Monday, August 31, 2009

The Fine Art of Making Bad Decisions

Butch Cassidy and the Sundance Kid are trapped on the edge of the cliff. “What I look at it, we can either fight or give. If we give, we go to jail. If we fight, they can go for position and shoot us, wait and starve us out, maybe start a rock slide and get us that way. What else can they do?”

“They could surrender to us, but I wouldn’t count on it,” replied the Kid.

Butch thinks for a minute. “Wait! We’ll jump!” It’s 300 feet down into rock-filled, treacherous waters. And after some argument ("I can't swim!"), both men eventually jump.

What kind of idiot makes a blind jump into uncharted waters? Answer: the one who’s otherwise dead anyway.

Making good decisions is easy. A good decision implies the existence of a good alternative, and anybody can do that. If there is a good choice, problem solved. But what if all your alternatives are rotten? Well, in most organizations, that gets kicked up the ladder. The higher you are, the nastier the choices that end up on your plate.

Actually, Butch and Sundance had a pretty easy choice: the certainty of death if they stayed, the probability of death if they jumped. Not a pleasant decision, but not a hard one. Real leaders have it worse. They have to choose among strategies each of which makes sense given a specific future. But the future is like Schrödinger’s Cat: depending on the actions of unknown random variables, the cat is both alive and dead until the moment the box is opened. The future become real only when it becomes the present.

Risk managers distinguish between the concepts of “pure risk” and “business risk.” Pure risk only contains a downside. If you didn’t get into a car accident yesterday, you’re not better off. You just failed to become worse off. If pure risk is avoided, it’s status quo. Business risk, on the other hand, combines threat and opportunity in the same decision. If you launch a new product, you might make a lot of money. If it doesn’t succeed, you’ll lose a bundle.

There are four parts of the business risk equation: the probability of the downside, the effect of the downside if it should happen, the probability of the upside, and the effect of the upside if it happens. In classical risk, you know the probability and the impact, so calculating the expected value of the decision is fairly straightforward.

What do you do when you don’t have the numbers? Try asking these four questions when evaluating potential bad choices:

1. What’s the best that can happen? (Can I make it better?)

2. What’s the worst that can happen? (Can I mitigate the impact?)

3. Is #1 worth risking #2? (Is the probability of one higher than the other? Is the impact of one higher than the other? Am I looking at an absence of good options?)

4. Can I live with #2 if it happens? (If not, do I have a less bad option available?)

The buck has to stop somewhere, and the available options may not be what anyone would prefer. Making bad choices is one of the unavoidable burdens of leadership. Do it as well as you can. That's what SideWise thinkers do.

Monday, August 24, 2009

George Patton, Meet Penn and Teller

You may remember the famous scene from the movie. The Germans have launched Operation Wacht am Rhein, better known as the Battle of the Bulge. Elements of the United States First Army, supposedly in a quiet sector of the front, are pinned down in Bastogne. British Field Marshal Bernard Montgomery will need weeks before his troops will be able to relieve the beleaguered Americans.

Allied supreme commander General Dwight Eisenhower asks Patton, “How long will it take you to get Third Army moving north?”

“I can attack with two divisions in 48 hours,” Patton replies, to a round of snickering from the other generals present.

Patton’s boss, General Omar Bradley, is not amused. “Ike wants a realistic estimate, George. You’re in the middle of a fight now. It’s over a hundred miles to Bastogne.”

But in the next scene, troops are marching north.

The assembled generals were right to be skeptical. Extricating three divisions from a fight and moving them 100 miles in 48 hours? Let’s take a look at what that involves.

A division is an Army unit consisting of approximately 15,000 soldiers, along with everything they need to do their job. Imagine picking up a town of 45,000, with all the services needed to keep them going, and moving 100 miles in 48 hours. For starters, if you don't have a detailed movement plan, you'll end up with the world's biggest traffic jam. Armored vehicles are gas guzzlers, people have to eat, and soldiers need ammunition. That means you'll have to pre-position gas, food and supplies along the route. A moving division is more vulnerable than a division on defense. That means you need fighting units to protect moving units, and they need more gas and food and ammunition.

A move of this nature requires a planning staff in the hundreds. In World War II, without cell phones, laptops, and GPS units, orders were typed on mimeograph stencils, duplicated, and hand-carried to unit commanders stretched out over an immense area. Today's technology is far superior, but so are the demands involved.

