How to Improve Your Communication of Probability to Senior Management

There is a lot of math, statistics, science, and engineering that goes into assessing probability. Or is there?

The Chance of Rain

Most people do not understand what the chance of rain means. Some believe it means it will rain "30% of the day," others "in 30% of the area," while others “when the weather conditions are like today, in 3 out of 10 cases there will be (at least a trace of) rain.”

In my webinars and workshops over the past decade, the usual audience split is 30 percent for each alternative (roughly 10 percent respond incorrectly that the chance of rain has something to do with the amount of rain that will fall).

This means that two-thirds of any audience does not understand probability.

Foundations - Probability Defined

The short definition in Merriam-Webster's Dictionary is "the chance that a given event will occur.”

The long definition is “the ratio of the number of outcomes in an exhaustive set of equally likely outcomes that produce a given event to the total number of possible outcomes.”

The term ratio (or percentage) can add to the confusion. Ratios can be back-sighted for events that have occurred (such as results of experiments) or front-sighted for events that may occur in the future (such as results from Monte Carlo analysis). Many audiences are confused by the percentage of a past event (whose probability is 1 since it has occurred) and a percentage [prediction of what may occur in an uncertain future (something less than 1).

Baseline - Prediction is a Fool’s Game

Every event that refers to future occurrences is uncertain. What we refer to as probability reflects our current knowledge. Probability is simply one valid method to express our degree of certainty (or uncertainty) in quantitative terms. Only clairvoyants and fortune tellers can predict the future with complete certainty.

Most people do not understand the chance of rain. Communicating probability to any audience is a challenge. (Image: Communicating Reliability, Risk & Resiliency to Decision Makers, 2nd Edition)

Rational thought as defined by objective numerical analysis is a modern one. Many technical professionals were trained in statistical hypothesis testing and consequently (and usually unconsciously) have a “baked-in” statistical Frequentist tendency. It is simply flawed thinking that a conclusion drawn from the past will objectively predict the future.

Probability is based on our current knowledge of future uncertain events, which always makes probability subjective.

Helpful Tip – Consider Compound Probability

Compound probability is the likelihood of more than one event occurring at the same time or the probability of event A and event B occurring together. There are two underlying conditions:

1. Events A and B must happen at the same time (for example, throwing two dice simultaneously).

2. Events A and B must be independent of each other (event A outcome does not influence event B outcome).

If these two conditions are true, the probability of event A can be multiplied by event B.

In other words, if it rains on 50% of the days like today and I usually have a 50% chance of catching more than 10 fish when I fish in the morning, then there is a 25% chance that I will catch fish this morning (0.5 times 0.5).

This probability assumes that I have good historical data (maybe “yes” on the rain forecast but likely “no” on tracking the fish count). And it assumes that the weather and catching fish are independent.

The tip is to list the underlying events and determine whether they are independent of each other. Then take a look at your historical data of each past event. Communicate this information before stating the probability of your prediction.

Helpful Tip – Consider Conditional Probability

Conditional probability is the likelihood of one event occurring, given that another event has already occurred. In other words, the idea of independence is now broken.

In our example, catching more than 10 fish in the morning depends on whether it has rained.

The math follows Bayes theorem, which we will not derive here, but it comes down to knowing the probability that it will rain and the probability of how often you catch 10 fish when it rains. We have to have better data and make a major assumption of whether it has rained in advance of knowing it rained.

The tip is to note all of the events that must occur before a predicted event is to occur. Then decide whether some of the underlying events must have happened to produce the predicted event or if all the underlying events occurred simultaneously to produce the predicted event.

Communicate all of the underlying events and the certainty (the data of past events) you have before stating the probability of your prediction. Then indicate whether the underlying events were independent of one another.

Helpful Tip - Comparative Comparisons

Organizations usually avoid after-event reviews. These reviews include predictions performed by modelers, data scientists, mathematicians, statisticians, engineers, and other enlightened staff. One of the issues is that it takes time and seasoned resources to do an autopsy. The other part is that most of us, including senior management, do not really want to know how bad our probability predictions were.

To communicate probability effectively, you must be able to communicate how good or bad you (or your industry) have been doing as a whole. If you lack that data, communicate historical values that forecast models are 60 to 80 percent accurate.

That’s right, many predictions of an uncertain are not much better than the flip of a coin. In some cases, like selling music, a twenty percent variance is not bad; however, it is wholly unacceptable in healthcare, safety, and finance.

The audience needs to understand how good or bad we are at computing or assigning “the chance that a given event will occur.”

