How can Daniel Kahneman help organizations get better at Strategic Planning?

Oxfam is embarking on another round of strategic planning – a protracted process of research, debate and

An outbreak of Strategic Planning. Credit: wikipedia

negotiation that sometimes make me wonder whether ‘INGO’ should really stand for ‘Interminable Navel-Gazing Ordeal’. Why the negativity? Partly because I worry that much of what is painfully agreed then sits on a virtual shelf until the next exercise 5 years on. The discussion itself can be useful and enlightening for those involved, but I have my doubts about its wider impact.

Trying to understand my lack of enthusiasm sent me back to Daniel Kahneman’s best-selling book ‘Thinking Fast and Slow’. Because it feels to me like the whole strategic planning process operates entirely in the thinking slow lane, while between strategic plans, people actually spend much of their time in the fast lane. Let me explain.

Kahneman describes ‘two systems in the mind, System 1 and System 2.

  • System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control.
  • System 2 allocates attention to the effortful mental activities that demand it, including complex computations. The operations of System 2 are often associated with the subjective experience of agency, choice, and concentration.’

These systems coexist and interact:

‘Systems 1 and 2 are both active whenever we are awake. System 1 runs automatically and System 2 is normally in a comfortable low-effort mode, in which only a fraction of its capacity is engaged. System 1 continuously generates suggestions for System 2: impressions, intuitions, intentions, and feelings. If endorsed by System 2, impressions and intuitions turn into beliefs, and impulses turn into voluntary actions.’

System 2 is really hard work (Kahneman likens it to mental maths), so when asked difficult System 2 questions people often choose to hear (and answer) a simpler System 1 question. Eg

  • Question: how should financial speculators be regulated?
  • What someone hears/answers: how do I feel about financial speculators?

So what’s the relevance to aid organizations and strategic planning? System 2 sounds very much like the SP process: ‘complex computations, agency, choice, and concentration.’ Yep. And we like to think that’s how we work the rest of the time too, but we don’t. We make snap judgements and have System 1-like ‘rules of thumb’. Building on a previous post:

Strategic Plan: sets out the kind of world we are seeking to build/support. This should encapsulate the values that get people out of bed and into the office every morning, inspiring them to soldier on, in spite of setbacks and annoyances. It could also include some ‘big hairy audacious goals’ for changing the world, and some guiding principles for how we work.

Rules of thumb: the kinds of heuristics we employ in our daily work, which reflect the organization’s identity, direction and values. According to Ben Ramalingam, the US marines have 3 such rules in combat situations: ‘stay in communication, take the high ground, keep moving’ and then improvise the rest. My candidates for Oxfam’s rules of thumb would include

  • Redistribute power and wealth
  • Find the feminist angle.
  • Makes sure it’s fundable
  • Be certain that this is what local partners want

But we never acknowledge, identify or critique those rules of thumb, and I’m pretty sure they would be different for people in different parts of the organization, which may explain some internal disagreements and conflicts – even when confronted with the same System 2 issue, people are actually ‘hearing’ different System 1 questions.

Obviously you need both – as my colleague Matthew Spencer points out ‘the idea that you can get by on heuristics alone is daft. Imagine the unintended consequences of those troops only operating to ‘stay to the high ground etc’ with no clarity on their mission, no reflection on whether there is a military solution’. The key to a good strategic planning should therefore be to examine the interaction between Systems 1 and 2 in an organization’s way of working.

Frustratingly, Kahneman talks mainly about individual psychology, and only touches briefly on how this applies to organizations.

‘Organizations are better than individuals when it comes to avoiding errors, because they naturally think more slowly and have the power to impose orderly procedures. Organizations can institute and enforce the application of useful checklists, as well as more elaborate exercises.

Whatever else it produces, an organization is a factory that manufactures judgments and decisions. Every factory

US marines discuss heuristics. Credit: wikipedia

must have ways to ensure the quality of its products in the initial design, in fabrication, and in final inspections. The corresponding stages in the production of decisions are the framing of the problem that is to be solved, the collection of relevant information leading to a decision, and reflection and review. An organization that seeks to improve its decision product should routinely look for efficiency improvements at each of these stages.

Constant quality control is an alternative to the wholesale reviews of processes that organizations commonly undertake in the wake of disasters. There is much to be done to improve decision making.’

OK, so Kahneman is saying continuous ‘quality control’ is better than periodic massive analysis + planning exercises, which sounds pretty much like the Adaptive Management mantra, but what he doesn’t shed any light on is whether and how organizations should focus on their System 1 rules of thumb. For example:

  • Get everyone to make them explicit, then discuss the differences
  • Acknowledge that system 1 is often OK, because it leads to fast, less exhausting decision making and action. But then what are the triggers for saying ‘Stop, let’s dip out into some system 2 slow thinking’? Is that the periodic stand-back that adaptive management often advocates – a time to review progress, spot where things aren’t working and new opportunities have opened up, and adjust the plan accordingly?

Half thought-through ideas, I’m afraid, so over to you.



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14 Responses to “How can Daniel Kahneman help organizations get better at Strategic Planning?”
  1. Joe

    Have you come across the concept of strategic doing? There is a free MOOC, run by an American university

    It basically boils down to following 4 simple stages:
    What could we do?
    What should we do?
    What will we do?
    The first two stages/questions are more visionary and create opportunities; the second two stages/questions move to action.
    I found this very helpful approach as it can be applied on any timescale. You can cycle through the questions to work out what is the most strategic actions for the day. It can also be used organisation wide for a full strategy

    The other process that is powerful for ‘collective strategic planning’ is theory U ( which is an ‘ecosystem’ approach for bringing in all stakeholders to design and plan together.

