Make a decision

| January 11, 2016

Your business decisions are having a different outcome to what you expected? So what, writes Adam O’Donnell, it’s better than making no decision at all.

Let me begin by telling you a story about my local barber shop.

The owner recognised that his ‘first come, first served’ system meant that during busy periods the waiting bench was full of men patiently waiting for their turn in one of the barber’s chairs. He also noted that some would occasionally opt for the 5-minute walk to a competitor rather than endure the 15-minute wait. Being a considerate guy, and keen not to lose trade, he purchased three new iPads that he figured would help them pass the time productively (or unproductively, if that was their thing). Less walk-outs, he reasoned, would mean more business and that would mean higher revenue.

The thing about bright ideas is that once we let them loose in the world, we can never predict with certainty what will happen. He certainly didn’t predict the fall in revenue in the months that followed.

Yes, people were using the iPads. Yes, they would endure long waits. Yes, they would sit patiently on the bench.

No, they weren’t paying customers.

Now that there were iPads to play with rather than a collection of newspapers and magazines to read, it transpired, children were now quite happy to come with their father on his regular trip to the barbers.

Fathers, it was noted, were also now happy for their children to come with them because now they would sit quietly and patiently playing games and doing whatever it is that children do on iPads for as long as it took for the father to get his hair cut. Many fathers, it was also noted, had more than one child with them.

And all the time they were waiting, they were occupying space on the waiting bench.

Now when a prospective client turned up, all he saw through when he glanced through the window was a bench full to overflowing — and he would immediately turn around and head off to the competitor, 5 minutes down the road.

Even some of the men who opted to wait soon got fed up with the interminable sounds of yet another animated character meeting their untimely demise, instead opting for the peace and quiet of the short walk to the nearby competitor for whom the apogee of technology was a radio playing softly in the corner that acted as a counterpoint to the soft buzz of clippers and the periodic turning of a dog-eared page in Men’s Health or GQ.

The barber made a decision (to introduce iPads to encourage business) even though the decision had a ‘second-order effect’ (driving business away).

Second-order effects

Let’s talk more about second order effects why you, as a business manager, should care about them.

The military concept of ‘effects-based thinking’ came to the fore during the Desert Storm campaign of 1991 where Allied commanders sought first to understand their desired strategic outcomes and then determine the tactical actions that they judged would best deliver them, rather than just running headlong into a pitched battle against a well dug-in and heavily-armed enemy which is never, in my experience, a good way to start the day.

Effects-based thinking seeks to understand the linkages between events, actions and their effects on the operating environment. It acknowledges that just as an action leads to an outcome which may be predicted with a high degree of confidence, those outcomes can then lead to further outcomes — or second-order effects — which are usually much less easy to predict but usually appear obvious in hindsight.

What do we do about them

The three most critical capabilities in dealing with second-order effects (as well as their close relative, third-order effects) are the organisation’s ability to:

1. Detect subtle changes in the operating environment

2. Identify causal links between the action and the effect

3. Identify and execute an alternative course of action

The organisations that do this well, in my experience, all share a number of key traits:

Unity of Effort: Two concepts are vital here. The first is vertical integration, where subordinates understand the intentions of their management chain two levels up and ensure that their own plans serve that intent. This understanding of intent also allows them to act on their own initiative when the situation changes rapidly or the results of a course of action aren’t as they expected or predicted.

The second is horizontal integration, where managers understand how their assigned tasks interact with those of their peers. This allows gaps in the plan to be identified and addressed rapidly as well as enhancing cooperation between functional groups.

Freedom of action: Business is chaotic, or at least the environment in which it’s conducted is; agility and flexibility require that people at every level are free to act within clearly articulated boundaries. By doing this, we allow our subordinate managers to adjust their plans to cater for the constantly evolving environment without always having to refer back to us for guidance. Conversely, these same boundaries establish the conditions or points at which our subordinates must refer back to us for input into subsequent decisions, thus ensuring that we maintain a level of control.

The art lies in balancing the unification of effort throughout the organisation with the provision of sufficient freedom of action for subordinates to make progress without constantly referring back to us for guidance.
      

Timely and effective decision making: Many organisations in Australia today have developed such a cultural aversion to risk that decision-avoidance is very much in evidence. So much so, in fact, that the ability to make timely decisions at every level of management is a significant capability multiplier.

No plan will ever be perfect and nobody will ever be able to accurately predict even the first-order effects of an action, let alone the second-order effects. That’s still no reason to not act and leaders at every level in an agile organisation are comfortable with not knowing everything and still making a decision. Sometimes, of course, the best course of action is to “wait and see” and it can be a real test of moral courage for a leader to do this.

Trust: We can tell our subordinates that we trust them to act on their own initiative and they won’t care — despite what they tell us. What they do care about is whether or not we’ll back them when they do act on their own initiative and it doesn’t work out as well as we, or they, might have hoped. Build their trust in you and you’ll have the nucleus of a powerful team who will go further for you than you ever thought possible.

 

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