Don't Plan For the Worst

Thinking clearly about operational planning and resources

“Hope for the best, plan for the worst.”

We’ve heard it a million times. We accept it as wisdom.

But while it’s a handy bit of folksy insight for life in general, it’s a great way to shoot your foot off as a professional leader working to intelligently allocate resources.

You can’t plan for everything. But you can imagine everything.

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I had a chance recently to support a client through a tough scenario.

The issue at hand was resources.

She felt serially short of the people, time, and direct support needed to cover operations. Yet, there was absolutely no possibility to get more of anything.

What to do?

Or more precisely, what to stop doing?

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With some analysis, we were able to determine that the organization was over-investing resources in low-percentage operational scenarios.

An outsized proportion of manpower, time, and direct support were committed to guarding against a few edge-case possibilities which had previously occurred and deeply scarred the team’s psyche.

By re-calibrating, my client was able to array resources more thoughtfully, and in doing so substantially reduce pressure on her team.

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I was able to help her because I’ve seen a lot of this type of thinking previously in both military and commercial environments.

And I’ve screwed up the balance myself many times.

It’s not mystifying why.

Organizations gravitate toward worst-case scenarios. Because they are comprised of individual people who feel fear.

The psychological torment of the worst possible scenario unfolding is powerful. Absent deliberate intent to the contrary, an organization will drift inexorably and sometimes unconsciously into guarding disproportionately or even unreasonably against it.

Information passing through the lens of bias will seem to confirm fears about the worst case.

And given that it’s much easier to argue in favor of avoiding cost than taking risk (hat tip to Clausewitz and defense as the stronger form of war with the weaker object), nightmare scenarios are like a high-powered tuning fork for resource debates and decisions.

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One way to beat this is to step back and think more carefully. Use analysis to dissolve emotion and make clear, logical resource decisions.

Quantifying the costs of different scenarios is a great technique.

Borrowing from my experience as a military planner, I like to divide operational planning into two possibilities: most likely and most dangerous.

What’s the likelihood of each? What’s the cost or payoff of each?

For example, if I’m planning for an event day in an operational fulfillment center, I can think of two hypothetical possibilities.

Most likely, demand will be 25% above baseline, and capturing all that demand is worth an additional £2M in revenue. This scenario has a 90% chance of happening.

But there’s a 10% chance demand will spike +50%, and capturing all of the additional orders would be worth £4M.

By multiplying likelihood x payoff, we can quantify the value of each outcome.

Now, armed with these values, we return to first principles.

Resources should map to value.

Thus, since £0.4M is 18% of the total of all possible payoffs (£1.8M + £0.4M) the most dangerous scenario (B) should attract no more than 18% of total resources. 82% minimum of all resources should be devoted to the most likely scenario (A).

In my client’s example, we realized around 40% of labor, time, and direct support were directed to the edge scenarios, which was about 3x the baseline investment suggested by our analysis.

Most of the organization’s reliability and maintenance capacity was misdirected into posturing for eventualities which were unlikely to ever occur. And therefore inert against the team’s primary effort.

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This is not scripture.

I do not recommend passing an organizational law saying resources are exactly limited by the likelihood of need.

It’s more like a doctrine. A suggested mental starting point for planning. An anchor point, from which detailed plans can adjust via debate, further analysis, and iterative assessment.

Continual adjustment may yet drive some level of purposeful over-investment in edge cases.

But without some kind of anchor, you’re at the mercy of a collective action problem driven by intuition and judgment without a tether to logic. You’re at the mercy of fear.

And this is not a good place to be. Because fear is bottomless. Investing in fear is a straight line to bankruptcy.

But here’s the good news.

You’re probably sitting on a gold mine. Maybe you feel short-staffed. Maybe you feel over-stretched.

Take a step back and think about how you’re investing your resources. To the extent you’re over-investing in certain scenarios, you may be rich without even knowing it.

TC is an expert in organizational leadership with three decades in the arena and graduate degrees in law, organizations, and strategy. You can schedule a coaching session with TC here.