An Organizational Development’s Perspective on Uncertainty and Risk

Readers of my byline and Blog know I have a deep fascination with the uncertainty and risk (U&R) concept, especially as it applies from and organizational development (OD) perspective. Today’s post continues my continuing exploration and learning about this subject.

The specific slant on the post is inspired by an article by Brian Lee Crowley titled “We’re all Hayekians now” (National Post; 8 may 2012;Page A13). Crowley notes that Friedrich August Hayek (author of “The Road to Serfdom”) had some pertinent observations about the failure of large scale planning of human lives. Hayek’s main point is that all human knowledge and especially the knowledge available to social planners is irremediably fragmentary and incomplete. This assertion means that planning will fail.

This post is not a slavish endorsement/condemnation of Hayek’s position on planning per se. Rather it takes the notions of necessary incompleteness and fragmentary knowledge and connects them to an OD centric concept of U&R.

I take a classical view of U&R.

  • Risk is when we know about the event, its consequences and the likelihood of occurrence.
  • Uncertainty level 1 is when we know about the event, something of the consequences of occurrence, but little in any useful for about its likelihood. Sometimes we may call these “Grey Swan” like events (with apologies to Nassim Taleb).
  • Uncertainty level 2 is when we cannot meaningfully envisage the event. When it occurs it is a surprise. Sometimes we call these “Black Swan” events.

From Hayek’s notion of knowledge incompleteness and the classical notions of U&R three things jump out for me that make U&R fundamentally a meaningful OD centric notion:

  • U&R makes sense only if there are people (or equivalent) present who are aware that something might happen and they consciously care about this.
  • U&R by definition is intimately tied to our incomplete knowledge and understanding of how things work. This means we create notions of likelihood (a truly human conceptual construct) to help us deal with our fragmentary and incomplete knowledge.
  • Third, the universe is complex enough that random events can and do occur. Shit happens!

So, we live in a U&R like universe because we cannot totally comprehend it at any one time.

I suggest this is a deliciously OD like notion. For those of us in this field, consider how what you practice deals with helping people such a universe and the resulting dilemmas arising from this for them.

What are the implications for us? Implications that enable us to survive cope, and thrive.

I have 5 that I want to suggest at this time.

First, always assume your decisions and actions will (concept of the future) turn out to be deficient. This suggests that any of our important plans should incorporate the ability to “bail out” or “navigate”. I use the navigate notion in the same way as a sailor or pilot would. This is why the Plan, Do, Check Act (PDCA) prescription is so important.

Second, create social systems mirror the level of apparent relevant universe complexity (i.e., our sense of U&R). In simple contexts rules and procedural oriented systems would be merited. Still the first suggestion above still stands. When setting up these kinds of systems, clarity around the “static nature” of the systems’ assumptions are explicitly understood. Example, “Which gender are you? M or F”. Be open to the possibility (remote maybe) that we determine that more than two genders exist. Remember, at one time we believe that all swans were white.

Third, become very sensitive to unintended consequences. these are the subsequent events that show your decision and actions are showing their deficiencies. This is hardest to do when we have been successful, but the first suggestion above still is in force. The CA in PDCA are the relevant pieces here.

Fourth, learn how to hold those who lead properly accountable for their responsibilities. I have seen very little over the years that shows we truly hold accountable those who botch things up and demonstrate incompetence at fixing their “inspired” messes. Leadership means knowing how to abide by the first suggestion above. Leaders who create unwarranted misery for others seems to be poorly handled in business, government, etc. When I meet a leader, I ask myself, do they demonstrate: self assuredness vs. hubris; and knowing their limits vs. arrogance?

Fifth, understand that when we introduce measures to mitigate our known U&R we are introducing a new set of U&R exposure. A U&R defensive or counter play has its own unique U&R. Why? We come back to Hayek’s observation about partial understanding and knowledge again. Complex arbitrage schemes seem to me to introduce so much ancillary U&R that we lose our intellectual capacity to know what we have wrought. Keep it simpler, at least keeps me less confused.

Your thoughts?


About 123stilllearning456

As a management consultant I am passionately interested in talent management and risk/uncertainty issues. In the area of talent management I propose that we seek strategies that look beyond the staffing/employee centric frames of reference. I have been frustrated at the "closing down on possibilities" by these more conventional staffing/employee centric approaches. I have been impressed where people have found systematic solutions to their talent management issues by going beyond the conventional approaches. In the area of risk and uncertainty, I am interested in making this topic relevant to more normal decision making situations. My conceptual foundation is to use the micro-economist's fixed/variable cost theme. I also think it is important to look at these issues for people through their emotional and psychological lens. As a premise I think risk and uncertainty only exist where there is a person who cares about possible events and its consequences. Hence, risk and uncertainty are social based concepts (no sentience, no risk and uncertainty). A major influence on my thinking in this area is Nassim Taleb of "Black Swan" fame. This BLOG provides me with an opportunity to express my thoughts on topics that interest me. As this is an online diary, content is more important to me than polish. I apologize if this distracts from readers' enjoyment and learning. Still I find this a useful way to live up to my namesake, learn more from others and hopefully provoke creative thoughts and ideas in others.
This entry was posted in Creativity, Decison Making, Performance Management, Risk & Uncertainty, Strategy, Talent Manangement, Values and tagged , , , . Bookmark the permalink.

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