Kudos to OMB and Federal agencies for completing the ratings of 100% of their major IT investments, which by the way was no small undertaking .  So we now have a complete and well presented view via the Federal IT Dashboard (http://it.usaspending.gov/) of how well our “major” Federal IT investments are adhering to cost, schedule and various risk (via the Evaluation Factors) metrics.  Assuming the data is and remains accurate and current (and sure, why not , we have a pretty good picture of the Investment side of the ROI equation.  

As OMB seeks to continually improve reporting via the IT Dashboard and facilitate effective management of our Federal IT systems, I’m hopeful that OMB’s next step will be to focus on the Return side of the equation.  After all, we don’t create and manage projects simply to have them completed on time and budget.  While some investments are still under initial development and thus have not yet had the opportunity to produce a return, many of the “majors” are in the Operations and Maintenance phase where they should be delivering value (return) to their end users.    

Measuring return, especially in the Federal government where not all benefits can be monetized, can be difficult, but there are ways that this can be achieved.  For starters, a simple measure of customer satisfaction might be an informative addition to the Federal IT Dashboard.  

Management is a form of herding.  Sometimes shepherding, sometimes cat-herding, but most of the time it’s much more complicated — like guiding a distrusting group of friends, who’ve grown apart, to regain the vaguely shared glory of some imagined past.  Envision herding a group of lions and lambs, foxes and hens, insects and birds to a meadow where the herder is paid based on how many people mistake this motley crew for a circus.

Leadership is different: leaders are to groups what cowbells are to cows — they provide a signal that others can follow.  A successful leader polishes the bell, tunes it to the sound of success, and convinces all it is the purest note ever struck.  But a false leader cannot sustain the true tone for long.  The inherent challenge of leadership is then to stay true in times of trouble, to appear — and to be — an honest broker among competing interests.  There are not many leadership tools available, other than experience, intellect, and integrity.  Not the type of things they stock at your local Home Depot. 

One constant I have observed in great leaders is that they allow — demand really — that each person they interact with become better than that person really thought they could be.   There is complexity in this.  A great leader in times of war — Churchill comes to mind — may not be so great in times of tranquility, and of course the other way around as well. 

So, are great leaders born?  Yes, of course.  They are just not born great leaders. 

When the going get’s tough, the tough have some choices to make.  There are some schools of thought here.  The first is that this is a golden opportunity for most companies to lay off the unproductive bottom 10% of their staff.  A second is to reduce future revenue generating efforts (such as new product development projects).  A third is to ask for an across the board reduction in exempt staff salaries.  A fourth is to reduce bonuses to an absolute minimum (especially since most staff will not quit their jobs with the economy as it is).  A fifth is to shift support staff to sales efforts (hence reducing the non-productive time of sales people).  A sixth is to ask for graduated reductions in pay (those with highest salaries receiving a greater share of the cuts).  A seventh is to slash prices on all items that don’t move, while reducing prices on hot sellers less.  An eight idea I heard was to offer all customers an iPhone with their purchases, since that seems to be the only thing that’s still selling like hot-cakes.

But whatever you choose to do, how will you make the decision?  Alone with a bottle of Jack?  With Jack, and a bottle of Perrier?  Or with Jack and Pierre and Otto and Lakysha and Anil and Sergey and Wang?   Today’s companies operate in 24 time zones (or 24 home offices in one city), have wastly different local customs, regulations, and success levels.  What’s perfect for New York may not work in Tokyo, and what’s right in Berlin can seem foolish in Cape Town.

Here’s an outline of process we are using to help our customers:

Part I – And the problem is…
You have to define the problem before you plan a solution.  Too many companies attempt to make changes to their plans without defining what has changed and how the new plan should address this.

Part II — …we need a process…
You can go without a process… you just won’t be very successful.  Circles are nice for doodling.  But don’t get caught going in circles when times are tough.  Without a process, you are walking with one leg a foot shorter — and will tend to circle the room.

Part III — …that we can buy into…
So you have a process.  Great.  Does anyone buy into it?  If your process is opague and non-inclusive, no one will buy into the results.  Open it up to the relevant people and set expectations for how their input will be used.  Just because people participate, the have to know that companies are not democracies — but why not let them bring good ideas into the mix?

Part IV – … and communicate to the organization
Once the leaders decide on what to do, they have to find a way to have the followers follow.  You have your carrots and your sticks, of course.  But usually there are not a lot of carrots in a recession, so that leaves sticks…  Not a good way to have people follow leadership.  So find new carrots that don’t cost money.  Communicate, provide non-financial benefits, give stock in lieu of cash bonuses.  But whatever you do — just make sure you communicate your sincere intent (unless of course your intent it’s insincere, in which case you are unlikely to be reading this.)