Helpful Tip – Sensitivity Analysis

A sensitivity analysis conveys the relationship between inputs and outputs. Two common ways to visualize the sensitivity analysis results are with a cone diagram or a tornado diagram.

A cone diagram is used to depict the results of a probabilistic forecast. The cone diagram resembles a funnel with its narrow end at the present time and its wide end at the end of the forecast period. Normally, a different shade of color is shown to distinguish the central 50th or 90th percentile from the extreme outer ranges. The cone diagram is easier for most decision makers to understand.

how good have you been at forecasting the twists and turns in your life? The future is full of complexity and uncertainty. (Image: Communicating Reliability, Risk & Resiliency to Decision Makers, 2nd Edition)

Tornado diagrams are modified versions of a bar chart. They are a classic tool used to communicate the results of a sensitivity analysis, which can be performed either deterministically or probabilistically. The tornado diagram receives its name from the visual image created from wider bars associated with input variables that have more impact on the output being located at the top, while the narrow bars associated with input variables with less impact on the output are shown at the bottom.

Explaining the results of a single sensitivity analysis takes time. The best manner to communicate effectively is to show two or more cone diagrams or tornado diagrams on the same visual. Senior management understands that wider ranges are bad. The presentation will appropriately and quickly migrate to questions about which inputs are causing the most variable scenarios, whether or not the decision makers completely understand the visuals.

I’m Going Fishing

Well, it’s time to go fishing now. The probability seems high that I will catch fish on a day like today – it is sunny, the wind is from the southeast, the windspeed is between 5 and 10 miles per hour, and the ocean is calm. I guess I should also factor in that the tide is rising. I do not have fresh bait or the best type of bait that the fish feeding like, and it looks like someone else is sitting on my favorite hole (there is a good bottom structure for fish).

There are indeed many factors that go into defining what a day like today is. Or how all of those factors may change in an hour. Perhaps the more I know about the past, the more accurate my prediction may be.

The more I know about probability, the more I understand that there is not much certainty in assigning a probability to an uncertain future.

Communicating Probability

Two-thirds of your audience will not understand what the chance of rain means. In the limited time you have, it isn't easy to attempt to create an understanding of probability while at the same time communicating a future prediction. So don’t.

Instead, communicate the underlying events, the independence (or dependence) of each with the other, and the amount of historical data you have about each underlying event. You will be telling your audience about your certainties. Or even better, you will be indicating your uncertainties.

Also, give the autopsies of how good past predictions of the same thing have been. If you do not have that data for you, your organization, or your industry, then that is telling your audience something too.

Finally, show them a sensitivity analysis of the input variables. Comparing tornado diagrams (bar charts) and cone diagrams (avoid box and whiskers) of different scenarios will help provide an understanding of which input variables are most critical.

Remember the obvious, too. Most senior managers understand that predicting the probability of future uncertain events is a fool’s game.

When communicating probability, avoid trying to buck instincts and convince your audiences of the certainty of the prediction. Communicate the uncertainties early and often.

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JD Solomon Inc provides program development, asset management, and facilitation at the nexus of facilities, infrastructure, and the environment. Communicating with FINESSE was founded by JD Solomon and is a not-for-profit community of technical professionals committed to being superior trusted advisors. Join the community for free.

Master Plans Are More Important with Persistent Inflation and Looming Recession

Now is the time to update your master plan. The recession train wreck is underway. Understand realistic growth needs and funding needed to take care of what you already own.

Two years ago, updating your master plan was a good idea because the world was getting back to normal and to position your organization for public funding in the aftermath of COVID-19.

Today, it is still a good idea but for different reasons.

Capital Programs Are a Wreck

Many capital programs were delivering between 60 and 80 percent of their budgeted funding before the pandemic. The world was booming, few organizations had sufficient human capacity to manage the projects, and it was difficult to provide multiple contractors to bid (and deliver) the work.

Today, the facilities and infrastructure are still not in the ground but the capital budgets are now over-spent. It is amazing how 40 percent escalation in construction costs produces unexpected surprises. And that is especially true if your project controls program was sleepily (and ineffectively) benefiting from an underperforming budget.

Recession Is Upon Us

Most of us on the front lines appreciate that we have actually been in a recession for the latter half of 2022. Now with the US mid-term elections over, just about everyone now admits that the economic outlook is less than optimal. Costs are still high but stable, but tens of thousands of layoffs are on the way in the first quarter of 2023. New growth in the facilities and infrastructure markets will be markedly slow.

