High-risk projects rarely go as planned. Reasons vary. Often cited are unanticipated unknowns, previous plan disruptions, and misconceptions revealed during execution. Changes external to the effort are also important. These include changes in the legal or regulatory environment, changes in organizational objectives, changes in organizational commitments, changes in markets, and more. The result can be volatility of objectives and general chaos.
To execute high-risk projects more effectively we usually try to reduce the chances of identified risks materializing. We also try to reduce the impacts of risks that do materialize. That effort does help. But how can we deal with the risks we haven't identified?
One approach is to reduce the chances of failing to identify risks.
A set of risks that often escape identification are those that flow from the Power Distance of the team culture. As we discussed last time, the Power Distance of a culture is "the extent to which the less powerful members of organizations and institutions…accept and expect that power is distributed unequally." [Hofstede 2011] If you haven't yet read last week's issue, it would be helpful to read it now.
To understand how a large Power Distance makes high-risk projects riskier, consider the following illustrations. In what follows, the term team members refers to people who have relatively little formal organizational power. The terms team lead and manager refer to people who have relatively more formal organizational power.
- Team members reject their own misgivings about the plan
- Upon learning about the plan, or perhaps while the plan is being executed, team members develop misgivings about the plan. In Large-PD cultures, they tend to reject their own misgivings, because they know that the managers and the team lead have confidence in the plan. In Small-PD cultures, team members are more likely to respect their own assessments of plans, and then raise questions. And those questions can be helpful if managers and team leads have overlooked something, which is more likely in high-risk projects.
- In Large-PD cultures, team members are more likely to assume that their own misgivings are unfounded or misplaced. Some feel that the team lead and the managers must know best. In this way, in the minds of some in Large-PD cultures, formal organizational power is a proxy for superior knowledge or talent. In Small-PD cultures, team members who realize they have doubts about a plan can be more alert to further doubts or to the possibility of problems when plan execution begins. This alertness helps the team because it leads to early attention to problems.
- Team members defer reporting problems
- When team members notice a problem that the plan doesn't anticipate, they must decide whether or not to notify other team members or possibly the team lead. In Large-PD cultures, the default belief is that team leads and managers have things well in hand. In Small-PD cultures, reports of problems are more likely. This helps Small-PD cultures operate more smoothly in high-risk contexts.
- In Large-PD A set of risks that often
escape identification are those
that flow from the Power
Distance of the team culturecultures, there is a tendency to defer raising issues, for at least three reasons. One reason is uncertainty as to the reality of the problem: "Maybe it will go away." A second reason is the hope that if the problem is real, another team member might report it. A third reason is a belief in team lead omniscience — the hope that the team lead already knows about the problem. In Large-PD cultures, team members can be endlessly creative in devising reasons for deferring reports of problems.
- Team members report that all is well when they believe or suspect otherwise
- Convincing oneself that all is well when it is not, or failing to report that all is not well, can be acts of incompetence or negligence. But reporting that all is well when one believes otherwise is another matter altogether. Concealing from the team lead or from management the fact that the plan has run into trouble can deprive leaders and managers of the opportunity to put things right.
- In Large-PD cultures, the less powerful might fear the consequences of reporting problems to the more powerful. Team members might fear retaliation if they believe they might have had some role in the problem's genesis. Even if they're certain of their own innocence, they might still fear retaliation if they believe that their report might be seen as a criticism. In Small-PD cultures, where team members view themselves as collaborators of the team lead, reporting problems promptly is viewed as a responsibility. This encourages reports, which makes Small-PD cultures better able to respond to trouble.
- Established ideas obstruct innovations
- In Large-PD cultures, one thread that winds through all three of the mechanisms above is the tendency of team members to question themselves before they might ever question the plan, let alone team leads or management. If necessary, they're likely to conceal their doubts or even claim they have no doubts. An analogous mechanism affects the likelihood of team members questioning established assumptions, ideas, tools, or techniques, or suggesting innovations that might displace existing assumptions, ideas, tools, or techniques. To do so in a Large-PD culture would be to question anyone who accepts existing assumptions, ideas, tools, or techniques.
- The likelihood of a team member questioning established assumptions, ideas, tools, or techniques in a Large-PD culture is smaller than it would be in a Small-PD culture. This is most unfortunate for the Large-PD cultures, because the team members are more likely than the planners to notice opportunities for improvement. For Small-PD cultures, suggesting innovations that might displace existing assumptions, ideas, tools, or techniques is expected. This makes Small-PD cultures better able to improve their processes.
- Greater risk of the sunk cost effect
- The sunk cost effect is a cognitive bias that leads us to use past investments in a project or position to justify further investment. Because of the sunk cost effect, we're more likely to continue to adhere to a position when we're more keenly aware of what we've already invested in that position. In a Large-PD culture, this effect can be amplified in situations in which people identify the position in question with people who hold power.
- For example, if the team lead and the organization's management have often expressed pride and confidence in a particular past position, then the greater the power distance of the culture, the less likely are team members to suggest an alternative or an innovative substitute for that past position. In some cases, team members' reticence can be traced, in part, to their assessment of the sunk cost. In other words, the larger the power distance, the greater the impact of the sunk cost effect.
These five mechanisms illustrate how the power distance of a team culture can affect its ability to respond to risk. If you work in a Large-PD culture, consider these mechanisms and other similar ones when you develop your risk plans. First in this series Top Next Issue
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