David Jacobson's External Insights

New Year Reflections: learning from experience

Ideally you should regularly reflect on your experiences and the lessons you have learned. But if you do not have a process for this, our calendar provides one in the form of the New Year.

In business, waiting for the New Year (or your annual holiday) may be sufficient to "recharge your batteries" but your learning and improvement cycle needs to be much shorter: you need to learn from each project or encounter with a customer.

There are different techniques for this including:

• The ADRI model used in the Australian Business Excellence Framework: It evaluates how key criteria are achieved by "exploring how the organisation puts its plans and structures into place; deploys those plans and structures; measures and analyses the outcomes; and learns from its experience. These are known as the “Assessment Dimensions” of Approach, Deployment, Results and Improvement (ADRI)."
• Action learning: Action learning can be defined as a process in which a group of people come together more or less regularly to help each other to learn from their experience.
• After Action Review , developed by the US Army. It essentially asks four questions: What did we expect to happen? What actually happened? Why was there a difference? How could we do it better next time?

The common element in these techniques is that you have to look back and learn before you can improve in the future.

Is there an optimum time to make a decision?

How do you know when it's the right time to make a decision?

Michael Useem in a Knowledge@Wharton article  and podcast discusses his work on the topic in researching his book The Go Point: When It's Time to Decide -- Knowing What to Do and When to Do It.

In writing this book, Useem asked more than 100 leading decision-makers to analyze decisions they had made, to name their best and worst decisions, to describe how they reached them, and to comment on what, if anything, they would change about how the decisions were arrived at.

Useem says that "leadership often comes down to decision making...[it takes] time to do that. And that is a constitution to know you've got to face a decision, you've got to see both sides, you've got to hear from the various parties and then you have to act."

So what makes a great decision-maker?

Here's his "executive summary" on good decision-making:

"I think the basic premise that underlies the book -- I think it just underlies reality -- is that decision making as a skill is learned really by making decisions. Critically though, [it means] looking back on those decisions, to make certain we don't make the same mistake twice, that you have some sense for what went right as well."

But don't be paralyzed by analysis.

The article sums up:

• As with many things, you learn to become a better decision-maker by making lots of decisions.
• Pay scrupulous attention to when to decide:  Too soon is too uncertain, too late is too much missed opportunity.
• Gather your trusted, unbiased, raw facts advisors, and listen hard.
• When in doubt, adopt a "bias for action."

Global warming impact

The movie An Inconvenient Truth has opened in Australia with a big promotion by Al Gore and mixed reactions from politicians.

What do businesses think about global warming?

At a recent International Financial Ombudsmans Conference, Bill Peck, AON's General Manager Risk Management and Compliance, delivered a paper on Global Warming-Impact on Financial Services.

Whilst the link is not the full speech, the notes themselves are sobering (starting with a tsunami crashing over the Opera House) and clearly indicate that some industries are acknowledging global warming as a growing risk and are planning for it.
 

The three dimensions of negotiation

Often negotiations get stuck in "positions" each party holds. In 3-D Negotiation authors James Sebenius and David Lax describe how you can shape important deals through the 3 dimensions of tactics, deal design, and set-up.

In this interview, the authors describe a "3-D barriers audit" for negotiations:

"First, you should ask whether it is a tactical or people-related barrier like communication, trust, misperceptions, or the like. Second, you should ask whether the problem is deal-related: Does the proposed agreement offer sufficient value to the parties to be more attractive than no deal? Does it accomplish their objectives? Third, are there set-up problems such as wrong parties, interests, no-deal options, sequence, or basic process choices?"

The article gives the following example :

Consider an example of both kinds of mistakes from the U.S. Midwest. In this case, environmentalists and farmers opposed a power company's plans to build a dam. On the surface, the parties appeared to have deep, irreconcilable positions, which had resulted in a long stalemate. Yet a superior deal could be designed if the parties looked past their stubborn bargaining positions to their underlying interests.

By stepping back and mapping the parties' real interests, it emerged that the farmers were worried about reduced water flow below the dam, the environmentalists were focused on the downstream habitat of the endangered whooping crane, and the power company urgently needed new generating capacity and a greener image. After a costly legal impasse that threatened to last for years, the three groups designed a better deal that included a smaller dam built on a fast track, water-flow guarantees, downstream habitat protection, and a trust fund to enhance whooping crane habitats elsewhere.

