The Gamble Mode

In many organizations I meet managers that are under a lot of pressure to achieve results, demanded by senior management. In this situation of pressure, it is expected of them to take decisive decisions. Nevertheless, these decisions often don’t seem to be based on facts. The manager seems to ‘gamble’ for the right choice. For some years I regularly say that managers are in a state of gamble mode. It this fact or fiction?

What is gambling?

Gambling is making a choice where the outcome is impossible to predict, and a risk of winning or losing is connected to the choice. Consider:

–  buying a lottery ticket

–  playing a card game for money

– participate in bingo

– go to a casino

You’re spending money, hoping you’ll win. Knowledge, expertise or skills play no role.

In this definition is not predicting an outcome or the addictive character gambling can have. The key for me in this definition is the last sentence:

“Knowledge, expertise or skills play no role.”

Cause and effect

In many organizations I’ve seen an above normal pressure arise, when the amount of work to be done is more that the amount the group thinks (!) they can handle. Also I observe that in a group often no one really takes the lead and takes responsibility for a good result. Not even the people that received and accepted the formal leadership in the team. As a consequence of this behavior under pressure, the group is incapable to use their available knowledge, expertise and skills to solve the problem successfully.

Years ago we were approached by a large organization to solve an urging performance problem. First analysis showed that existing competences were attacking the problem with large ammunition, in a completely isolated way. There was no structured analysis of what really was the problem. Every time someone came up with a solution, it appeared not to be a working solution after all. This situation existed for several months already.  Instead of fulfilling their request for more technical expertise, a problem manager was pushed forward. The required technical expertise wasn’t sufficiently used. A joint and structured analyses with the engineers about what actually happened months ago was facilitated. Consciously distance themselves from present developments and allow the group to spend time on a real good solution. This removed the tension out of the group.  This approach led to the cause within two weeks and delivered the only possible solution for the problem. All the efforts and tension during half a year appeared to be unnecessarily wasted energy.

Practice

In a management simulation time between events is shortened so events are intensified, and behavior is enlarged. This makes the described behavior painfully visible and it shows participants in the simulation that this behavior is present in everyday practice. Though in everyday practice the ‘gambling’ might be less visible or recognizable. A manager always will make sure it is perceived as a deliberate decision. The existence of gambling behavior can be proved based on the responses of participants of the Apollo 13 simulation when they are confronted with it. This is remarkable and disturbing. It means the important decisions in organizations are taken without seriously taking knowledge, expertise and skills in account.

How do we recognize this? The learning cycle of Kolb is the foundation of management simulations. This cycle shows we successively: do, reflect, think and decide what to do. Or in the words of Kolb: Concrete experience, reflective observation, abstract conceptualization and planning active experimentation. Key elements are pondering and thinking, or put in different words: reflecting and explain it. ‘Thinking’ in this context is considering the solutions to do better, the choices to be made and the consequences. Only then make your decision. In the reflecting and thinking is the added value of knowledge, expertise and skills of people within the organization. What happens if people fail to trust their knowledge, expertise and skills for decision-making? What I hear during reflections after management simulations, is many managers are commuting between deciding and doing in times of pressure on the organization.

Decisions

Is it indeed the gamble mode, or is it intuition, a prior experience or their own interests in which they base their decisions?

Intuition

Intuition can be described as an ‘inspiration’, a form of ‘direct knowledge’ and no one has rationalized it. Intuition is sometimes described as psychological implicit hunches an a result of certain thoughts and observations. This is in contrast to the conscious or explicit knowledge and observation. Intuitive hunches may help people in complex situations and decision-making. One of the reasons is that it has a low demand of the limited capacity of our brains. Intuitive hunches do not always make the right decisions and it can be seen as a gamble by the rest of the organization. For the decision-maker it may give a certain security and often arguments are constructed to justify the decision to others.

Experience

Experience is knowledge of the usual course of business, acquired through observation and involvement in certain processes or situations. The concept of experience is almost synonymous with ‘understanding’, ‘know how’ and ‘knowledge’. A person with significant experience in a certain area is seen as an ‘expert’ and his experience as ‘expertise’. Experience is a form of knowledge, taught by discovery. Knowledge is seen as the whole of theory and experience. This word has a special meaning in relation to science. Often is required that in order to be recognized as knowledge, it has to be empirically experienced. That is, the phenomena should be reducible to sensory perception. Again, the experience gives the decision-maker a certain degree of certainty. He or she is the expert. It is often forgotten this experience comes from a completely different context. This allows a correct decision to be seen as a gamble by the rest of the organization.

Self interest

Simply put: act according to you own advantage. Here isn’t reflected on what is really going on, but just to the decision that is most advantageous for the decider. This is not always a good decision and the decision-maker will usually not share what his true motives were. This decision can also be seen as a big gamble by the rest of the organization.

Dan Gilbert

On TED (www.ted.com) Dan Gilbert gives a great lecture on how people make decisions. He shows that many decisions aren’t made based on facts, but based on what we have experienced in the past. This is stored in our brain as a ‘structure’. And he shows that the context helps to determine what decision we’re making and not what is actually going on.

An example: A new employee is offered a job in which he makes € 60.000,- in the first year, € 50.000,- in the second year and € 40.000 in the last year. At the same time he is offered an other job, somewhere else. Here his first year salary is € 35.000,-, the second year € 45.000,- and the third year € 55.000,-. Research shows most people go for the second option. The reason for that is that it is so common to see an increase in income over the years, we’re so used to that structure. And a decline in salary often indicates the person is performing in a negative trend. But fact is, in option one he will make € 150.000,- over three years and in option two he makes € 135.000,-. Still a majority will choose the second option. Is it the best option?

 

An other example: You want to purchase a car radio. A shop in your neighborhood offers one for € 200,-, but a shop on the other side of town offers the same radio for € 100,-. Most people will drive to the other side of town, to buy the cheaper radio. Then you want to buy a car. The shop in the neighborhood offers the car of your dreams for € 40.000,- and the shop on the other side of town offers the same car for € 39.900,-. Now most people will not bother to go to the other side of the town. In both cases you’ll spend € 100,- less. But the decision is essentially different.

If we link this to intuition, experience and self-interest, like I explained earlier, I come to the following observation: ‘The brains of people appear to stimulate this behavior. Experiences in old and familiar contexts are important and subconsciously they are more important than evident facts.’ Some managers say they will decide based on their intuition and others based on their years of experience. Few people will admit that their own interests were leading. It is certain that decisions made under pressure are based on experience that are not relevant, because the facts are different. Or intuition that isn’t relevant due to a different context.

Conclusion
Knowing this, a manager may be able to admit he doesn’t look at the facts, but to his past when he is under pressure. It helps to have to take some time to reflect and weigh different choices. It is a valuable suggestion to walk through the circle of Kolb. Together with the experience and the gut feeling that was already there, one can make a very good decision. Perhaps the best decision ever taken. The Apollo 13 game has shown for years that it is possible. Let’s put it into practice.

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