BETTER PREPARED DECISION MAKING AND MANAGEMENT BY EXPLICITLY LOOKING AT UNCERTAINTIES OF THE FUTURE

"Management by Luck" or effective steering in day-to-day life?

On which basis do we take decisions? How do we manage the chances, the risks? How certain are we that it works as expected?

Management by Luck
Management by Luck

For the path into future normally plans are prepared. Strategies are developed, execution plans, operational plans, etc. Many humans don't like to plan. And if they plan, they plan linear. Interrelations are also just seen linear or not seen, ignored or forgotten. We decide then based on what we have in front of us - what you see is all there is. 

A lot of things ar simply overseen. This produces uncertainty. Everybody asks himself for this the following: How much do I still throw dice when it comes to critical decisions on a scale from 1 to 10? Or, if not myself, how much do others do? How is it in the periphery? How much control do I have? How are decisions managed?


It is bad if the management of chances and risks for critical decisions fails. Its about a lot of money, about reputation, health and assets.

Humans decide thousands of times per day. We are weak when the decisions are of great importance but rare and therefore not practiced a lot and need different expert knowledge. In this case, we like to take shortcuts and decide from the stomach, may be with routine in some areas but not all, following the motto: it will hopefully work out well. Frequently observed situations and problems before and after important decisions are:

BEFORE DECISIONS

We have too much or too little information, have overseen something, have no common view of the situation as a group, have difficulties in distinguishing the critical from the uncritical, only look linear into the future, don't see the entire picture, commit the typical human errors (availability heuristic, overconfidence, turkey illusion, etc.)


AFTER DECISIONS

We don't execute decisions at all or execute but inconsequently, to slow, not with the necessary quality or costs, ignore the change abilities of humans, use inappropriate methods and instruments, neglect important topics, commit the typical human errors (procrastination, loss aversion, attention illusion, etc.)  


Since years we observe the attempts of organizations and enterprises to execute explicit risk management. Most of the times it fails, develops to a paper tiger exercise, gets bureaucratic and is more a compliance exercise. Very seldom we see that it is executed systemically and holistically like in a flow, naturally and for steering. In some areas this happens intuitively or with experience and routine of good managers, however nothing that works effective on a comprehensive level → as a consequence: we see a lot of management by luck!

there are two approaches:

YOU NEED TO DECIDE


the Classic

Future management and risk management are done separately, execution activities only help very limited - litte value for leadership - a gamble.

We call it Management by Luck

  • often not accepted
  • rather a paper tiger
  • more risk reporting than risk management
  • compliance driven
  • bureaucratic and a parallel process

the Modern

Future management only functions holistically, that is in combination with risk management - a lot of value for leadership - clarity about the chances/risks situation and the scenarios of the future. It is a steering instrument

  • makes the unseen seen
  • allows distinction of critical from uncritical
  • creates a common view
  • overcomes organizational silos
  • increases risk competence

Overall, this leads to higher robustness, e.g. of organizations and projects al well as to more certainty for entrepreneurs, manager and board members


Value creating future management (FM) combined with risk management (RM) before and after decisions isn't trivial. It needs to be learned and regularly practiced. 

One needs routine when using the instruments and should be aware of the sources for errors. Further, one should be able to think out of the box and interdisciplinary. Since this only functions limited, FM and RM are more performed scientifically or bureaucratically or according to the "one size fits all" principle. The result is often Management by Luck with negative surprises. It doesn't need to be like that.

We show the path - effective and practical. It is our aim to replace management by luck with coordinated, effective management of chances and risks of the future. For that we always regard two different things: (1) the risk management system and (2) the world of certain chances and risks and their management, It is important to decide what is in focus - the whole system or a certain topic.