Using evidence to make decisions

Decision-making is not always linear: it can evolve using a combination of facts and personal biases.

In How We Really Make Decisions David Maister suggests that "nearly all the time, rhetoric triumphs over reason, personality over substance, politics over merits, neuroses over facts."

He refers to Lovaglia’s Law: The more important the outcome of a decision, the more people will resist using evidence to make it.

Bob Sutton also comments on Lovaglia's Law: the more is at stake, the more that people will be motivated to push for solutions that increase their power and decrease other’s power.

It's an interesting proposition. If you want more discussion, read the comments after David Maister's post.

UPDATE: Coincidentally, I've just read this post on how some angel investors make their investment decisions: before they even get to the financial analysis, they go through an initial meeting and then a getting to know you period to establish trust and an understanding of the people they are dealing with ("gut feel"), and only then comes the rational decision process.

Cole Inquiry: what the Government knew about AWB contracts

The bracket of evidence about the Government's knowledge about AWB's oil-for-food contracts has ended with the examination this week of the Deputy Prime Minister and Minister for Trade Mark Vaile (here, p75), the Foreign Minister Alexander Downer (here, p46) and the Prime Minister John Howard (here, p2).

Regardless of the political consequences (some performed better as witnesses than others and the administrative failings of some were exposed), the bottom line is that AWB did not get much comfort from the evidence as shown by an exchange during Mr Downer's examination and an interview Mr Howard gave to the 7.30 Report on 13 April, both of which suggest the Commission may find that AWB mislead the Government. 

This exchange during Mr Downer's examination (asking why his office didn't follow up inquiries with AWB):

"Q. The evidence, as I understand it, is that the inquiry extended to reading to him or conveying to him the contents of the Moules cable and receiving a response, "This is bullshit", together with an emphatic denial, and that was the extent of the inquiries made by Mr Bowker. Do you
regard that as satisfactory conduct?

MR ROBERTSON: I object to that question.
MR AGIUS: I object to that question, Mr Commissioner. That question may have relevance if there was any possibility at that time that, if Mr Bowker had conducted his inquiry differently, AWB would have given him a different response. The problem with all of this examination is, if I may say so, with respect, which is why I did not embark upon it, all through this time AWB was denying that it had done anything wrong. In my respectful submission, it sets the bar too high to say and to suggest in the course of the examination that, in the face of that denial, the Commonwealth ought to have rejected the denial, and now be criticised for not conducting a different inquiry when the only inference available is that, if the different inquiry had been made, AWB would have made the same response, that it was not acting in breach of sanctions. The answer to that question can't possibly assist you, Mr Commissioner.

MR JUDD: On behalf of AWB, that is rejected as a proposition. My learned friend knows, as his questioning has indicated during the course of the examination of some of these witnesses, including the ministers, that, had specific questions been asked, there may have been specific answers. My friend has asked those questions and he's put it to witnesses on the assumption, presumably, that such questions might have elicited a different answer. Of course we don't have the answers because the questions were never asked. But it's not right, in our submission, to draw, as our friend does, the conclusion that, had the questions been asked, nothing would have been said to enlighten the questioner. That is unfair and wrong.

THE COMMISSIONER: I had thought, maybe wrongly, that up until at least 4 October 2005, and possibly later, AWB maintained that it had done nothing wrong.

MR JUDD: It did make general denials of wrongdoing, but if one looks carefully --

THE COMMISSIONER: Not just general denials, specific denials. We have a folder here of correspondence between AWB and the various departments. It will no doubt be collated at some point of time and addressed. We have the evidence of what they told the Volcker committee. We now know from the brief which was produced the other day that they had a deal of information which they withheld from the Volcker committee. The Volcker committee's report may well have been quite different if that material had been made available to them.

MR JUDD: It's rejected that material was withheld. Material was provided to the committee on exactly the same basis as it was by government. That's a matter which is established by this inquiry.