Understanding Current Needs

Organizations have struggled for several decades with allocating enough money for assets they already own. If there is a bright spot in 2023, it will provide organizations with the opportunity to evaluate how much money is needed for new growth and expansion and how much is needed to take care of what they currently own. Of course, the opportunity only exists if organizations update their master plans.

Keep It Simple

Data used to update the capital program and criteria for project prioritization can be simplified. Short-term priorities can focus on the demand for services trends that existed prior to COVID, new projects that are needed and can be realistically permitted projects, and current condition assessments of existing facilities and infrastructure.

That is not to say that traditional approaches and criteria such as net present value, sustainability, and economic expansion are not important in some markets. However, the belt will be tighter, the project management personnel will continue to be limited, and the decision-making more intuitive over the next few years.

The Time is Now

The time for an updated master plan is now. There is no need to overthink it. Simply keep it simple – use existing data and master plans, engage a knowledge facilitator, and make sure the right internal staff are participating. Opportunity comes to those who are prepared.

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JD Solomon Inc provides project development, asset management, and facilitation for facilities and infrastructure. Contact us for more information on our services related to master planning, capital programs, asset management, and organizational capacity.

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Facilitation Lessons Learned: One Board, Four Board Retreats, and Four Formats

Interactive stations require increased planning time and logistical challenges. However, boards love interacting with staff and seeing tools and technology.

Facilitators seldom have the opportunity to use four formats with the same board of directors for four consecutive years. Blame it on COVID. In 2019 the board retreat was in-person, we were virtual in 2020, hybrid in 2021, and this year we were once again in-person.

Here are a few lessons learned.

The Overall Approach Matters

Many board retreats are no more than a string of PowerPoint presentations from department heads. Somehow, the leadership thinks the retreat should be one big information session. This approach is ineffective, and facilitators especially struggle with information-type retreats in virtual or hybrid formats.

Board retreats should be interactive because the intent is to create common understanding and synergy for the big things that need to be done in the coming year. As a facilitator, you will not struggle with the technology hand-offs and a bored board if you focus on the primary purpose.

In every format, send them the monotonous report-outs in advance and find interactive ways to cover the key information. Staff will get a little mad because they cherish their time on the stage, but the retreat is about the board and not the staff. And the board can read the details.

Five Pillars of Facilitating with FINESSE matter

The five pillars are: conduct a pre-session exchange, ask powerful questions, anticipate disruption, have engaging exercises, and roll with the ebb and flow.

For example, this board finds a pre-session survey using Microsoft Forms very useful. This retreat marks the fourth time in a row that we have used this technique. Creative ways to ask questions, using different question formats, and tying the questions to topics covered in the retreat are ways to keep the technique fresh.

Regardless of the format and experience of the facilitator, doing these five aspects well is the formula for moving from good to great.

Have a Plan B for Schedule and Content

Regardless of the format, the schedule and content will likely need an adjustment on the fly. Develop the schedule and content independently.

We organized an interactive session at this year's retreat using an audience response system (ASR) on board roles and responsibilities. The session used only two information slides and then moved into five real-world situations where each board member responded how they would handle the scenario from the perspective of the manager and as a board member.

The session was scheduled as the last of the morning because it was fun and because two earlier sessions were potentially controversial. Plan B was deleting a scenario just before lunch as an easy way to make up some time.

Both potentially controversial sessions went well and on time. However, a different session gained some unexpected interest, and more time was provided (both speakers had additional material, as planned). In the end, a modified version of Plan B, chosen by the board, was simply a pivot to a 15-minute delay in lunch rather than dropping a scenario.

Boards Love to Interact with Staff

This is not the same thing as those boring PowerPoint report-out given by each department head (avoid this – do not create a bored board).

Interaction with staff means one-on-one or small group time together. And it goes farther down than the department heads. Find ways to have the front-line employees showcase what they do or the technology they use, whether the format is in-person, hybrid, or virtual.

For the first time in four years, we were able to use six stations that allowed pairs of board members to rotate together and meet with staff. Each station covered a specific topic, had hands-on material or equipment, and included at least two staff members.

Facilitating is Relatively the Same

Facilitating board retreats requires some different tools and techniques than other types of facilitated sessions. Within the specialty of board retreats, there are a few examples where a facilitator can run the gamut of in-person, virtual, hybrid, and back to in-person with the same board. There are some powerful lessons learned, including that at its core, all facilitation is relatively the same – at least, if you know what you are doing and follow the five aspects of facilitating with FINESSE.

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JD Solomon Inc provides program development, asset management, and facilitation for facilities, infrastructure, and the environment. Contact us for more information about our services related to Board Retreats, Strategic Planning, and Public Workshops,

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