An Elephant? What Elephant? Where Is the Elephant?
Decision-Making: Actions, Influences, Impacts and Unintended Consequences
Issue 75: Sept 29, 2022
In June of this year, we published an article about unintended consequences and how many organizations, governments and individuals are blindsided by not anticipating the future. Technically, unintended consequences are outcomes of actions in the immediate past or in current times that have unforeseen impacts or influences on the near or far future. Consider a line of dominoes or a house built from playing cards. When one is touched or removed, all the others are influenced and fall into disarray.
Living in the Moment
Although we seem to be evolutionarily programmed to constantly assess our surroundings to ensure safety and security for the long-term, we often react based on the immediate moment. We struggle to understand what seems far off, ambiguous, or outside of our span of knowledge and experience. Furthermore, we prefer to stay on the surface, like skipping stones over water. For many of us, our goal is to stay on the surface and not explore what lies in the deep where things are unknown, perhaps complicated, or uncomfortable. It is hard to contend with the future when we are living in the present and have unfulfilled needs, wants and problems that need to be solved right now. We typically think (or not) and take action to ensure we meet expectations in the present.
The pandemic disrupted many of the systems we depended on with far-reaching effects. For example, the price of food, cars, and just about everything has escalated because of labor shortages, scarcity of materials and distribution costs. These are external forces that come back to impact us personally and professionally. Markets react to these shifts affecting the value of personal and organizations’ investment portfolios. Then the shortfalls are passed back to consumers and customers with higher prices and even the workforce with longer hours and no pay increases. Everything is connected. And today, we are experiencing the domino effect of over two years of disruption and inability to pivot quickly enough to avoid the unintended consequences of a series of events largely out of our control.
Single Decisions or Actions
Each decision or action we take as an individual, organization or a society is part of an interconnected set of systems in a larger societal system. We influence and impact other parts of the systems, whether we know it or not.
For example, the price of butter is up 25% over the past 12 months. Why?
Let’s look back to early 2020:
- Demand for product from suppliers and wholesalers quickly shifted from providing businesses (restaurants, factories, schools, etc.) with products to providing product for individual household consumption.
- Suppliers and wholesale companies couldn’t adapt quickly enough operating in a complex system structured to meet near future demand.
- The situation was then compounded by a disrupted distribution network contending with the lack of sufficient equipment (trucks, ships, containers) and an exodus of a workforce to operate the equipment.
- While the price of raw materials and the cost of labor across production and the supply chain increased.
Now in 2022:
- The butter price increase is being driven by supply shortages: The U.S. has the lowest amount of butter in storage facilities since 2017.
- Milk production, which apparently usually sees year-over-year growth, recently saw a production decline as increases in underlying costs hurt dairy farmers.
- Exacerbating the problem is that as the WSJ explains, butter is actually at the bottom of the milk hierarchy, with milk typically being sold to bottlers, followed by makers of products like ice cream and cheese, before the remainder is churned into butter.
- Toss in continuing labor shortages at processing facilities and simply increasing production isn’t an option.
- In planning out demand, the timing is especially problematic: The winter holidays are prime baking season, when butter demand is expected to increase. The USDA has said suppliers in parts of the country are worried about being able to meet all the orders from retailers.
The end result is that we are expected to pay more for what we need — if we can even find it. Scarcity leads to highly dependent consequences across most systems. So, to reinforce the concept, we have created a complex infrastructure in which any change impacts the rest of the system. The pandemic reflected this dramatically.
Benefitting from Consequences
As a society, when an opportunity is noted, many take advantage of the situation. Organizations (companies selling products or services) also take advantage of the conditions betting that consumers will eventually accept price increases and therefore raise their own prices for products or services. The market seemingly bears the brunt of the increases which in turn increases profit. Who wants to miss an opportunity like this created from unintended consequences?
What Are Unintended Consequences?
The law of unintended consequences is that the actions of people, and especially of governments, have effects that are unanticipated, according to author Rob Norton. He adds, “Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.”