So, that’s the process.  Now get going.

By the way, I make software that helps with this.  www.expertchoice.com.

Good outcomes are the result of three factors: Quality of the decision, quality of the execution, and chance.    Quality of a decision comes down to a correct assessment of the ability to execute and the element of chance (which includes risk).  Quality of execution similarly is strongly related to chance, as executing without regard to risk is foolish.

Over the past decade or two the world’s business leaders have been obsessed with execution.  Here is a typical list from Amazon that shows a strong focus on execution as strategy. A similar list of books on risk is telling.  The focus here is more tactical and technical.  Risk apparently is the domain of geeks, not general managers.

And who was focusing on decision making?  Again a simplistic list from an Amazon search is revealing: almost all the books are on the psychology of individual decision making.  Few titles on collaborative decision making, or improving businesses to make better decisions. Put simply: why has there been so little focus on decision making that marries execution and chance for better business outcomes.

The current economic crisis is immensely complex and flip summaries will not resolve it.  However, it is clear that decision making in business, government oversight, and personal behavior has been found wanting.

- A finely tuned system that executes well, when all is well, will not do in dire times — our banking system is Exhibit A.
- Risk models that model economic times when there was little risk, will not tell us about the dangers the future inevitably holds– our housing and mortgage industries are Exhibit B.
- Business leaders whose rewards are reaped in the short term, will not make good decisions for shareholders and households that plan to reap their rewards in the long-term– our current stock markets are Exhibit C.
- Government that aims to regulate the interest of all market participants while clearly sitting in the pocket of some stakeholders earns the trust of no one– our crisis of confidence now is Exhibit D.
- People who have become only consumers, and whose life-style is borrowed with abandon, one day will have to return to the values of that People–we are almost all, unfortunately, Exhibit E.

Decisions.  We all face decisions.  Hopefully next time they will be better–decisions that acknowledge the importance of risk, and decisions that take into account our ability to execute.

Cooperation and collaboration may rival computers and communications technology as the most improved aspects of business in the past 50 years.   Optimists hope that management by fiat, grunts, and growls will sometime soon be fully replaced by a conscious attempt to arrive at the best solution, regardless of its source.  This, I’m afraid is folly.  Two major problems remain to be solved before we herald in the era of kumbayaesque business practices:

1. The transaction cost of keeping everyone happy, and
2. The elimination of poutology as a career strategy.

Let’s treat them in turn. 

Transaction costs is a technical term from economics.  In it’s simplest form this can be thought of as just what it costs to exchange things in a market place.  More generally, transaction costs can be seen as the direct and indirect costs of obtaining a certain outcome.  So, in a business decision environment we can view transaction costs as the price of paying off the foot-draggers, saboteurs, whiners, and single-focus freaks.   In a highly collaborative environment where consensus and collaboration are valued as an end in themselves (because they are believed to bring about better decision options and execution actions) this cost is not negligible.  Who hasn’t seen a decision delayed, implementation altered, or lowest-common-denominator choices prevail, because someone appeared to object.  This is especially prevalent in hiring decisions, where a single ‘uhmm’ can be seen as the prelude to a veto war. 

Poutological behavior is more pernicious.  While more common among friends and family, pouting is often employed effectively as means to an end in business.   This refers to the act of pouting to gain leverage later.  In a sense, this is a particular type of anchoring bias.  If I pout about a decision today, but then acquiesce ‘because I’m a team-player’ then next time people will, whether they realize it or not, take into account my “magnanimous” gesture.  The net effect is that the pouter has greater leverage coming into the next round of collaborative decision making.   A pouter who is perceived as being invaluable has double leverage since the implicit threat of abrupt departure hangs over the team like Damocles’s sword.

Tomorrows collaboration tools and team training in business school have to do more than just help us collaborate and achieve consensus.  Managing the process of collaborating, disarming the poutologists, and reducing transaction costs are very important to help us avoid the politics of teams, and the dreaded ‘groupthink’ which poorly configured teams often sink to.  Such tools will allow us to prioritise tasks, and maintain a goal-oriented focus, thereby making politically motivated pouting as transparent as a child’s crossed arms and foot-stomping. 

A company of two has politics in its decision making.  These office politics grow as the number of employees grows.  To examine this, let’s separate between three types of office politics: 1. Those that arise from specialization of functional skills; 2. Those that arise from differences in people’s personalities; 3. Those that arise from internal competition in the company and each employees’ trade-off between corporate and personal success.

We can see the importance of collaboration and establishing priorities as we examine the politics of decision making from these three perspectives. 

