Maybe you’re an executive involved in a major business deal; the director of high-profile agency facing a public crisis; the surgeon staring down at a critical patient. But what if the deal goes bust? What if there’s a public outcry over your performance? What if the patient has already died?
Take a step back from that hypothetical worst-case scenario and figure out what went wrong – and why. That’s what’s called the “pre-mortem.”
The pre-mortem is a powerful tool for ensuring a project succeeds by identifying ahead of time possible pitfalls. Whether it’s imagining how an emergency surgery could go wrong, playing out where a department merger could encounter obstacles, or anticipating when a retirement account could no longer meet expenses, thinking through the challenges that any future plans might face can help to avert them – or at least create preparation if they come true.
According to cognitive psychologist and pre-mortem inventor Gary Klein, a pre-mortem can take the pressure off of anyone worried about seeming disloyal to a group by voicing concerns, and generate spirited competition to find new reasons for a project’s potential failure.
Business has been quick to adopt the practice of a pre-mortem for new projects, but performing a pre-mortem also has application as a retirement planning tool. Retirement planning can stir a range of emotions, from anxiety to anger to paralysis. In a successful pre-mortem, we take our heads out of the sand and go right into the belly of the beast as we face head-on our fears related to retirement.
It takes just three easy steps to perform a pre-mortem. Begin the exercise with critical stakeholders such as your spouse in the room. List everything that can go wrong in retirement. Be exhaustive and catastrophic. No possibility is too horrifying. At a minimum, start the exercise by considering a state of advanced age, poverty, and ill health. Scenarios might include income not covering current expenses. Your emergency fund has been depleted. You are living with your children, in a state of failing health. Just get ideas on the table, no matter how absurd. At this stage when everyone is brainstorming, there should be no moving on to problem solving.
Next step: pick the 10 worst outcomes. Focus on problems that, if not solved, will mean true catastrophe. Discard events over which you have no control. Instead, pick events most likely to happen. If you are on track to pay off your mortgage by retirement, a foreclosure on your home shouldn’t make the list, but you’ll still need income to pay property taxes, insurance, utilities, and maintenance.
Finally, devote time to thinking up solutions. Insufficient income can be checked by saving more today, or retiring later with a larger amount from Social Security or a pension. Health concerns can be addressed now with preventive screenings, diet, and exercise. A life insurance policy may be in order for burial expenses or for a surviving spouse or children. Also outline plan B if plan A can’t be obtained. Because the exercise involves all stakeholders, hold each other accountable for the action items identified. Break items into smaller steps, assign tasks, and stick to agreed upon deadlines. The exercise is useless if inertia carries the day.
The pre-mortem should generate actionable items today that, if implemented, prevent the worst from happening. Placing yourself in a future catastrophic financial situation also combats the tendency to discount the importance of future events for more immediate ones. Go ahead. If the glass isn’t at least half empty, the exercise won’t be a success.