If someone sees an elephant in the room, who says that others need to see it if they don’t want to? We all reserve the right to believe what we believe, see what we want to see and ignore everything else. Why look at the elephant if it represents what we don’t care to know? We justify our blind spots by arguing that we don’t need to be told to exercise some critical thinking to understand what and how the dots connect.
Granted it’s hard to connect the proverbial dots when you’re in the throes of market disruption and cultural chaos. We learned that the perfect stormfronts of the global health crisis, economic uncertainty and civic unrest resulted in some unintended consequences that persist now a couple years later. In addition to our butter example, here’s a quick checklist of what we are now managing in the wake of those highly connected storms — with unintended consequences that may become permanent paradigm changes:
- Scarcity of goods, raw materials and labor shortages have resulted in inflation and may result in a potential US recession. The US Federal Bank is seeking to slow the economy by raising the overnight borrowing interest rate with the hope of slowing inflation and avoiding a substantial decrease of growth (slowing demand theoretically decreases prices). If borrowing costs more, companies will do less of it.
- An overall slowdown in the highly connected and interdependent global economy (higher price of energy and scarcity of food supplies) is resulting in a lack of business and individual consumer confidence. A long-term global recession could impact the capital markets and the world’s economy — then cause consumer, capital, and organizational spending cutbacks and potentially causing widespread unemployment.
- Forecasting has been thrown into chaos. Companies like Microsoft, Apple, Facebook, Walmart, Ford Motor Company, and a long list of others are playing catch-up, trying to clear the cloudiness of their crystal balls to predict what’s coming. So, they have adjusted their earnings outlooks, froze hiring or cleared their corporate ranks. If one company takes action, it is an isolated incident. When a long list of companies takes action the dots begin to connect at scale. Increased unemployment will come shortly. Reduction of consumer income will then influence the bottom line of other companies and organizations. The overall economy will then retract and we as individuals will feel it in a variety of ways.
- The impacts of labor shortages and demand for higher wages continue to cascade across the worldwide manufacturing infrastructure as it continues its struggle with supply chain shortages of components and parts to meet current orders and consumer demand. This is a perfect storm where the only way out is through it, but there are unknown unintended consequences to the business, market and eventually, you. Higher labor, higher material costs and higher transportation costs lead to you paying more for what you or your organization need. Consider the recent announcement by FedEx to raise their prices as they contend with higher costs.
- Retail is still reeling with supply chain disruptions and evolving changes in consumer wants and needs leading to overstocked inventories of outdated or unwanted products. Consider sweatpants and other casual clothing that seemed all the rage during the pandemic that are no longer wanted. Remember, it takes time to react to market demand and meet the needs across the market. Time is always of the essence, however. The time it took for retail to adapt has resulted in the devaluation of current inventory now available with major markdowns to entice consumers to buy what they don’t want or need. Companies have no choice but to contend with the losses and perhaps jettison the merchandise into landfills to the detriment of the environment.
- Still with retail, the pandemic inspired creative workarounds for the essential brands including curbside pickup — and for all of the industry more robust online businesses, resulting in 20-30% returns, 21% acceleration in shipping costs (in 2021) and 2 billion tons of plastic have been produced, of which only 9% has been recycled properly with non-recycled plastic packaging waste that often ends up in the oceans and landfills. There is an upside on face value until, of course, you consider how many dominoes were “touched” in the shift. More plastic, more cardboard, more gas, and more labor for transport — all so you can have what you want at your front door when you want it.
- The unexpected war in Ukraine continues to disrupt the region with an unprecedented refugee disaster and pressure on other countries to provide humanitarian aid and munitions. It also continues to impact global food security and energy supplies as Russia limits energy exports to EU countries. Ukraine (one of the largest exporters of grain representing 12% of all grain produced) is hindered in harvesting its fields and prohibited from exporting their limited harvest to markets outside of their borders. The UN has already stated the world is three years behind having adequate food supplies, has declared major food security issues in global regions and raised alarms about more impacts coming. In the US, the price of food alone has escalated by 11.4% from August 2021 to August 2022 given scarcity and negative consequences are echoing across global markets.