First we have the politics that arise from a function-based assessment of how to prioritize a company’s risks and opportunities.  The marketing/financial/operations/sales/etc. perspectives all have value, but they differ in how the evaluate available information, and in the time horizon they consider.  The marketer’s ‘luxury’ of focusing on the future may not be terribly relevant in the mind of a sales manager that needs to meet this quarter’s sales quota.

Then there are personal differences that give rise to politics.  Some people thrive on risk-taking and value a big upside.  Others may think steady-going is the way to go.  Some people like everyone to get along and need consensus building before making decisions.  And then there are the sociopaths and sycophants, the ignorant and the lazy, the smart and the arrogant.  The wallflowers and the wannabes, the we-don’t-do-it-like-that-here old-timers, the know-it-alls, and of course the never-do-wells. 

Lastly there is the simple truth that people change jobs, and that they want to work on things that makes them look good in the eyes of prospective future employers.  Hence, people would rather lead their own cool sexy project with the big budget, than work on someone else’s boring old infrastructure effort.  People’s behavior in order to get their project funded is often the source of office politicking.

Experience tells us that all companies have these dynamics, and that they are the root-cause of negative office politics.  Now it is clearly true that office-politics — especially as a mechanism for fostering healthy competitions of ideas and people — is not all bad.  The true question companies face today is how to harness their diversity of opinion, experience, and attitudes:  that is how to collaborate and prioritize.  Ironically, dispersed workplaces where people have more meetings that are not face-to-face may help here.  When run properly, telephone and online meetings can be very effective as they allow us to focus on the objectives and not the people.  Tools that enable this way of working are emerging–and will provide a way to reduce the negative aspects of office politics, while at the same time enhance the positive aspects.

A fundamental question for business leaders is how much influence rhetoric has on business decisions.  By rhetoric I mean emotional appeals and sophistry, as opposed to presentation of a cogent, fact-based line of thought.  As has been laid out in this blog before, intuition is a very important part of daily decision making.  Powerful as intiution is, however, it is subject to manipulation. 

For example, if two people used exactly the same words to try to convince us of something, we are more likely to ‘believe’ and trust the argument when given by the person we find more appealing.   This was famously illustrated in a FedEx ad some years back.  So, how can one avoid the sirens of corporate stupidity? 

First establish an outcome: What is it that you are trying to accomplish?  What are the parts that influence that outcome.  For example: Outcome: We want to generate 100 new qualified leads this quarter.  What parts are necessary for that?  Part 1: I need contact names.  Part 2: I need to cull through the list and qualify the contacts to those that are most likely to want my stuff.  Part 3: I need to contact the people and see if they are willing to listen to my pitch.  Part 4: I need to validate that they have the money to buy my stuff. 

Second establish possible solutions:  In the example above I might go to the phone book and find contacts at random.  I might go to my personal rolodex.  I might call up friends and ask them for leads.  I might go and buy any of a 100 list of names and call them.  I might go to a conference and find contacts.  I might buy a list and do direct mailings.  I might take out ads in media.  I might run an ‘Internet special’ on my website.  I might hire some people for cold calling.   I may call upon my existing customers.   Bottom line though, you have to look at each alternative and see how well it performs against the parts necessary for the outcome.

Third make sure you understand the alternatives:  Each alternative may or may not be able to meet my outcome.  I will want to know that.  But I also will want to know what each alternative requires me to do.  For example, most of the above alternatives require me to ‘qualify’ the lead with an email or phone call — I have to determine if the lead is for real.  The Internet special if it’s accompanied by a direct ability to buy online might be an exception.  But in general, you cannot make the decision until you understand the alternatives in the context of the outcome.

Fourth make sure you have the resources to implement the alternative(s):  The ‘best’ solution is not always the right solution.  The best solution for you, given your constraints is the way to go.   Getting a mailing list with 10.000 names is not the best solutions if you don’t have the budget to push out 10.000 mailers, or if you don’t have anything to say in the mailers.  Or if you only have home addresses and you are selling  B2B products. 

Here’s a final tip:  You’re already doing most of this.  Either implicitly by trading of alternatives in your mind, or directly by soliciting feedback from different people.  You may even be drawing up a list of criteria, or stating your objectives.  Problem most organizations face:  they don’t know how to pull it all together and make it work.  They don’t know how to collaborate on decision making.  For more on that, visit this shameless plug.

I remember reading ”The Country of the Blind” by H.G. Wells when I was a teenager.  The story is basically built around the maxim that “In the country of the blind the one-eyed man is king.”  Except the inhabitants of the country of the blind find the antagonist’s obsession with this incomprehensible ’sight’ thing crazy and eventually he is convinced to have surgery to remove his eyes.  Among many other things, this story is about context — and especially the context of decision making. 

