Risk Acceptance: Naïve Realism

When a project is underway, or even when we're still in discussion stages, we sometimes stumble upon an unanticipated risk. Some unanticipated risks can be serious — fatal or near fatal to the project if they materialize. For convenience, I call these risks Very Bad News (VBN) risks. After serious study, if we can't devise practical approaches to avoid, transfer, reduce, or compensate for the VBN risk, we cancel the project and move on. That's what happens if we're thinking clearly.

Sometimes we don't think clearly enough. We decide to accept the VBN risk. Here are three scenarios that frequently lead to risk acceptance:

• Someone who's politically very powerful insists that this project must succeed no matter what, and "you'll find a way around the problem somehow."
• The team has found some approaches that might mitigate the VBN risk somewhat. The time, budget, or capabilities required are beyond what's available, but somebody says, "If we make a solid demo, they'll find the money."
• There's division of opinion about whether the VBN risk is real. Most expert members of the project team acknowledge the risk, but one ambitious fellow, currying favor with Management, disagrees.

These situations are fertile ground for toxic conflict. When the VBN risk is fundamentally technological, a common pattern for this conflict is an oppositional debate between the "technologists" (IT or product engineers) on the one hand, and on the other hand the "business" (product managers, executives, or Sales or Marketing officials). When the conflict becomes toxic enough, it can leave lasting social scars that limit future organizational performance.

The conflict that arises in the context of debates about VBN risks isn't unique. We can understand its dynamics in terms of a psychological phenomenon known as naïve realism. Naïve realism is our human tendency to assume that our perceptions of the world are accurate and objective [Ross 1995]. Consequently, when our understanding of the world conflicts with that of others, we attribute the difference to distortions in others' perceptions, due to their ignorance, false beliefs, irrationality, or biases. As we do this, so do our partners in conflict attribute to us ignorance, false beliefs, irrationality, or biases. Naïve realism thus provides an elegantly symmetric setup for toxic conflict. It can transform a disagreement from one in which each party critiques the value of the other's approach to the issues to one in which each party attacks the other's value as a person.

But although a setup for toxic conflict is necessary, it isn't sufficient to seriously damage relationships. For truly destructive toxic conflict, the participants need to care deeply about the outcome of the conflict. VBN risks can provide the missing element. We know that conflict participants care deeply about the outcomes of debates about VBN risks, because they all regard VBN risks as "Very Bad News."

On the "business" side, After we identify a "Very Bad News" risk,
a common pattern for the ensuing
conflict is oppositional debate between
product engineers and the "business"conflict participants strongly desire project success. They want what the project promises to deliver, and they can get what they want only if the project goes forward. On the "technologist" side, conflict participants want to work on successful projects, and they want to avoid working on projects that are doomed from the start. Too often, in their experience, project failures have been unjustly and incorrectly attributed not to foolhardy decisions to accept VBN risks, but to the lack of professionalism and low work quality of project teams. In the context of the VBN risk, the technologists can get what they want only if the VBN risk is properly acknowledged and managed, the cost of which can be prohibitive. The "business" faction wants the project to go forward despite the VBN risk; the "technologist" faction wants the project to be reconfigured or cancelled because of the VBN risk.

In many organizations, the "business" prevails. In practice, the technologists are directed to execute the project with the VBN risk wholly or largely unmitigated. Because the people who represent the "business" want the project to proceed, and because they cannot afford to manage the VBN risk, they decide to opt for "risk acceptance."

But exactly how does this happen? What patterns of thought and decision making enable the group to proceed despite this stark disagreement? I'll explore this part of the story next time.  Next in this series  Top    Next Issue

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