Optimism is a blessing. Optimists perceive the world as favorable, expect success more often than pessimists do and are far more willing to take risks. Their risk-taking appetite also makes them the inventors, the experimenters and the entrepreneurs. They are precisely what the world needs. Optimists are also capable of ignoring the odds of success, of undermining threats and of overlooking competition. So let me rephrase: optimism is probably a blessing for everyone but the optimists themselves.
Everyone is a victim of the planning fallacy, optimists a little more so than others. It’s easier for an optimist to ignore relevant statistics when deciding whether to take a risk or not. Let’s take entrepreneurs, for example. The chances of a small business surviving for 10 years in the United States are about 34%. Yet, a survey found that US entrepreneurs tend to believe that they are in a promising line of business and estimate their chances of success at a whopping 60% (whopping in comparison to the actual statistic). This makes sense. You would hardly expect an entrepreneur to proceed with their plan if they acknowledged that the chance of the venture surviving 10 years was a mere 35%.
Cognitive bias also pushes optimists to entirely underestimate the competition. More often than not, optimists tend to believe that they are better or luckier than the average person. When faced with the difficult question of how entrepreneurs will withstand the competition, they focus on what they know best—their plans, their actions and an understanding of the immediate environment. They also tend to be more confident in their abilities than those of their competitors. The important thing to note, however, is that all of these are key characteristics that enable optimists to innovate despite all the odds. Without this biased perspective, the number of startups and inventions we see in the world today would probably be halved.
So how do we help optimists mitigate their overconfident optimism, especially optimism in business? While there isn’t a foolproof method, pre-mortems are an increasingly popular and effective way for organizations to overcome the pitfalls of overconfidence. A pre-mortem confronts overconfidence in two ways.
Firstly, it pushes the team of experts to work systematically through the available statistics, likely pitfalls and the effect of an unpredictable external environment. It also frees the imagination to consider all that can go wrong in the undertaking of a project. Secondly, a pre-mortem acknowledges overconfidence and legitimizes doubt. Both go a long way in terms of establishing a sturdier plan of action.
What does a good pre-mortem look like?
The first part of a successful pre-mortem is getting an outside perspective. You’ve been working on your project. You know your plan of action inside out. Now, look at similar data that exists outside of your project. If you are opening an Italian restaurant, look at what percentage of Italian restaurants fail. Look at the statistics around how much investment it usually takes to get an Italian restaurant up and running. Block out your own estimates for the time being and look at the averages. If 70% of all Italian restaurants fail, understand that you are working against those odds and that there is no reason why your chances are better. Now work on pushing up the averages. This is where the actual pre-mortem kicks in.
Picture yourself one or two years into the future. Imagine that your venture has failed. Now begin to draft the reasons why. Put your wildest imagination to work. This process should involve all stakeholders, which is why it works best in an organization. Dedicate an hour to thinking of every possible scenario. In fact, I would recommend sleeping on it and revisiting it the next day to think of more way the venture might fail. If you feel like you’re sinking into the depths of despair, go get pizza and ice-cream.
Then comes the fun bit. You now know all the obstacles (well, not all, but most) that stand in your way. Now get to work on strategies to overcome them bit by bit. Create pro-active plans. Create backup plans. Create an entire handbook if you need to. Once you are done, not only will you be in a better position to evaluate the project, but if you continue with it, you will have a stronger action plan.
Is this foolproof? Hell, no! You will most likely feel even more invincible than you did before. You may trick yourself into believing that you now have all you need and that your chances of opening that Italian restaurant are definitely higher than 30%. Well, I hate to break it to you. At best, it’s 35%.
So why do a pre-mortem? Like I said, it’s the best chance that you have (well, until a better method comes along). It also gives you that 5% advantage. More importantly, if you get it right, you should strike the right balance between being confident and being realistic.
Go ahead. Try out a pre-mortem and let me know how it worked for you. I’m curious to hear all about how it goes.
Ankita Poddar is HR professional based out of India. Identified as one of the emerging young HR leaders in India in 2016, Ankita’s experience as an HR Business Partner gives her the opportunity to work closely with business leaders, innovate and execute on the behalf of customers especially in areas of people analytics, employee engagement, rewards and recognition and performance management.
Ankita blogs about all things HR at https://thehrbpstory.com.
You can follow her on Twitter @ankitapoddar.