MR AGIUS: As my learned friend knows, the Hogan/Borlase trip report was not provided to the committee. My learned friend knows that the fact that the last two contracts had their prices inflated so as to conceal the Tigris debt was not provided to the committee. Not only was it not provided to the committee; it was not provided to counsel, from whom advice was sought. It's ridiculous to suggest that AWB was in the same position as the government. I'm not here to defend the government, but I'm certainly not going to sit here and hear misrepresentations put as submissions. AWB was denying that it had done anything wrong right up until at least October of 1995. To suggest that if Mr McConville had been asked any other question in any other way it would have suddenly decided to tell the truth is preposterous, in my submission.

THE COMMISSIONER: In any event, we've had enough of that. That can be the subject of submissions in due course. Your question is rejected, Mr Forrest."

From the ABC's 7.30 Report on 13 April:

"JOHN HOWARD: No, well, the reality is - and I choose my words carefully - I don't want to say something that I shouldn't be saying at this particular time but I think I can say this - that AWB has misled the following: it misled the Department of Foreign Affairs and Trade; it misled Mr Volcker because it didn't provide all of the information it wanted; it's misled the United Nations; it appears to have misled a former chief justice of Australia, Sir Anthony Mason, whose opinion - I understand this is now in the public domain - provided very strong legal exculpation in relation to the behaviour of AWB; it's misled the wheat export authority; and misled Ferrier Hodson. I mean, AWB, every time ministers rang them, they were going through denials. You asked me directly, "All you had to do was pick up the phone". What's wrong, Michael. "If you'd have picked up the phone", Michael, I mean that's said, that's said glibly as though it's all easy, "Just pick up the phone". The point I'm making is that if a company systematically and successfully is able to mislead people in that, of that list I've just given you and leave the Government out of it - but Sir Anthony Mason is no slouch. "

AWB Index

AWB Index

This is an index of my postings on AWB and the Oil for Food Inquiry conducted by Commissioner Cole ("the Cole Inquiry"):

Australian companies and Iraq Oil For Food Inquiry (19 Jan)

Reputation risk: the AWB experience  (31 Jan)

Oil-for-Food Inquiry: expansion of terms of reference (3 Feb)

AWB and Oil for Food Inquiry: Managing Director resigns and corporate governance to be reviewed (9 Feb)

AWB and Oil for Food Inquiry: who knows what and where is it kept? (16 Feb)

AWB: monopoly and governance issues (22 Feb)

Cole Inquiry: what did the AWB Board know and when and why is it important? (11 March)

Cole Inquiry terms of reference amended (3) (20 March)

Cole Inquiry: isn't there a summary of AWB facts and where are the missing emails?  (25 March)

Cole Inquiry: AWB risk management advice is not legally privileged (6 April)

AWB challenges Cole (6 April)

Cole Inquiry : AWB corporate secretaries resign (12 April)

Cole Inquiry: what the Government knew about AWB contracts (14 April)

Cole Inquiry and AWB: corporate culture and criminal responsibility (25 April)

What offences might AWB have committed? (27 April)

Cole: no action over political comments  (28 April)

AWB Inquiry update (12 May)

Federal Court decision on AWB apology (17 May)

Cole publishes AWB document (18 May)

Royal Commissions Act to be amended (24 May)

Cole Inquiry: AWB goes back to court (30 May)

Royal Commissions Act amended (13 June)

AWB obtains injunction against Cole (21 June)

AWB Oil for Food Inquiry reporting date extended (22 June)

US class action against AWB (11 July)

AWB v Cole update (19 July)

Cole Inquiry and AWB update (10 August)

AWB: case study in the difficulty of apologising (17 August)

Cole Inquiry hearings resume (24 August)

Federal Court decides on AWB's claim for privilege (18 September)

Cole Inquiry reporting date extended (22 September)

Understanding biases in strategic decision making

What makes an executive make a risky strategic decision even though it is based on "trust" and "gut instinct" rather than facts and research?

CFO.com have published a McKinsey article co-written by Dan Lovallo a professor at the Australian Graduate School of Management of the University of New South Wales with Olivier Sibony, Distortions and Deceptions in Strategic Decisions (via Business Pundit) which argues that :

Strategic decisions are never simple to make, and they sometimes go wrong because of human shortcomings. Behavioral economics teaches us that a host of universal human biases, such as overoptimism about the likelihood of success, can affect strategic decisions. Such decisions are also vulnerable to what economists call the "principal-agent problem": when the incentives of certain employees are misaligned with the interests of their companies, they tend to look out for themselves in deceptive ways...

