How to Spot Trouble -- Before It Hits Your Company

"I should have seen it coming."

How many times have you uttered that phrase after you've been blindsided by trouble, realizing that the signs were there all along?

The recent subprime mortgage crisis is a good example of a collective "we should have seen it coming." The recent MIT Sloan Management Review article "How to Make Sense of Weak Signals" by Wharton professors Paul J.H. Schoemaker and George S. Day asks how key players like Bear Stearns, Lehman Brothers and Merrill Lynch missed the signs. The answer:

"Organizations get blindsided not so much because decision makers aren't seeing signals, but because they jump to the most convenient or plausible conclusion," they write.

So how can you interpret signals of pending problems, even if those signals aren't very clear?

• 1. Minimize biases: We constantly reshape reality to fit our personal beliefs: These jeans must have shrunk, because there's no way I gained weight. Organizational beliefs work the same way, which often blinds us to pending problems. Spreading decision making throughout the company and creating task forces to monitor potential dangers can combat this tendency, according to the authors.
• 2. Apply multiple search methods and find overlapping results: Organizations often force new and ambiguous information to fit the existing course of action. Citing the faulty intelligence leading up to the Iraq war, the authors advocate testing several hypotheses and listening to the organizational grapevine as ways to gather new points of view.
• 3. Use different frameworks: Groupthink can lead to a convenient obscuring of potential problems, so encouraging constructive conflict within the organization, seeking out the wisdom of experienced managers and trusting your own intuition can lead to broader perspectives. The more expansive your horizons, the better the chance you'll see trouble coming and be able to respond proactively.