Saturday, February 03, 2007

Risk Aversion and Problem Solving

I have been helping a group of managers in a large corporation learn a series of different problem solving techniques. Three of the managers are by their own admission very risk averse. In the words of one of them "I need to know what is happening and I hate anything happening I wasn't expecting, absolutely hate it. I make sure that everyone in my team brief me everyday and anything that goes out of the group only goes through me."

It has been interesting watching this group of managers engage with a series of problems and the process. There are a number of observations worth making:

  • The first is that when compared to the rest of the group what constituted a problem was very different. For example a great worker was identified who was the most productive in the firm. A discussion about them started and it was discovered that because she was so outstanding she kept her own hours. Often preferring to work out of the 8 - 6 hours of the office. Sometimes she would be seen working at weekends too. These three managers would have stopped such practices and made her conform to the 'normal' working hours. Such leniency was seen as a risk and therefore a problem. 'The thin end of the wedge' according to two of them.
  • The second observation was that people prejudge a problem based on the amount of risk they perceive is inherent in the problem. So their definition of the problem (see previous posts about reality and problem solving) was altered radically dependent on how much risk and uncertainty (which were the same for these three managers) they thought the situation contained. In one case we studied all three of them started to engage in flight behaviour. When explored they saw the situation to be so uncertain either they engaged in displacement behaviour or outright denial. "No one can solve this it's just ridiculous". The answer to this by another (non-risk averse) manager was "Are you kidding this has happened here. I dealt with it last year. They were dumbfounded.
  • Another observation about how risk aversion changed the problem solving process is that the range of possibilities of the problem definitions was a lot narrower and 'safer' than for the rest of the team. All of the categorisations of the problem were already part of the common knowledge. Unlike the rest of the group non of them came up with new problem definitions. Interesting once they had settled on a problem definition moving them to other possibilities was hard.
  • This lead to all of their solutions being ones that they had previous experience of working. Not one solution was experimental, they were all solutions that were historical, tried and tested. When solutions from others came up that were novel and had never been tried these were seen as too much of a risk. "But what if it doesn't work" and "Prove that it will work and then I'll go along with you".
I gave my business card to someone last week. He thanked me and stood there reading it for a while. Then he raised his head and peered over his glasses at me and asked. "What on earth has ambiguity and problem solving got to do with each other?"

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