FUTUREVIEWS, January 2010

Gary Klein discusses how business leaders can make better decisions under shifting conditions of high uncertainty and ambiguous goals where traditional procedures fail.

Gary Klein, Ph.D., is a Senior Scientist at Applied Research Associates. He was instrumental in founding the field of Naturalistic Decision Making. Dr. Klein received his Ph.D. in experimental psychology from the University of Pittsburgh in 1969. He spent the first phase of his career in academia as an Assistant Professor of Psychology at Oakland University (1970-1974). The second phase was spent working for the government as a research psychologist for the U.S. Air Force (1974-1978). The third phase began in 1978 when he founded his own R&D company, Klein Associates, which grew to 37 people by the time it was acquired by Applied Research Associates (ARA) in 2005. During this phase, Dr. Klein developed a Recognition-Primed Decision (RPD) model to describe how people actually make decisions in natural settings. He also developed methods of Cognitive Task Analysis for uncovering the tacit knowledge that goes into decision making.

He has written: Sources of Power: How People Make Decisions (1998); The Power of Intuition (2004); and Working Minds: A practitioner’s guide to Cognitive Task Analysis (Crandall, Klein, & Hoffman, 2006). Dr. Klein’s latest book, Streetlights and Shadows: Searching for the keys to adaptive decision making, was published in October 2009.

WTRI: Give us a brief overview of your new book, Streetlights and Shadows.

GARY KLEIN: The book is about how people make decisions under messy, complex, ambiguous, shifting conditions when all the traditional advice goes out the window. It examines ten examples of traditional advice, for example, pinning down the goals, following the procedures, gathering information to reduce uncertainty, waiting to see all the evidence before drawing conclusions, and preparing for all the risks. These ideas make sense in well-ordered situations but they can get us into trouble in complex situations or when confronting what we call “wicked problems”. That’s when we have to give up our reliance on procedures, statistics and formal logic, and prepare ourselves to continually adapt to situations and rely on our own judgments.

WTRI: We often see managers who, from the outside are operating in these kinds of complex situations you describe, but they still think they are not, or act as though they are not. How does a person would know that they’re operating in what you would call “messy” or “complex” conditions?

KLEIN: Some basic criteria for gauging that you have moved from a well-ordered situation to a complex one are, first, lack of structure. You know you are lacking structure when more and more often you try to apply rules and you hear the answer: “It depends”. Another is, lack of stability, which means that the situation is continually changing in important ways. A third one might be lots of moving parts, lots of connections between those moving parts, a lot of uncertainty about which are the most important ones, and little confidence that you know all the important linkages. Finally, you know you are in a complex situation when there is considerable uncertainty about the key causal drivers. When these kinds of factors come together, you have low predictability, difficulty in anticipating, and differences in the way people size up the same situation.

KLEIN: When I first started talking to executives I assumed they were working with mostly with well-ordered situations, and maybe 20% of the time they were confronted with these kinds of complex situations. So I questioned them: “How often do you encounter these kinds of complex situations or ‘wicked problems’?” And they just laughed. They would say, “it’s easily 40 to 60%, some say 60 to 80%”. So, when I talk to Army generals, in the past they would say, “we pursue the mission”. But now they just shake their heads and say, “we were just in Iraq. My job was to restore the educational system in Baghdad. What does that mean?”

WTRI: What is different about now than in the past, for both military and business?

KLEIN: I think it’s always been tough for business. For the military, before they went to Iraq, they weren’t as heavily caught up in the intricacies of stability operations. And so they could think, “okay, I’ve got to take this hill by 2 tomorrow”. While the path to get there could be quite messy, the goals were relatively clear, they have to take the hill. But it’s different when you have a more ambiguous goal like restoring the educational system in Iraq. Nobody gave them any useful guidance. It’s not that they withheld it, they had to do something, but they didn’t know what it was.

WTRI: We were curious ; in this book, what was for you the most new or surprising insight you had?

KLEIN: One development was that the work we had done on decision-making had spilled far beyond decision making to include sensemaking, planning, re-planning, and common ground. These kinds of approaches take us into new areas of decision-making research. People have beliefs that are not usually accurate and are not often helpful. People hold on to myths, and the myths are getting them into trouble. You’ve seen that with your clients as well. That’s what I love about your work is that you’re able to shake people loose from the conviction that they live in a simple world and move them to some place else. Let’s take the medical domain. With evidence based medicine, when you’re doing things like inserting intravenous lines, things that seem relatively stable, and reasonably predictable, research that deals with procedures and checklists applies very well. But when you get into complex tasks, the research and beliefs can start working against the community. There can be a belief in the effectiveness of certain procedures that can have a negative impact.