Of all the documented cognitive distortions, overoptimism and loss aversion (the human tendency to experience losses more acutely than gains) are the most likely to lead people who make strategic decisions astray, because decisions with an element of risk — all strategic ones — have two essential components. The first is a judgment about the likelihood of a given outcome, the second a value or utility placed on it.

The article gives practical examples of bad decisions from each aspect: going ahead or not going ahead with a project because of overoptimism or loss aversion.

It talks about "sunflower management": the inclination of people in organizations to align themselves with the leader's real or assumed viewpoint.

The article proposes that:

Corporate leaders can improve an organization's decision-making ability by identifying the prevalent biases and using the relevant tools to shape a productive decision-making culture.

McKinseys emphasise the need for review and feedback and constructive debate: A fresh pair of eyes with no emotional connections can sometimes see things that escape the notice of more knowledgeable colleagues.

This is  fascinating and useful article which will improve your chances of making good decisions.

Perfecting public speakng

Before you get to the stage of preparing your powerpoint you need to have something to say and be able to say it well.

In How to get a standing ovation Guy Kawasaki offers 11 tips on public speaking.

Tip 11 is "Practice and speak all the time". After having researched the topic and prepared your talk, practising is probably the last thing you want to do. But the delivery is the part that the audience sees.

Kawasaki links to Behind the magic curtain an article by Mike Evangelist on how Steve Jobs prepares for his keynotes and how Evangelist had to meet the standards himself.

There are no short cuts and a powerpoint does not replace good delivery.

Business 2.0 now free online

Business 2.0 and its associated magazines Fortune and Money have removed their online subscription requirement.(via Om Malik).

In My Golden Rule 49 US leaders give their recipe for success.

NY State Attorney- General Eliot Spitzer says: "Never write when you can talk. Never talk when you can nod. And never put anything in an e-mail."

It makes you wonder what strategy the Australian Financial Review is following. Its access to archives is extremely limited, even for paid subscribers.

Confidentiality of information and documents

What do you do when you receive a document "in confidence" but believe it should be published in the public interest?

This week, the ACT Chief Minister John Stanhope released a copy of the draft Commonwealth Anti-Terrorism Bill. (ABC News)

The Government was upset at the breach of confidentiality. Other Premiers said they wouldn't release it. Stanhope said he had a public duty to release it, it should not be kept confidential.

UPDATE 21 October: Stanhope excluded from further consultation

What do you do if you obtain such a document (eg it is given to you or you are told where to download it) if you had no personal agreement to keep it confidential?

Well, most Australian journalists seem to have taken the approach that the document shouldn't be confidential and that their readers had the right to know what was in it.

Some lawyers have taken the same approach but I'm not so sure.

UPDATE 21 October: Academics are also happy to publish: see Jupp's analysis

If I was a lawyer acting for a client and received documents from another party's lawyer that was clearly confidential or sent to me by mistake, I would return the documents. Would I use the information in the documents? Hopefully the same information could be obtained from other sources.

But where I'm not a party to the confidential agreement or acting as a lawyer, do I take the same approach?

I have been reluctant to comment on the Bill even though there are issues I am interested in. Why?

In "strictly confidential" by Simon Longstaff from the St.James Ethics Centre, he discussed the the alleged use by some radiologists of confidential information relating to changes in government funding as a result of which they manipulated orders for expensive diagnostic equipment.

He argued:

Understood in its simplest terms, the doctors must have known that the information they received was not legitimately theirs to be used. It really doesn’t matter how or by whom the doctors were informed. Even when governments break their own rules on confidentiality and orchestrate a ‘leak’, they do so in a public manner designed to avoid the perception that they are providing special access to some favoured group. Indeed, to do otherwise would be to court the charge of corruption.

All of this suggests that if the doctors received confidential information, then they should have refused to use it. If we think of information as property, then this information belonged to someone else. To use it would be similar to putting your foot on a two dollar coin dropped by a person, at the front of the queue, so that you can spend it later. The same would be true if the money was found by someone else and offered to you in the mistaken belief that it was yours. In neither case is the money yours to spend. ..

