How can Daniel Kahneman help organizations get better at Strategic Planning?

June 11, 2019

     By Duncan Green     

Oxfam is embarking on another round of strategic planning – a protracted process of research, debate and negotiation that sometimes make me wonder whether ‘INGO’ should really stand for ‘Interminable Navel-Gazing Ordeal’. Why the negativity? Partly because I worry that much of what is painfully agreed then sits on a virtual shelf until the next exercise 5 years on. The discussion itself can be useful and enlightening for those involved, but I have my doubts about its wider impact.

Trying to understand my lack of enthusiasm sent me back to Daniel Kahneman’s best-selling book ‘Thinking Fast and Slow’. Because it feels to me like the whole strategic planning process operates entirely in the thinking slow lane, while between strategic plans, people actually spend much of their time in the fast lane. Let me explain.

Kahneman describes ‘two systems in the mind, System 1 and System 2.

  • System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control.
  • System 2 allocates attention to the effortful mental activities that demand it, including complex computations. The operations of System 2 are often associated with the subjective experience of agency, choice, and concentration.’

These systems coexist and interact:

‘Systems 1 and 2 are both active whenever we are awake. System 1 runs automatically and System 2 is normally in a comfortable low-effort mode, in which only a fraction of its capacity is engaged. System 1 continuously generates suggestions for System 2: impressions, intuitions, intentions, and feelings. If endorsed by System 2, impressions and intuitions turn into beliefs, and impulses turn into voluntary actions.’

System 2 is really hard work (Kahneman likens it to mental maths), so when asked difficult System 2 questions people often choose to hear (and answer) a simpler System 1 question. Eg

  • Question: how should financial speculators be regulated?
  • What someone hears/answers: how do I feel about financial speculators?

So what’s the relevance to aid organizations and strategic planning? System 2 sounds very much like the SP process: ‘complex computations, agency, choice, and concentration.’ Yep. And we like to think that’s how we work the rest of the time too, but we don’t. We make snap judgements and have System 1-like ‘rules of thumb’. Building on a previous post:

Strategic Plan: sets out the kind of world we are seeking to build/support. This should encapsulate the values that get people out of bed and into the office every morning, inspiring them to soldier on, in spite of setbacks and annoyances. It could also include some ‘big hairy audacious goals’ for changing the world, and some guiding principles for how we work.

Rules of thumb: the kinds of heuristics we employ in our daily work, which reflect the organization’s identity, direction and values. According to Ben Ramalingam, the US marines have 3 such rules in combat situations: ‘stay in communication, take the high ground, keep moving’ and then improvise the rest. My candidates for Oxfam’s rules of thumb would include

  • Redistribute power and wealth
  • Find the feminist angle.
  • Makes sure it’s fundable
  • Be certain that this is what local partners want

But we never acknowledge, identify or critique those rules of thumb, and I’m pretty sure they would be different for people in different parts of the organization, which may explain some internal disagreements and conflicts – even when confronted with the same System 2 issue, people are actually ‘hearing’ different System 1 questions.

Obviously you need both – as my colleague Matthew Spencer points out ‘the idea that you can get by on heuristics alone is daft. Imagine the unintended consequences of those troops only operating to ‘stay to the high ground etc’ with no clarity on their mission, no reflection on whether there is a military solution’. The key to a good strategic planning should therefore be to examine the interaction between Systems 1 and 2 in an organization’s way of working.

Frustratingly, Kahneman talks mainly about individual psychology, and only touches briefly on how this applies to organizations.

‘Organizations are better than individuals when it comes to avoiding errors, because they naturally think more slowly and have the power to impose orderly procedures. Organizations can institute and enforce the application of useful checklists, as well as more elaborate exercises.

Whatever else it produces, an organization is a factory that manufactures judgments and decisions. Every factory must have ways to ensure the quality of its products in the initial design, in fabrication, and in final inspections. The corresponding stages in the production of decisions are the framing of the problem that is to be solved, the collection of relevant information leading to a decision, and reflection and review. An organization that seeks to improve its decision product should routinely look for efficiency improvements at each of these stages.

Constant quality control is an alternative to the wholesale reviews of processes that organizations commonly undertake in the wake of disasters. There is much to be done to improve decision making.’

OK, so Kahneman is saying continuous ‘quality control’ is better than periodic massive analysis + planning exercises, which sounds pretty much like the Adaptive Management mantra, but what he doesn’t shed any light on is whether and how organizations should focus on their System 1 rules of thumb. For example:

  • Get everyone to make them explicit, then discuss the differences
  • Acknowledge that system 1 is often OK, because it leads to fast, less exhausting decision making and action. But then what are the triggers for saying ‘Stop, let’s dip out into some system 2 slow thinking’? Is that the periodic stand-back that adaptive management often advocates – a time to review progress, spot where things aren’t working and new opportunities have opened up, and adjust the plan accordingly?

Half thought-through ideas, I’m afraid, so over to you.

June 11, 2019
Duncan Green