16 May 2016

Professor Paolo Quattrone argues it’s time to stop blaming complexity for failure and realise it’s our search for certainty that’s at fault.

During the past quarter of a century, society has advanced faster than ever before. So it’s no surprise we’ve become accustomed to thinking we live in a more complex and challenging time than our predecessors.

But I reject the conventional wisdom that says it’s any more difficult to exist today than it was, 50, 100 or 1000 years ago.

Because the very technology we’re all too happy to blame for our modern problems means we have the tools to address challenges our ancestors could only dream of.

When the Jesuits set out on missions in Latin America, they didn’t have a map, let alone GPS.

In this intricate, technological world, society has focussed on one of these tools – complex, automated financial reports – to make the uncertain, certain.

We’ve asked accounts, accounting systems and accountants to become our ‘answering machines’. And our addiction to the numbers on the screen has made us forget about the blind spots that simply cannot be accounted for.

It has forced us into a situation where current financial reporting has lost its relevance.

Because as soon as we start to simplify, clean up and account for the inherent messiness of life and work, all we can hope to create is a fiction.

In the drive to present a ‘transparent’ picture for stakeholders, organisations have come to believe a good report is one which measures the most data.

We no longer ask questions like: Why did that happen? What can’t we know? What are the risks? What could go wrong?

It’s time business embraced uncertainty. We have to start focussing our energies not on accounting for every detail but accepting and interrogating the unknown.

We need to restore dialogue in decision making and use financial data not just for basic compliance, but as a tool to make complex judgements.

Because they knew nothing of the missions they were embarking on, the Jesuits devised a system to imagine the issues they could be faced with and discussed them to judge the best solution.

They also looked at numbers as the tools we need to give us the information necessary for decision making, and they ritualised the need for dialogue.

In their colleges, cash boxes had two keys – one held by the procurator (the equivalent of today’s CFO) and one held by the rector (in today’s terms, the CEO).

Only by talking to each other and mediating competing interests could they open the cash box and appropriate funds as agreed.

When constructing Terminal 2, London Heathrow Airport’s project team used a similar model to ensure decisions balanced frictions between difficult to align risk, safety, cost and schedule considerations.

Only through discussion and by managing these frictions among relevant departments could major decisions be made.

With the rise in big data, we are now able to draw on boundary-less sources of information to develop statistical models which know us better than we can know ourselves.

But we run a very real risk of assuming even more certainty and accuracy in our predictions, and again ignoring the pieces that don’t fit.

In some cases, big data may force people to make more wrong decisions, more quickly.

On the other hand, it also gives us a significant chance to increase the scope of our interpretive power.

With access to more points of analysis, there is also a huge opportunity to create dialogue and ultimately restore judgement to the use of numbers. But only if we’re willing to question what the data tells us.

Complexity isn’t the cause of failure. It lies in our inability to use it as a tool to make better choices.

Image source: Daniel Wiedemann @iStockphoto

Professor Paolo Quattrone is Dean of Special Projects, College of Humanities and Social Sciences and Chair in Accounting Governance and Social Innovation at University of Edinburgh Business School.