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Peter Cochrane's Hard Drive 2000 Strange that sane people make dumb decisions EVERY day we have to make sensible choices between price, quality, convenience and risk. In general we get it right - we don't make bad choices or take silly risks. When purchasing everything from a car to food, we weigh up the cost, quality, likely reliability and suitability in a few minutes or seconds. Given the number of parameters involved in this process, we have to call upon our past experience, the opinion of others and the impressions imparted by advertisers and sales staff. What we don't do is become totally blinded by the up-front price. If something is remarkably low cost compared to the competition we ask why, and check it out before buying. Overall we come to a balanced view. How strange then that sensible and sane people working in large organisations across the planet make such dumb decisions. Almost without exception, large organisations always go for the lowest price, which inevitably tends away from the lowest lifetime cost. Why are people so smart in their private lives and so dumb in their corporate ones? Well, in their private situation, they have a vision of the entire process. They are both the customer and supplier, and feel the full brunt of their actions. In contrast, corporate life isolates them from almost everything, they only see a small fraction of the playing field, have very few levers to pull, and seldom feel the full impact of their individual decisions. Over a century ago Joseph Lister identified the importance of cleanliness in the process of curing disease and healing wounds. More recently, hospital administrators discovered that they could save minimal amounts of money by cutting back on cleaning contracts. As a result, many hospitals are dirty and grimy places alive with the deadliest of infections just waiting to attack. The outcome of upfront cost decisions is now manifest in extended patient bed times, multiple return visits, post-surgery complications and many a tragic demise. Somewhere between 6pc and 36pc of healthcare budgets are now wasted at the back end for a saving of much less than 1pc at the front. When the UK transport planners of the 1960 and 1970s came to the conclusion that all motorways should be at least four lanes wide, they were overruled by political forces bent on saving money. The result in the 1990s is massive congestion costing more than the national healthcare budget. There are many more examples. People are not really stupid. So what gives? I think it is simply that organisations get so big, and the problems and relationships so complex, that they defeat the inherent abilities of the human brain. In the past this may have been excusable, but not anymore. We now have the networks and computing power to analyse all the macro and micro aspects of organisations to be able to see everything at once. But if investment in the technology infrastructure, data mining and visualisation, is lacking, then by definition, so are intelligent decisions. We wouldn't try to drive a car blindfold, but it is exactly how many companies are managed. Peter Cochrane holds the Collier Chair for the Public Understanding of Science & Technology at the University of Bristol. His home page is: |
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