Premortem, Planning Fallacy and Risk

Premortem, Planning Fallacy and Risk

Premortem, Planning Fallacy and Risk
Premortem is a decision theory technique developed by Gary Klein, who is a leading research physiologist popular for his literary contributions on what drives our decisions. 

You could probably refer to postmortem, hypothetically opposite of premortem, i.e. while postmortem is done after the event to establish the cause, premortem investigates reasons for failure before any eventuality occurs to uncover any potential hot spots.
In a corporate setting, premortem can be performed in the following steps:
  • Arrange a meeting with key decision makers and stakeholders before locking into the project
  • Assume that it's 6 months past after the decision had been made, however, it has remarkably failed to deliver expected outcome
  • Next, as the team to write down the reasons for the failure (assuming it has failed already)
  • Collect notes, and calibrate reasons noted by members
Daniel Kahneman, a champion behavioral psychologist, and Nobel Laureate endorsed premortem's efficacy in his popular book "Thinking Fast and Slow". Kahneman explained premortem assists in restraining biases which otherwise decision makers ignore, which he referred to as the planning fallacy.

(Planning fallacy is illustrated below)
Planning fallacy
Planning fallacy
I learned the application of premortem through applying Murphy's Law, an old adage, the assessment of risks, and after learning Klein's technique could associate a structure to the old heuristic.
The above illustration shows, except the obvious, that at planning stage we actually are not aware of certain events in future (i.e. uncertainty, not risks), and we feel we could overcome certain problems on the run with our skill/team, leading to planning fallacy, simply we underestimate reality and overestimate our skills, creating blind spots.

Audit is a classic postmortem scenario i.e. you review data patterns and information to unearth deficiencies in control designs failing to control deviations. The ultimate objective of controls is to manage risks at an acceptable level. By using premortem you can develop an audit program or develop a testing strategy for processes which have a disproportional effect on the outcome. In simpler words, it cuts through the clutter of procedural controls and focuses on critical processes.
Similarly, using premortem in the assessment of risks would provide insights to most critical areas which require attention to improve the chance of success. 

I recommend supplementing your risk management program with premortem in risk assessment stage i.e. you should use both the traditional approach of defining objective and the good old what could go the wrong approach, in addition, apply premortem to validate/explore your most critical risks. You could expect to come up with critical risks, and consequently improve the organization's processes, risk strategy, and audit plans.

Premortem is generally scalable, but I think its most effective in project setting e.g. marketing campaigns, product launch, new market entry, change management, etc., where a definite start and end is defined. Another important attribute is that its failure could be clearly defined and therefore adds means to work with a premortem. 

These attributes can be overwhelming at an organizational level. Therefore, it is a good idea to break down the large activity (organization) into manageable units (e.g. functions/departments) to apply premortem effectively.
(Opinions expressed are solely my own and do not express the views or opinions of my employer.)

The article was originally written and posted by Majid Mumtazand was republished at our website with his permission

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