Second Order Effects

By | March 17, 2014

[March 17, 2014]  As leaders we need to be aware of the effects of our actions.  I remember as a new Infantry Platoon Leader that to increase physical fitness scores, I provided an incentive for Soldiers to run faster than me (I gave them a day off).  Yet, many Soldiers actually performed worse on their run times.

Five years ago an American insurer group was saved from collapse by a $170 billion taxpayer bailout.  The insurer subsequently distributed $165 million in bonuses to their executives “because of legally binding contracts.” 

It is incumbent upon leaders to predict these impacts; the most obvious effects but also other impacts that are not so obvious.  Senior leaders have no excuses for a failure to predict major events that occur because of our actions, especially bad ones. 

Things that happen as a result of a planned action are the “first order effect.”   Those things that happen because of the first order effect are called “second order effects.”  Such effects can be either positive or negative.  When second order effects are planned and positive, we can claim good management.  When second order effects are unplanned and positive, we call it good luck. 

Leaders who do not predict second order effects are not effective leaders.  Being able to consistently predict future actions is part of the standard decision-making process.  A classic junior leader mistake is failure to foresee second order effects.  Senior leaders with appropriate experiences have no excuse; the negative effects can be very detrimental to the organization. 

There can also be “third order effects.”   My platoon’s average physical fitness scores also declined.  And, the President was highly criticized for giving taxpayer money to an insurer that gave out large executive bonuses.  Obviously, these affects were both unplanned and unexpected but should have been foreseen, to some degree. 

Leadership means thinking ahead and planning properly to predict second and third order effects, avoiding them if negative, and embracing them if positive.  An interesting note: government entities are notoriously poor at predicting second and third order effects because there is no accountability for bad planning.


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Author: Douglas R. Satterfield

Hello. I'm Doug and I provide at least one article every day on some leadership topic. I welcome comments and also guests who would like to write an article. Thanks for reading my blog.

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