The Business Advice of a Lifetime: How a Pre-Mortem Can Save You from Disaster
How many times have you read about companies that made terrible choices? An acquisition goes awry, a product decision boomerangs, a new business direction flops. It happens all the time. But there’s a simple planning exercise that can help organizations mitigate many of the risks that businesses are bound to encounter.
It’s called the pre-mortem.
What you need to know
Simply put, a pre-mortem is a management decision-making technique that flips the traditional idea of the postmortem on its head. Unlike a pre-launch risk analysis, the purpose behind the pre-mortem is to identify potential problems early in the process by envisioning everything that might go wrong with a future project. But there’s value in the exercise; as a Harvard Business Review article on the topic notes, a pre-mortem is the best way to eliminate the need for a painful postmortem later on.
Who came up with the idea?
The term goes back to work published by cognitive scientist Gary Klein and Nobel laureate Daniel Kahneman. Their article leaned on research that Klein carried out on a process known as prospective hindsight and the help it offers improving the ability to predict future outcomes.
How it works
Essentially, a team is asked to anticipate the unanticipated and identify threats early in the planning process. If done correctly, the pre-mortem process surfaces all possible worst-case scenarios when it comes to execution.
After the exercise leader finishes briefing the team, it’s on the participants to think up every possible reason to explain the things that can go wrong. The team’s resulting list can then get applied to create proactive solutions.
Come ready to rumble
As Klein noted in an earlier Freakonomics interview, most people are way too confident at the beginning of a project. The pre-mortem is one way to sober them up in a hurry. All stakeholders in the organization should be invited to participate in a process that needs to be open and vigorous. Projects often fail because too many people are reluctant to speak up about their doubts during the all-important planning phase.
Consensus isn’t the goal of the pre-mortem. The team leader should foster dissent and debate. The point is to cultivate an atmosphere where job titles don’t count. If this is going to work, then the brass’ opinion can’t be worth more than anyone else’s in the room.
How can channel practitioners benefit?
There are any number of situations where resellers can apply pre-mortems to the task at hand—everything from taking a new product direction to making an acquisition or even selling the company. This is about blending theory and practice. The overarching goal is to gain a greater awareness of the different possibilities and challenges facing the organization before deciding upon a new course of action.
Tech companies that might have benefitted?
Take your pick. The list of ill-considered decisions is as long as the Mississippi. Everyone has their favorites but a few incidents over the last couple of decades stand out. Consider the following:
In early 2000, AOL and Time Warner announced a stunning $162 billion merger that proponents said would remake the tech and media landscapes. Unfortunately, it later became known as one of the biggest ever business flops. There has been no shortage of postmortems since then diagnosing what went wrong. But might a pre-mortem have helped the AOL and Time Warner teams avoid the looming catastrophe that seems so obvious in retrospect?
Pre-mortems are supposed to help find potential problems that otherwise don’t surface until they flare up. With the benefit of 20-20 hindsight, a pre-mortem into Time-Warner-AOL would have identified the corporate culture questions that later become so acrimonious. Had management thought this through more clearly, it might have been able to proactively build a new corporate culture that effectively subsumed the two rival cultures. Alternatively, the exercise might have forced all concerned to realize this was a hopeless situation, and both sides would have been able to step away from the abyss.
Voice of the Practitioner
When it comes to the importance of pre-mortems to corporate culture, would-be merger partners should heed the experience of MJ Shoer. After running Jenaly Technology Group, an MSP outside of Boston for 19 years, Shoer sold his company to Internet & Telephone, LLC in December 2015. Negotiating the sale of his company as well as advising clients on sundry deals taught Shoer the value of thinking about what can go wrong before signing on the dotted line. Here’s an edited version of a conversation we had with Shoer:
“You need to look very hard at the worst-case scenarios in case everything that I think is positive turns out to be 180 degrees opposite. It’s important to create a safe environment where you can challenge ideas and the accepted norms. What’s the worst thing that is going to happen? Will we be OK? Will our customers be OK? Will our employees be OK? You've got to do your best to think through all these things. I think the pre-mortem is an interesting concept because you can try to think outside of the box. A lot of times, the people who are involved in the acquisition get so involved that it’s hard to see the impacts of decisions. If you have a process by which you have those discussions, you’re going to be a step ahead of not having them, for sure.
“Companies can prevent a lot of trouble later by spending a lot more up front time considering the culture of the two companies and how the cultures are going to be integrated. Whether that will be a straightforward process or whether that brings out some issues that you need to be concerned about, you need to try to head them off. I’m talking about simple things, like looking at how the people in the merged company will integrate and how their positions will align or the seniority of managers and things like that. Often there’s too little pre-thought put in and so you wind up dealing with tensions because something’s not working out.
Sources for future reading:
The premortem technique: Paper by the Asian Development Bank on how to conduct premortems.
McKinsey Quarterly Report: “Strategic Decisions: When Can You Trust Your Gut?”
Harvard Business Review: “Performing a Project Premortem”
Freakonomics blog: “Voice of the Practitioner”