How groups make risky decisions
Posted by APM on 30th Apr 2012
This event was kindly hosted by Atkins (APM Corporate Member) at their excellent facilities at the Hub, Aztec West.
We are all used to looking at risk from a process perspective and traditionally that is what most risk courses and lectures cover. The risk process is pretty mature and has been around and taught for a long time, so why do people and groups still ignore risks and make irrational decisions?
Tonight, David Hillson (the Risk Doctor) took a very different perspective to risk, looking at people and behavioural aspects of managing risk and opportunity. His research has identified a number of factors which influence risk decision making that as project managers we need to be aware of and to think how we can ensure that we avoid making mistakes.
David first looked at what he means by risk and decision making. We make decisions all the time, but the important ones are decisions that are both risky and important; important is where outcomes are uncertain and they matter. Therefore risk can be defined as uncertainty that matters.
Individuals will make such decisions based on the data available, but also their attitude to risk. Some will be happy to accept risk; some will be adverse to risk. Understanding risk attitude is key to understanding how people reach decisions. Risk attitude can be defined as a chosen response to uncertainty that matters influenced by perception. This exists on multiple levels, individual, groups, society.
At an individual level, perception is influenced by three factors: conscious (situational assessment), subconscious (gut feel and how close it feels to you personally), and affective (feelings and emotions).
Of course, in organisations, decisions are often made in groups, which further complicate matters. Davids research has provided an insight into how groups make decisions.
The key influencing factors are stakeholders, the situation and group dynamics, and these are influenced by risk attitude of the individuals and the group.
Group behaviour is mainly influenced by either a strong leader, who can override situational factors such as context and culture, with group dynamics following the leader, or strong situational factors, with key individuals adapting to fit, with group dynamics following the context and culture.
The key is managing risk attitude, noting that this is chosen and can be modified using knowledge of emotional intelligence, starting with self awareness.
David presented the Six As Model:
Awareness and appreciation of stakeholder factors, situational factors and group dynamics, assessment of whether change is needed through assertion and action, or, whether acceptance of the status quo is ok. The use of facilitation can often help with awareness and appreciation of the influencing factors.
David concluded that risk is not managed by robots, but by people, and decisions are also made by people, who are emotional beings, influenced by psychology. Managing, and if necessary, changing risk attitudes is key to effective risk management, and emotional literacy offers a useful framework for this.