Million Dollar Consulting® Mindset
From Alan Weiss

Volume 1 Number 7
July 2011

A monthly newsletter with the objective of quickly and pragmatically helping consultants to improve their craft, results, and lives.

The Nature of Adverse Consequences

There are three aspects in decision making. There are the objectives to be met, which typically seek to maximize output while minimizing input (resources); there are the alternatives to be considered, or options that are available; and there are risks, or adverse consequences.

Every single alternative in every single decision has adverse consequences. The may be minor or mild, but they’re there. And they may be major and fatal, but unseen or underappreciated. That’s why every good consultant need to develop a healthy respect for them, and help clients identify and deal with them.

People tend to “hop on the bandwagon” of popular alternatives, which seem highly favorable in terms of meeting the objectives of the decision. But if that zeal is too strong, it tends to overlook the risks. We become blinded by the light of the benefits. Adverse consequences lurk in the shadows of the decision, and we have to cast light on them in terms of the probability of their occurrence and the seriousness of their impact if they do occur.

Case Study

I ask people frequently, as an exercise, “What would you do if concerned about fire when you’re building an important new facility?” I encourage them to shout out their first responses, and they tend to be sprinkler systems, evacuation routes, fire extinguishers, fire alarms, fireproof doors, insurance, and even on-site fire apparatus.

The problem is that all of these are contingent actions, designed to reduce the effects of fire if it occurs, mitigating loss of property, money, and life.

However, to prevent fires, one needs a fire marshal, “no smoking” signs, adhered to standards for electrical equipment, isolated combustibles, and so forth. The fire fighters earn deserved respect for racing into burning buildings, but fire marshals are the ones who can prevent the fire.

No matter how excellent the sprinklers, insurance, or escape routes, the fire has already begun. Look to seriousness in risk to develop contingent actions to mitigate effects,  but look to probability to develop preventive actions which can eliminate the problem from ever occurring.

Frequently Asked Question

Q. Is there a case to be made for simply accepting risk, sort of rolling the dice, because trying to prevent it or contain it is simply too expensive?

A. It depends what your investment is in terms of money, time, energy, and repute. If the worse thing that walling on ice can do is create a fall that skins my knee, then that may be worth the risk of walking. But if the streets are coated and the risks of driving include death or severe financial loss, then perhaps I don’t want to take the car that day. For example, any consultant who doesn’t carry errors and omissions (malpractice) insurance in this litigious age is accepting far too much risk just to save a few bucks.

Upcoming

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