The Danger of SWOT Analysis for Quality Leaders

Pride and rose-colored glasses goeth before destruction

Published: Tuesday, January 21, 2020 - 13:03

In the context of our increasingly disrupted, globalizing, and multicultural world, quality leaders greatly appreciate the security and comfort of clear-cut strategic plans for the future. After all, following our in-the-moment intuitions frequently leads to business disasters, and strategic plans help prevent such problems.

Tragically, popular strategic analyses meant to address the weaknesses of human thinking are deeply flawed. They give a false sense of comfort and security to quality professionals who use them, leading them into the exact business disasters that they seek to avoid.

Take one of the most popular of them, the SWOT analysis, where you try to figure out the strengths, weaknesses, opportunities, and threats facing your business. SWOT doesn’t account for the dangerous errors of judgement revealed by recent research in behavioral economics and cognitive neuroscience, what scholars call cognitive biases.

These are the systematic and predictable mental blind spots that cause us to deviate away from the most optimal decisions. Relying on SWOT to inform your strategic plans without accounting for cognitive biases results in serious oversights that can ruin profitable businesses and bring down high-flying careers.

One of the most dangerous mental blind spots for quality leaders is overconfidence bias. Scholars have found that business leaders at all levels make bad decisions due to overconfidence, especially those who have been most successful in the past. They tend to believe themselves infallible, a dangerous judgment error called the bias blind spot. To quote Proverbs 16:18, “Pride goeth before destruction, and an haughty spirit before a fall.”

A related problem is the optimism bias, our tendency to look through rose-colored glasses. Research shows that top leaders are especially likely to be excessively optimistic about their success. Such optimism harms their ability to make effective strategic plans.

Fortunately, recent research in these fields shows how you can use pragmatic strategies to address these dangerous judgment errors, whether in your professional life, your relationships, or other life areas. You need to evaluate where cognitive biases are hurting you and others in your team and organization. Then, you can use structured decision-making methods to make “good enough” daily decisions quickly; more thorough ones for moderately important choices; and an in-depth one for truly major decisions.

Such techniques will also help you implement your decisions well and formulate truly effective, long-term strategic plans. In addition, you can develop mental habits and skills to notice cognitive biases, and prevent yourself from slipping into them.

Cognitive biases and SWOT

When taking on new coaching and consulting clients, I always ask whether they did a SWOT. In all cases when they’ve done one, I’ve seen their overconfidence and optimism biases lead them to disregard risks and overestimate rewards.

For example, consider Saraj, a technology startup founder of quality-oriented software. His venture capital investors encouraged him to turn to me for coaching as his company passed $5 million in equity.

Saraj showed me the SWOT he did himself several months earlier for his own role as a leader. I was surprised that he didn’t list effective delegation as an area of weakness, since some of the investors who directed him to me expressed that as a topic of concern.

Asking him about it, I heard an immediate defensive tone. Clearly, I hit on a sore spot. He felt strong ownership of what he perceived as the core activities in the startup, flinching away from the possibility of delegating these tasks.

Indeed, SWOT allows leaders to sweep under the rug those areas of weakness and threats about which they feel defensive. Their optimism and overconfidence serve to justify failure to address these problems. Eventually, I was able to persuade Saraj that effective delegation makes him a stronger leader, one capable of best serving the startup in the long term.

It’s particularly problematic when SWOT is performed in a group setting, since cognitive biases are often exponentially increased in such environments. One particularly big problem is known as groupthink, where groups tend to coalesce around the opinions of a powerful leader.

Martha, the CEO of a Midwestern healthcare company for whom I started consulting in early 2016, showed me her SWOT analysis from mid-2015. I was surprised to see no discussion of political threats to the Affordable Care Act (ACA, aka Obamacare), despite her company’s growing reliance on patients covered under that program.

She told me that she didn’t see much probability of a threat to the ACA and neither did other leaders in the healthcare company. To me, it was a clear example of groupthink, ignoring the elephant in the room (and on the ballot).

I eventually convinced her otherwise, and we developed some plans in the event that problems arose in this area. She was very glad we had done so when political headwinds threatened Obamacare from 2017 onward.

What should you use if not SWOT?

Fortunately, cognitive neuroscience and behavioral economics research have revealed much more effective techniques to use in your strategic planning.

Rather than using SWOT to make a simple strategic plan, you need to focus on addressing cognitive biases when assessing potential threats and opportunities for your plan. You emphasize making your plan flexible and resilient, able to handle unanticipated developments that you didn’t consider when you made the original plan.

An easy way to do so is a technique called “defend your future.” This technique allows you to get the benefits of strategic planning—confidence, clarity, and certainty—without the failures, risks, and problems accompanying typical strategic planning and assessments.

So the next time you’re thinking about doing strategic planning, take some time to consider the dangers of the excessive confidence and optimism that you and your team  likely experience, at least if you’re successful.

Watch out for these dangerous judgment errors by focusing much more than you intuitively feel is appropriate on risks, threats, and dangers, rather than achievements, hopes, and rewards.

If you notice yourself or anyone else flinching away from an uncomfortable topic, double down your commitment to explore it thoroughly. Only through vigilance and discipline will you ensure that you can avoid the pride that goeth before a fall.

About The Author

Gleb Tsipursky

Gleb Tsipursky is on a mission to protect quality leaders from dangerous judgment errors known as cognitive biases by developing the most effective decision-making strategies. A best-selling author, he wrote Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters (2019). His expertise comes from 20+ years of consulting, coaching, and speaking and training as the CEO of Disaster Avoidance Experts, and over 15 years in academia as a behavioral economist and cognitive neuroscientist. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, Twitter@gleb_tsipursky, Instagram@dr_gleb_tsipursky, LinkedIn, and register for his Wise Decision Maker Course.