Managing Crisis

Managing Unintended Consequences

Three tips for improving decision making

by Lucien G. Canton / March 19, 2013 0

The Law of Unintended Consequences says that the actions of people always have unanticipated consequences, something the State of California is finding out as it considers the impact of its decision to furlough public employees. As many do, government decision makers failed to consider the impact of the human factor. If you give an employee an unpaid day off during the week, that employee will make use of the time and save their leave time. The result is that any current savings may well be exceeded by the long term costs as employees cash in unused leave upon retirement.

The State is, of course, not alone in falling victim to unintended consequences. During a series of floods in Southern California, I was told of a homeowner who had built a very effective barrier to divert flood waters from his home. It was effective all right - the flood waters flowed around his property and wiped out his neighbors' houses on either side.

We see the same issue on a much grander scale. The levee system in the Mississippi basin was favored over more effective methods of flood control because it increased the amount of arable land in the floodplain. The result was more infrastructure being built in at-risk areas and increased damage due to levee breaches. The Flood Insurance Program was designed to encourage mitigation planning. Instead it has subsidized construction in flood zones.

These examples have several things in common. The first is the driving factor of economics. In each case, the original intent was to reduce costs but the ultimate result was to increase costs. Closely associated with this is the human factor: if there's a way to make money, even at the cost of increase risk or future expense, someone will do it.

So how do you prevent unintended consequences? Well, by definition, you can't. Our actions, no matter how simple, always carry unintended consequences and they are not always negative. However, we can do a better job of identifying the potential consequences of our decisions. Here are a few ideas:

  1. Question your cost-benefit analysis. There's something about numbers, even made up ones, that imbue even the wackiest projects with reality. Numbers equal reality in our minds. Avoid this trap by looking closely at the assumptions that drive the analysis. Also recognize that the cost-benefit analysis is one data set - it should not drive the decision making process.
  2. Consider intangible consequences. The results of bad decision making are not always tangible. This why the cost-benefit analysis cannot be the sole determinant of decisions. Loss of reputation is not easy to quantify but it can destroy an organization. Demographic shifts as the result of disaster can destroy communities. Look beyond just the costs that are easily-quantifiable.
  3. Don't forget human nature. People are their own worst enemies sometimes. Understand the community affected by your decisions and how they will react is critical part of the decision making process. Studies on mitigation have shown that what works in one community won't work in others if the community culture is different. You need to consider whether people will support your decision and how the may try to circumvent it.

The Law of Unintended Consequences is unavoidable. But that doesn't mean we can't make better decisions by expanding our thinking and not taking things for granted.