- Educators are facing a generation of students whose learning and social development have stalled. Home schooling resulted in significant declines and setbacks in student performance and anxiety among children who were isolated from their school communities. Schools are struggling to fill teaching positions as many teachers have left the profession having had enough. Population shifts resulting from the pandemic have increased pressure on suburban school districts to accommodate the increase in number of students. Higher housing costs have put pressure on local educators to maintain quality of life. And with teacher shortages, some schools hire teachers with only a high school degree as school systems waive the minimum requirements for employment. Consider the unintended consequences, many of which society may not feel for years to come, but rest assured there will be consequences.
- The President optimistically announced that the pandemic is over, yet people continue to die, and the long haulers are still disabled without a certain cure. Do we overlook the elephant simply because the President says so? We will let you be the judge based on your own personal thoughts and beliefs.
- Remote work changed employees’ definition of the workplace and work in general, resulting in expensive empty office space and deserted extravagant corporate headquarters, with a commercial real estate market in crisis and supporting small businesses surrounding those buildings struggling day to day to survive. Leaders have had to learn new managerial skills practically overnight and have experienced varying degrees of success and failure as they navigate an entitled and empowered workforce. At least until unemployment increases.
- The majority of the workforce has said enough is enough. The decline in employee mental health, seemingly a new societal issue precipitated by the pandemic, is actually the result of a historical, type-A demand that individuals must work at any cost regardless of the consequences. This has resulted in an imbalance of work/life boundaries. Pressure on the workforce in all sectors to deliver high performance in a sustained time of insecurity, recognition of inequality in sex, race, ageism, and gender — and unfair pay — triggered the ongoing Great Resignation and its related trend of becoming part of the Silent Resistance of quiet quitting.
- Social media and media channels (now loosely defined as everyone has an equal opportunity to have their voices be heard) continues to fuel civil discourse on any topic, leading to society being fractured and divisive. These elephants are so large that we see and feel their presence no matter what side of the aisle we’re on. As individuals, we don’t know what to do about them or how to fix the problem, and we are fearful of what may result in creating an even more divided nation. What consequences are yet to come and what will society look like in the future is anyone’s guess.
What we see in many individuals and organizations is that often they live in the moment and focus on the short term. They are often reactionary and act in response to public sentiment, opinion, and the loudest voices in the room. Some want to see the elephant, call attention to it and debate why it is there. Decisions, responses, and actions in the moment often don’t look forward. Looking forward takes energy and critical thinking. Looking forward also reveals what we don’t want to know or want others to see and know.
When we connect the dots to understand the influences, impacts, and consequences that we didn’t foresee, it reveals our blind spots. Without anticipating unintended consequences, we take action out of perceived necessity for the short-term and based on our blind spots it can derail us and cause us to make terrible and consequential decisions that permeate across the societal system. We simply didn’t think to exercise critical thinking and see the influences and interdependencies that our decisions could impact. In our haste to return to post-pandemic normal, solve problems, and react to new disruptions, if we do not view these challenges holistically using systems thinking, we may be the victims of unintended consequences, tens, or hundreds of times over.
Our new prediction as we race toward the end of the year is that until we face the facts and consider how our personal defaults influence our decisions, individuals, our political leaders, organizations and their management will continue to move forward without recognizing their blind spots resulting in shock and surprise by events that occur. Without connecting the dots, we will perpetuate unintended consequences and collateral damage. Hindsight is 20/20, but a heavy price to pay when mindfulness, awareness, and critical thinking could have averted expensive short-term decisions.
We expand on the need for an actionable strategy to manage unintended consequences in our new book, The Truth About Transformation. It is a comprehensive playbook for working and living in disruptive times.
Get “The Truth about Transformation”
The 2040 construct to change and transformation. What’s the biggest reason organizations fail? They don’t honor, respect, and acknowledge the human factor. We have compiled a playbook for organizations of all sizes to consider all the elements that comprise change and we have included some provocative case studies that illustrate how transformation can quickly derail.