WTRI: Is there anything you found in research for your current book that has disrupted your thoughts and convictions in your previous research?

KLEIN: Listening to a lecture by David Snowden on complexity, well-ordered situations, chaotic situations, I realized that the issue is not whether these common assumptions we make about decision making are not right or wrong, the issue is really: Under what conditions do they hold and under what conditions don’t they hold? But the thing that challenged me the most was a book by William Duggan called Strategic Intuition. In my previous work I discuss Recognition Primed Decision Making. This works best when you have a stable enough situation that somebody can match a pattern. But what happens when you can’t? So many organizations put most of their energy into reducing mistakes. And that’s important because you don’t want lots of mistakes, they can cripple you. But eliminating mistakes isn’t the same as having insights. I have a formula which is P = ↑ + ↓. P stands for performance improvement. To improve performance you need to increase insights and expertise and reduce mistakes. Most organizations focus on procedures and standards. And the reason for doing that is you can measure and monitor people. You can see when people depart from best practices. It’s very easy to evaluate performance. You might think that the way you reduce mistakes will increase the chance of having insights. I don’t think so. I think if you’re lucky, the way you reduce mistakes will have no effect on insights. But I think the more common case is that the procedures that are put in to reduce mistakes get in the way of insights.

WTRI: What kind of scaffolding would organizations provide to produce more insights rather than have a focus on procedures?

KLEIN: I think companies need to focus on what they can do organizationally to harvest the insight of the people within the organization, rather than focusing on reducing mistakes. Often, the more deviant the insight, the more it gets brushed aside. When we look at intelligence failures, like Pearl Harbor, 9-11, Yom Kippur War, or the Cuban Missile Crisis, there were lots of people in many of these cases, who were sounding the warning. But they were brushed aside, because if it’s an anomalous incident, then it’s often too discrepant with people’s mental models. It’s hard for them to get their heads around it. So I think it’s more of an organizational failure than an individual failure. You can’t do this all from the top down. You have to appreciate the strength from the bottom and listen to them.

WTRI: In the ten claims you talk about, you touch on objectives and ill-defined goals. What do you mean when you talk about goals?

Well, it depends on which direction you’re looking from, or what you’re vantage point is. For a corporation you might think the highest level goal is profit. But this is not always the case. It’s good to take the Xerox 914 copier example. Xerox was making specialty types of paper. They weren’t making business machines and they never wanted to. They were forced into that business. The highest level goal was keeping that organization alive. And they were willing to sacrifice profits in order to pursue a next technology that would let them continue to survive. We see lots of examples where corporate leaders care more about their own jobs and stability than they do about profit. We see cases where corporations say we’re so confident in our company that we’re going to buy back stock. And what they’re doing is not necessarily in the best interest of the stockholders.

WTRI: Maybe when we’re talking about profitability, we’re really talking about survival, because if you keep losing money you will not survive.

It’s important to distinguish between profitability and survival. You want to have both profitability and survival and the question is: How much are you going to trade them off under certain conditions? If you look at the example of Boeing, a book was written called Betting the Company. Boeing has to bet the company every time they introduce a new major product line. Companies that fail to capitalize on those kinds of bets don’t exist any more. On the other hand, you look at the classic story like Bill Gates. He never set out to start a software company. It wasn’t his goal to have profits or sustainability for a software company, because there was no such thing. But I also think that you can’t have a company that simply maintains focus on discovery. The original Xerox was desperate and was trying to find something that would keep them afloat. And then they developed this enormously successful product line and they became a very large and powerful company. They became much more risk averse. They needed to impose management controls, but if those controls had been there from the beginning, they never would have become a successful company. They had transformed. That’s the downside of being successful. Risk aversion can get in the way of innovation.

WTRI: How would you apply what you discuss in the book and apply it to researchers like us who are focused on organizational change?

I think you’re in the right place, because I think there’s a limit to what you can do with a top-down approach, where you decide what everybody should do. What excites me these days is organizational learning. Instead of trying to program the instruction, I’d look at the organizational environment and see what’s going on that allows people to learn faster in one organization than another. With the kinds of simulations WTRI develops, this is something I think you’re well poised to address. How can you harness bottom up innovation? How are we accelerating the learning process without having to control it all and without a central insight? It will be interesting to see if you can shape your technologies to support a non-focused organizational learning. Because focused organizational learning says: “Here are the things we want everybody to learn, now let’s come up with a strategy, let’s come up with procedures for getting the information across.” In the meantime, you’re incurring all these coordination costs to do it, and by the time it gets rolled out, it might not be as relevant. I think you’ve been very successful in making people less complacent – showing them that their mental models are inadequate in terms of how their business actually works. Even if the company you’re working with is not in a crisis, I think the way you are able to challenge their thinking is a great motivator.