It takes weeks to pull off an operation like this. It can’t possibly be done in 48 hours.

And yet it was.

Like any good magic trick, it’s interesting to learn just how the apparently impossible happened. In this case, Patton had seen the German offensive coming, knew he would need to move forces north, and had his staff hard at work preparing the necessary orders (including three different contingency plans) well in advance of the fateful meeting.

Patton was the only senior American commander to anticipate correctly the German assault. Strangely, he was helped by insufficient information. He was not cleared for ULTRA, the top-secret project that read the top secret Enigma cipher used by the Germans. But the Germans weren't using Enigma; for the most part units were close enough together to have in-person planning sessions. Even radio traffic was restricted.

Patton, remembering that the Germans had already come through the Ardennes twice, had his intelligence staff looking closely at the area, and saw evidence of the buildup.

The difference between possible and impossible can be just a matter of time. When we say “nothing is impossible,” we usually envision a universe of unlimited time, unlimited resources, and really flexible performance standards. But that’s not the real world. When we’re asked to do something, we have to do it within the boundaries of the triple constraints of time, cost, and performance. Magicians plan well in advance. Often, by the time you know a trick is about to start, it's already over. You're just waiting for the reveal.

When Patton left the meeting with Eisenhower, Bradley, Montgomery, and the others, he went down to his jeep, picked up the radio, contacted his headquarters, and gave them a code word to trigger one of his pre-existing plans. (Patton’s driver, Sergeant Mims, reportedly said, “I don’t know why they need all those other generals. You and me can run this whole war out of your jeep.”)

Contingency planning, careful observation, and acting ahead are vital parts of the management process. The best time to influence tomorrow is usually yesterday.

Monday, August 17, 2009

Six Skills for Managing Your Boss

I didn’t learn to appreciate the art of managing up until I first had the experience of managing down. One of the common surprises a new manager experiences is how much time you spend doing things for your employees. And when it comes to your employees doing things for you—well, I was so naïve when I first became a supervisor I actually thought that meant that people would do what I said.

How quickly we learn.

When I talk about “managing up,” people often think that’s something you do to your boss, that the goal is for the employee to get power over the boss. But that’s not the case. “Managing up” is something you do for your boss, and if you’re the boss, it’s something you wish more of your employees knew how to do.

At work—and at home, for that matter—we live inside a tightly woven web of mutual obligations. If you’re the boss, your employees are obligated to do certain work for you. And you normally have obligations in return: you review and approve and advise and decide. You go to bat. You run interference. You receive the passed buck. And occasionally you call for a Hail Mary play.

You have a similar relationship with your own boss, and he or she with his or her, and so ad infinitum. And that’s not even getting into the more complicated lateral relationships that cut across organizational boundaries.

Management, in a nutshell, is getting work done through the agency of other people. Whether those people actually report to you is largely irrelevant. You have to manage in three dimensions: up, down, and sideways. The official power you get as a supervisor or manager is never adequate to the task at hand. Ultimately, we’re all Blanche DuBois, from Tennessee Williams’ A Streetcar Named Desire: we rely on the kindness of strangers.

We had better be good at it.

A few years ago, my wife Deborah and I researched and wrote a series of three books on the practical challenges of the workplace: Coping With Supervisory Nightmares, Enlightened Office Politics, and Managing UP! As we interviewed managers on what worked and what didn’t, we also looked back on our own careers. We had learned most of these lessons the hard way ourselves, many of them imperfectly, and more than a few we had missed altogether.

While the target audience of the book was new supervisors, we quickly learned that higher ranks of leadership were far more interested in the skills we had identified. That’s because we feel the need most keenly because we’re also on the other side.

Of course, you’ve long since learned the basics, but like us, you probably acquired your knowledge the way the cat learned to swim—by being thrown into the deep end. Even more importantly, you’ve learned what’s at stake.

Managing up isn’t just about taking care of your personal career, although it does. Managing up is the missing link in the relationships you need to run a large, complex organization in today’s crisis-prone environment.

To manage up effectively, you have to start with yourself and move outward. The first issue, the first rung on the ladder of MANAGING UP, is you: the self. A big part of your success in managing others, in whatever direction, comes from your own fundamentals: the quality of your work; the value of your word; and the content of your character

From the inward self, we move outward to style: our own and that of others. None of us checks our humanity at the door when we clock in. For better and for worse, human beings have personalities, preferences, and interests. Friction is unavoidable. Without lubrication, the machine grinds, and eventually freezes.