  2. Good reflections. There are never either/ors here. Our organisation has long promoted the idea of finding your ‘learning rhythm’, which is regular space, a few days at a time (to ensure some immersion), every month or two, where the organisation or team can pause, reconnect to purpose and each other, reflect together, deepen, adjust and improve their practice – call this monitoring if you like, though I hate the word – it’s really an action learning practice that closes the gap between System 1 and 2. Then longer Strategic rhythms are also necessary (every 6 months to 3 years depending on the instability of the context) to re-examine the context, re-purpose, re-align, re-vamp, re-partner etc – call this evaluating, with an emphasis on validating and renewing strategy – about keeping System 2 relevant. Of course we know that donors screw up the whole system by imposing their compliance needs over an organisation’s learning needs, but that’s another vital topic. Learning rhythms are important here to bring some sense of stability to the chaos – we are rhythmic beings after all – without reflective rhythms we can become insecure in ourselves and our relationships. Knowing that there is planned time ahead where, as a practitioner, I can bring my experience, concerns and ideas can do much to reduce anxiety and promote a reflective, collective practice.

  3. Ben

    The three rules of the US marines are deployed when battlefield plans break down. They provide marines trapped behind enemy lines in a fluid and rapidly evolving, dangerous environment a set of guiding principles for action when facing uncertainty. They also allow HQ to guesstimate frontline developments even when they can’t see what’s going on — ensuring coherence of the whole operation even when the situation starts unfolding in unexpected ways. So they are not a strategic tool but more a way of framing immediate possible tactical actions in a coherent fashion.

  4. gawain kripke

    One of my frustrations with strategic planning (at oxfam and elsewhere) is how resource-blind they are. So much of strategy is actually resource-dependent. You should select strategies based on resources – or reasonable expectations of resources. Thus (using your military similies), you would have a very different war-fighting strategy if you are guerillas in the mountains with slingshots than if you have B-52s. And you might have very different goals as well. For me, the ideas of strategy/planning is about assessing and then applying your resources most effectively towards goals. It requires choices and discipline. And that’s missing in a lot of our strategic planning.

  5. I think many people set up a false dichotomy between doing what you are currently doing but doing it better versus focusing on what you do in future – falling into the trap of using different approaches to deal with the present and the future. The future is of course informed what we are doing now, which is shaped by the past – so its worth reflecting on the here and now (as well as the past), which can itself inform future thinking and actions. A lot of time is wasted idealising a distant future and hoping somehow that becomes true.

    • Duncan Green

      And I guess part of that interrogation of the present should be ‘what are the implicit rules of thumb that we currently use, but maybe don’t acknowledge’. Then drag them into the light, take a look, and see if they are the right ones.

  6. Abdifatah Dhuhulow

    If we are adopting strategy for making change to the lives of many or for organisational change, one can do well by including the discussion or consulting with the people at of the bottom of the hierarchy.

    In the case of organsition, the front line workers have the insight knowledge of what needs to be changed better than the people at the top of structure and can also sense well ahead before things reach crushing point. As for the beneficiaries or the people to be served, they have the local knowledge that are vital for making good decisions in the early stages of strategy formulation as well as the implementation process i.e. knowledge about the culture, environment, attitudes and imaginations.

    My second point, we need to know that organisation is the same as an individual – no one can do alone by themselves.

    For example, in order for an individual to act and make change three things must happen together for that change to materiliase i.e. Comptence, desire and opportunity. So talented individual and ambitious individual can achieve nothing, if the opportunity is missing. Likewise, for an organisation to change, there has to be cooperation and willingness to cooperate among people running it, but these two cannot happen if there is no trust.

    So to think logically and strategically, we need to recognise from the outset that we are interdependent on each other and that whatever strategy we come up with might not even work, but our ability to adopt is what will works at the end.

    There is an Arabic saying, Al-ilmu bayna al-talamid, and the rough translation: “knowledge lies within the students”.
    In a nutshell, whatever we are trying to solve, we must not see things only from our point view, but that of others. Creatively and collectively, we must match knowledge with resources, culture with attitude, and environment with imagination. And lastly how we can change things collectively, please read ” The Power of Positive Deviance by Richard Pascale, Jerry Sternin and Monique Sternin.
    Thank you for reading.
    Abdifatah Dhuhulow

    • Duncan Green

      I’m a big fan of Positive Deviance and the Sternins, Abdifatah, not least because it recognizes the system’s ability to generate its own solutions – a good antidote to ‘white saviour complex’.

      • Abdifatah Dhuhulow

        We tend to forget what people facing difficulties or one serves can do and contribute, if they are included in the solution process.
        From business perspectives also I like the book: Co-Opetition by Adam M Brandenburger.
        I like your blog and read it alot. Thank you for your good work. Keep it up.

    Much strategic planning is “visionary”. I mean it are visions you get after eating the wrong kind of mushrooms. Not really reality based. A first step to get grounded is just noting what you are really doing, and what you are proud of. Do more of it.
    Good strategic planning would also actively “game” the interaction between system 1 and 2: define rules of thump that are simple and replace convoluted procedures. I try for the moment to use “first principles” thinking. As an example take the SDGs. The goals are often straightforward: you know it when you see it: does this approach support women? Really? . The indicators however, are easier to game: what is the real value of having more female parliamentarians in a dictatorship? Also on accountability, if find the principles behind the rules for giving subsidies easier to take as a guide, than the complete rulebook, where fast, very fast, we are just trying to live at the extreme of what is allowed.

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