions for which their organizations prepare don't come true.
What can be done about this challenge? Maree Conway has one prescription: "...organizations have no mainstream way of thinking about the future of their organization, and then acting upon their insights.... Organizations today need to schedule time on a regular basis to consider future implications for their companies...and then decide what action to take." Muller suggests, alternatively, that "traded companies be required—by regulating authorities—to include in their...financial report an...evaluation [of] business risk assessment...[possibly even] stating company action taken to prepare for the expected events." The latter would certainly encourage, perhaps at a substantial cost, what Conway proposes, as we've seen with recent legislative and regulatory rulings on corporate governance.
Can organizations take a systematic approach to the assessment of, and response to, predictions, particularly those involving substantial future risks? What role should corporate boards play in this process? Is such assessment the first step toward the ultimate test of true leadership, action to ameliorate projected risks? What do you think? 