Style without substance, however, is insufficient. We begin our rise up the management ladder by demonstrating technical merit. But we quickly discover that there’s no such thing as a promotion, not really. Instead, each level is a career change, and we have to discover for ourselves what we need to be successful at the next level. The current age requires continuous learning: what do you need to know next? Where do you need to grow?

We can’t do it alone. We need systems in order to function effectively. Leaders are necessarily generalists; the higher you go the wider the set of skills and knowledge you need. Eventually you need to know everything, and that’s impossible. We feel we’re stuck in the Peter Principle trap, promoted to the level of our incompetence. But we can pull ourselves out. There are two ways out. Sometimes we have to acquire new skills and knowledge…or else we have to manage others to provide the work we need.

The word of the day is “team,” because none of us, it is said, is as smart as all of us. Sadly, sometimes the opposite is also true. Nothing is dumber than groupthink gone wild. The real synergy involves balancing the wisdom of the team with the wisdom of the individual. If “there is no ‘I’ in ‘team,’” it’s equally true that “you can’t spell ‘team’ without ‘m-e.’"

General rules will take us only so far. We have to apply our skills tactically as well as strategically. Managers manage problems as well as people—not to mention problem people—up, down, and sideways. Some bosses are harder to manage than others, and some live up to the old observation that “BOSS” spelled backwards is “double SOB.”

In an ideal world, you want your work environment to have certain characteristics, from the level of challenge and responsibility you desire to how you want to balance the demands of the office and the home. It's unlikely that happy accident alone will achieve what you want. Take responsibility for managing the relationship between you and your boss, you and your peers, and you and your worklife. You'll be much better off.

Tuesday, August 11, 2009

What's SideWise Thinking?

At the end of World War II, Montgomery Ward chairman Sewell Avery made a fateful decision. The United States, he was sure, would experience major difficulties moving from a wartime to a peacetime economy. Millions of troops would return, all seeking jobs. At the same time, factories geared for the production of tanks, bombers, and fighting ships would grind to a halt with no further need for their production.

Avery was not alone in his belief. Many leading economists also predicted that the United States would fall back into the Great Depression. The massive financial stimulus provided by World War II would wear off, and the nation would return to status quo ante.

Let Sears and JCPenney expand; Montgomery Ward would stand pat on its massive cash reserves (one Ward vice president famously said, “Wards is one of the finest banks with a storefront in the US today.”) and when the inevitable collapse came, Montgomery Ward would swallow its rivals at pennies on the dollar.

As we know, it didn’t turn out that way. Instead of falling back into depression, the United States in the postwar years saw unprecedented economic growth.

Sewell Avery was wrong. But was he stupid?

The outcome of the decision doesn’t by itself prove whether the decision was good or bad. Lottery tickets aren’t a good investment strategy. The net return is expected to be negative. On the other hand, occasionally someone wins. That doesn’t make them a genius. Wearing your seatbelt is a good idea. There are, alas, certain rare accidents in which a seatbelt could hamper your escape.

In 1945, no one knew for sure what the postwar world would be like. To understand the future, the only resource we have is the past. It was certainly not unreasonable to conclude that a nation traumatized by depression might well fall back into one.

But it was far from certain.

Year after year the economy grew, but Avery stuck to his guns and refused to permit expansion, expecting the Depression to start any minute now. Sears and JCPenney grew in size and in profits, and by 1954 Montgomery Ward was a lagging also-ran in the department store business. In 2000, the company declared bankruptcy.

Sewell Avery thought ahead, but he failed to think sideways. From our time bound perspective, the future is a wave front consisting of numerous possibilities. We often have only a vague idea of the relative probability of each outcome. But that does not excuse us from the necessity to make decisions.

Foresight is not enough. We must think laterally as well. What if we’re right? What if we’re wrong? What could come out of left field and upset all our precious calculations? What are the signposts that hint at the shape of things to come?

The art of lateral thinking melds classical decision-making with outside the box ideas and a search for clues and models that help us unravel and manage the complexities of organizational life. Whether you are setting strategy for a Fortune 500 corporation or figuring out how your small business plans to cope with economic uncertainty, one answer – whatever it is – simply isn’t good enough.

The art of SideWise thinking – learning to think “what if” – applies numerous models and insights tools to help you avoid the mental blindness and linear thinking that trapped Sewell Avery.