Thus, data in context is information.  Information in context is knowledge.  Knowledge in context is wisdom. 

For example:  The number 93 is data.  It’s more than 92 and less than 94 (this btw. is the implicit context of our counting system), but without any further context this data is useless.  If we provide context for this number: “The percent of satisfied customers is 93″ we arrive at some form of information.  This information is more useful than the data we had before, but without further context this information is not very valuable.  Is 93 percent satisfaction good or bad?  I guess that could depend on what type of customers and what kind of service or product we are delivering.  

Now if we add more context: Our percent of satisfied customers is 93, our competitors’ customers are 95 percent satisfied. OK.  Better, I now have some knowledge that may be helpful.  But still, this is not entirely satisfying.  Is this 2 percentage point difference meaningful?  If it’s statistically so, is it financially so?  Again, we need context to our knowledge: we need wisdom.  Without the wisdom that tells us if the 2 points make a difference or not, we lack the ability to make a wise decision.

Of course context can also vary from one person to another, from one place to another.  What is important in one country may not be important in the next.  What is important today, may not be so tomorrow.  It’s a shifty thing context.  One of the key things I do when I make decisions with other people, is ask them to tell me how important different things are to them — that gives me the ability to discuss the context of their goals/objectives — and it also helps me challenge my own assumptions about the decision.

Business intuition is a remarkably understudied topic.  Intuitively we know that it’s what separates the great from the good.  We call  it by many names, define it haphazardly, and often time ascribe magical talents to people who possess it.  Intuition, btw. isn’t acting without thinking, it’s thinking without awareness.

But can it be analyzed?  Can it be understood?  Can it be learnt?  Can it be taught?  Yes. Maybe. Yes. Maybe.

You can analyze it for sure.  You can come up with many graphs and metrics, but ultimately to understand it you may need to use your, err, intuition.  Similarly, you must be able to learn it, unless you want to believe there is a power on high that doles out business intuition with the wisdom teeth.  So here’s a prescription for how to improve your business intuition:

1. Find a mentor who clearly has better than average business intuition.  2. Figure out what she/he does and how they train their intuition.  3. Seek and create environments that give you immediate feedback about the quality of your business inuition. 4. Think laterally. 5. Seek disconfirming evidence.

If you’re inclined to reading, and don’t mind non-fiction, there is a fascinating book called ‘Educating Intuition‘ you should read.  It’s academic and a little dense, but inside of this book there is a fascinating amount of detail about how your brain works, even when you don’t.  Two key points: 1. your intuition is not fixed and it is always learning and building on previous experiences.  But intuition is generally built in a specific and concrete context and you have to be careful to NOT trust your intuition where you have insufficient reason to trust it.  2. Some environments are better than others for learning intuition.  Immediate and accurate feedback is critical to ensure your intuition improves. 

Education is to working what ingredients are to cooking, as an SAT question might go.   Just having an education is necessary for being able to work well, in the same way that having ingredients is necessary for cooking.  But, the analogy actually has a deeper and more interest angle to it.

Cooking is a skill that for the most part can be learnt.  Similarly, working can be learnt.  Most people, when they come out of college are long on education, short on usefullness.  To use the cooking analogy: they know the names of all the ingredients, they know the names of the kitchen gadgets and utensils, but they lack the experience and on-the-job training to a lot of things necessary to be effective workers.

Unforunately, training new workers requires a lot of time, and often a lot of failing.  These skills fall under the experience and exposure kind.  Your average medical doctor completes approximately 16 full-time-equivalents of work in 8 years.  The holy grail of recruiting and staff development is thus finding the people who will develop into useful employees — or failing that, how to poke them from the competition.  But staff development and recruiting both suffer from the ‘ingredient’ problem: we tend to overemphasize good ingredients — and fail to recognize good cooking. 

So, what then makes someone a good (knowledge) worker?  And equally important, what makes someone not so?  Learned books have been written on this topic, and I’m not planning to rehash all that.  But, let me point out three things that are often overlooked:  1. Excellent understanding of own and others’ decision making.  Without understanding that people make decisions differently, using a different set of assumptions, information, and processes, a manager can never hope to correctly assess a situation.  2. Balance of induitive and deductive skills.  Without knowing when to rely on his/her intuition a manager cannot know when to dive in and do the laborious deductive analysis/data collection that is not possible for every decision.  3. Ability to leverage others’ to shore up own weaknesses.  No manager can be successful without the help of others.  Efficiently and effectively depending on others is a skill that lies at the heart of most group activities.

Funny how there are almost no tools out there to measure these three components.  If you know of tools that help evaluate these please let us know and we’ll provide a listing here. 

A bad knowledge worker, btw. is someone who knows, but doesn’t work.