Risk III – Can’t believe your luck

Good, you shouldn’t believe in luck.

It is human nature to be attached to beliefs, dreams and the notion that luck plays a part in our lives. This is a risk that can negatively impact your organization. Got a salesperson on a hot streak – are they lucky or just experiencing circumstances that mean they are winning a higher than normal quantity of work? Negotiation goes well – were you lucky or well prepared and unaware of the needs of the other party?

Consider that the perceived luck could also be a false impression of a limited data set. When we review events we tend to focus. That focus is usually tight limiting our view and the data we use to make conclusions. Consider again the salesperson, was their hot streak permanent suggesting good luck or was it limited when you assess the full body of their work. That negotiation a singular event in a long relationship or contract the luck you considered was only visible with that tight focus.

To compound this risk it is a simple function of mathematics and statistical probability to determine that following a period of good luck a period of bad luck must follow. This return to average will happen. Clearly, the average may be skewed by the positive event or events that catch your attention but a return to average will happen.

The risk then is small data samples and human nature. To manage this risk which can impact many areas of your organization you must establish:

  • Process – how your organization does things
  • Review periods that align with your organizations’ activities
  • Key Indicators that truly give factual information – that you then use

So being lucky is good, but being honest about your organization based on a set of facts is better. Unless you are in Vegas – then have some fun but remember hot streaks end, averages exist for a reason and those nice hotels weren’t cheap so you might win but definitely not more than those hosting the games.

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