There is an increasing risk of failure as financial institutions reach beyond their comfort zone to create new products and services, automate legacy processes, or even rethink business models. Often, projects fail because people involved in the development of a new idea are reluctant to speak up during the early planning phase.
One way to identify risk at the outset of a project is to use ‘prospective hindsight’ — imagining that a failure has already occurred — and to generate viable reasons why the project may have not succeeded. It has been found that this premortem process can increase identification of reasons for future failure by 30%.
This process is far different from the typical analysis of what might go wrong, or a postmortem analysis of what went wrong. By determining reasons why a project hypothetically failed, a deeper understanding of risk is created, allowing for a strengthening of the project and creation of better ways to analyze a project’s progress during implementation.
“When you’re working on a high stakes project, no elephant should be left in the room!”
According to a Harvard Business Review article, “A premortem doesn’t just help teams to identify potential problems early on. It also reduces the kind of damn-the-torpedoes attitude often assumed by people who are over-invested in a project.” This process also opens doors for all project team members to provide input without regard to level or title.
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. Discuss the worst thing that can happen … and prepare for the potential scenarios.
Steps to Perform a Premortem
Premortem analysis is most beneficial for medium to large scale projects that could have a significant impact on a financial institution’s financial, structural, or cultural future. As with any project, the initiative should have a clear scope, defined goal, and specific time frame for implementation. The facilitator of the premortem does not have to be the same person as the project leader, since the project leader usually has a vested interest in the final outcome of the project.
Here are five key elements of an effective premortem analysis:
1. Preparation. Convene the project team after they have been provided a deep understanding of the project’s overall mission. Ensure that all participants are comfortable and are provided open opportunity for interaction. A premortem facilitator will run the scenario discussion. This leader does not need to be the overall project leader.
2. Set the scenario. The premortem facilitator sets the scenario by having the project team imagine the outcome of the project at hand. Then he/she asks the team to imagine the project as a complete failure. Not just off plan, but a disaster. The facilitator then asks the team to provide reasons that may have caused the failure.
3. Find reasons for failure. Each person on the project team writes down all the reasons they think the failure occurred. Not just a single reason, but any reason that the team member believes could derail the project entirely after it was introduced. The collective knowledge among team members with different experiences and backgrounds is far greater than that of any single person. All ideas are considered.
4. Sharing. After the team members build their lists, each person shares the items one at a time with the others on the team. The facilitator keeps track of all of the shared reasons for failure. By the end of this step, the list will include everyone’s concerns. The only thing not allowed during this phase is proposed solutions that can draw the team away from getting every single problem out in the open.
5. Prioritize and review. Immediately discuss the items of greatest concern that could have the most significant negative impact on the project. Then generate ideas for avoiding or minimizing the most impactful challenges and also keep the less impactful ideas available for review. Regularly during the project development and implementation phase, take the list out to review any problems that may be emerging. Creating the solutions is actually the easiest part of the process.
The effectiveness of a premortem is often based on the level of detail in the reasons for failure. It is also important to not have any project member make others in the group feel that sharing reasons for failure can have a negative impact on their career. By eliminating the fear in anticipating a negative outcome, you can encourage everyone to be observant of potential pitfalls in projects before they happen.
Why a Premortem is Important
A project postmortem is a way to determine why a project failed after the fact so steps can be taken in the next project to avoid the same results. Alternatively, a premortem is review of a potential failure before the project even starts. Obviously, after your project has failed is the wrong time to discuss some of the major issues that may have been evident up-front.
A great quote around a premortem is, “When you’re working on a high stakes project, no elephant should be left in the room!”
The benefits of a premortem include:
- Creates permission to identify problems and risk despite any momentum and excitement around an innovation or project
- The project team doesn’t feel it’s inappropriate to raise causes of failure
- Encourages creativity and out-of-the-box thinking
- Encourages dissenting opinions and avoids ‘group-think’
- Liberates people at all levels of an organization to express themselves
According to Gary Klein Ph.D, the creator of the premortem, “The pre-mortem method has a number of benefits besides identifying trouble spots in a plan, reducing overconfidence and promoting discoveries. It can strengthen members’ mental models as they hear from others. It can deepen the appreciation the team members have for each other. And it can help create a culture of candor and trust.”