Kennedy and the Art of Bank Decisions

Bank Decision Making

Say what you will about the morals and politics of President Kennedy, but his administration did more for bank decision making than almost any other group of people. After a horrible set of decisions connected with the Bay of Pigs in 1961 Kennedy vowed never to make those mistakes again. As a result, he commissioned an “after action review” that was uncommon at the time, but is now standard procedure for the military, highlighting some key failure points in the decision making process of the operation. It is solutions to these failure points that we try to instill in every bank we touch, as they have proven extremely effective.


The Most Important Point


The Bay of Pigs decision making process from the start was destined for failure, as it was based on a set of faulty assumptions. The assumptions, such as the size of the Cuban counter-military force, the level of training by the CIA and their ability to get equipment and supplies to the insertion point at Playa Giron were never challenged and led to what Yale psychologist Irving Janis later termed “groupthink.”


Putting It into Practice


To eliminate the concept of groupthink, President Kennedy put the following rules in place that have to do with creating a formalized process and strengthen the management culture. We have tried these principals out and whole heartedly believe banks should adopt them for their critical thinking decisions:


Diversification: Good ideas come from anywhere and may actually be more prevalent in your newest employees or those employees that have the greatest customer interaction.  When making critical decisions, invite a broad range of experience talent regardless of title or position. Different views drive different solutions.


Drop the Formality: When it comes to critical decisions, forget status. Anyone should be able to respectfully challenge anyone else.  Even the venue is important. President Kennedy found that holding meetings in the Cabinet room led to more formality, less discussion and more respect for positions. After the Bay of Pigs, more meetings were held away from the White House, at Kennebunkport and other less formal locations in an effort to stimulate ideas from all.


Remove The Leader: Often times employees try to play to the leader. In Kennedy’s case, people told him what he wanted to hear and not what the best decision might be. President Kennedy would make sure that a portion of the meetings, particularly those in the early idea stage would take place without him present so they would not be influenced.


Common Set of Facts & Assumptions: In our opinion, the most important aspect of President Kennedy’s post-Bay of Pigs decision process was the starting point. Before any decision is made, JFK would insist that the group start with what is “known” and “not known” so that everyone has the same information to make a decision. More importantly, the group must identify missing information and decide how critical it is to the decision. For information that is missing, then it would either then be tracked down or be labeled assumed or “unknown.” In this matter everyone understands the quality of information that is available when a decision is being made.


When it comes to banking, this single point, in our opinion, is the result of more bad decisions than anything else. Faulty asset-liability assumptions, how your competitors will react, customer adoption and many other failure points would be more accurate if team members had full knowledge on the quality of the information, decided how critical it was to the process and then worked in improving the quality.


Two Groups: For important decisions, President Kennedy would break the team up into multiple groups, assigning them the same set of facts and assumptions and then tell them to come back with alternatives. Once the top alternatives were aired, the best would be re-assigned to the groups to further refine. In this manner, the odds of arriving at the best solution are improved, as ideas tend to form more freely with a smaller number of participants and there is less probability that both groups could be dominated by a single idea or viewpoint.


Devil’s Advocate: Next to challenging the facts and assumptions, our favorite lesson here is the assignment of a “skeptical generalist” or “devil’s advocate” position. One person or one group, regardless of view would be assigned to counter any arguments of the majority held position. This structure forces members to challenge a commonly held belief and serves to stimulate debate. While often a member may not want to counter a commonly held belief, the devil’s advocate position forces bank members to come up with counter arguments and explore alternatives.


After Action Review and Risk Assessment: After every critical decision, a time should be set in the future to review the decision and the outcome. One meeting should be held right after just to review the decision making process and to learn how to improve. Another meeting should be held after the decision is put into action to see if the initial outcome is meeting expectations and validating assumptions. If not, a quick correction is warranted. Once enough data on the outcome is collected, it is important to go back through the decision discussion to learn what risk arose that was not contemplated. If all your risk were covered and discussed, you know your process is working. While sometimes risks arise that could not have been foreseen, often, after an honest assessment, it is found that they could have. It is important to determine and document on how to improve the process so that overtime, more risks are realized with the proper probability of occurrence.


Eighteen months after the Bay of Pigs, President Kennedy was forced to make the most critical decision of the administration – the Cuban Missile Crisis. While an invasion was the most commonly held view of a response at that time, after a series of meetings, the concept of a naval blockade arose. This was the ultimate outcome, a solution that might have been missed during the old decision making process.


In the after action review of the Missile Crisis, the way President Kennedy orchestrated and led the decision-making process was said to have made the difference. It is rare that we see leaders learn from their mistakes so profoundly. President Kennedy’s decision making process has had material impact on today’s management thinking when leading teams. The idea of having a formal process whereby the debate to avoid groupthink is brilliant and has become a guiding principle in many business school classrooms and boardrooms.


On this 50th anniversary of President Kennedy’s death we remember his critical decision making legacy, as we try to employ it a variety of times per week.

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