I encounter many people, in business, politics and the like, who seem quite happy to make use of strictly confidential information that falls off the back of the proverbial truck. Their typical response is to say that all is fair in love, war and business and that if a competitor makes a mistake, then it is perfectly ethical to take full advantage of their error and make use of the lost property – no matter how sensitive or valuable it might be.

What if you get no personal benefit from use of the information? What if it is in the public interest, like Watergate?

Perhaps in this case where the Bill will be introduced into Parliament within weeks, there is no major issue. But I think I'll wait anyway.

Vivian Alvarez and DIMIA: Ombudsman's report

In this note I referred to the Palmer Report on Cornelia Rau.

The Commonwealth Ombudsman has now released its report on the deportation of Australian citizen Vivian Alvarez.

The Ombudsman said:

‘There are many lessons that emerge from this report. Government administrative systems and processes must have a sound legislative basis. Staff must receive adequate training and support to administer the law in a fair, lawful and transparent manner. It is expected of all officers in government that they act responsibly and with integrity. Unless these lessons are put into practice, serious failures in public administration can occur with potentially devastating results for vulnerable members of the public.’

The Department has apologised to Ms Avarez. The report found  a negative culture and recommended new systems and training programs.

The importance of corporate minutes

Whilst the Corporations Act requires that minutes of company meetings be kept, the Act does not specify the format or detail of those minutes.

If minutes are prepared carefully they serve a number of purposes:

1. a record of the decisions made at the meeting;
2. a record of the basis on which the directors made their decisions: both the process and the information and experts they referred to (in the case of board meetings, minutes can show that the directors have discharged their duties and can help them rely on the business judgment rule if necessary)
3. an action item list: who has to do something and by when.

The minutes should be concise but detailed enough to record the key points.

As they could be referred to for legal purposes in the future, all directors present at the meeting should check they are accurate and reflect any concerns before they are approved by the board.
Provided the process is set out, the minutes need not be a complete record of the discussions that occurred.

Prompt preparation of minutes after a meeting is evidence of good corporate housekeeping and decision-making.

Morris Bundaberg Hospital Commission of Inquiry and technology

It's now a matter of public record that the Morris Inquiry has been shut down because of bias against 2 hospital administrators.

Here are the reasons for judgment.(pdf)

This note is on an aspect of the inquiry that has not been discussed elsewhere: the use of technology.

From the day the Inquiry was established it maintained a website that I believe will become a model: it didn't just have the terms of reference, it had every ruling, press release, submission and, as hearings progressed, daily transcripts.

Early on the media asked for video access. Morris gave it to them (provided they didn't affect the privacy of witnesses) so that the inquiry was on every night's news and audio feeds were heard on the radio.

The use of technology gave the public confidence that the inquiry wasn't being held "behind closed doors".

Ironically the technology was used to shut the Inquiry down. DVD's of Morris' questioning of witnesses were tendered in evidence against him and were in the eyes of Justice Moynihan compelling evidence of ostensible bias. The DVD's communicated in a way that a written transcript can't. A transcript wouldn't have shown Morris descending from the bench to shake the whistleblower Toni Hoffman's hand at the end of her evidence.

The Inquiry's use of technology was a successful experiment to show that the law can improve its interactivity with its users.

Disappointingly all that's left of the inquiry is this screenshot (pdf).

How to prioritise problems

Although How to Decide What Bugs to Fix When is about software development, it offers some great guidelines generally on prioritizing work.

The author argues that you should regularly perform "bug triage" to keep control of your project. Divide your problems into 3 piles: Must Fix, Might Fix and Won't Fix (or Priority 1, 2 and 3):

1. If a bug is a Must Fix, it must be more important than any bug in Might Fix and Won't Fix.
2. If the bug is a Might Fix, it must be more important than any bug in Won't Fix.
3. If the bug is a Won't Fix, it must be less important than the least important Might Fix bug.

No more than 50% of the bugs should be in Must Fix and if the pile is too big divide it into Must Fix this week, and Must Fix eventually.

Each pile can then be analysed for severity.

The key quote:

" the criteria for prioritizing work should be what is most important to the project and the customer. A team's commitment to serving the project goals over other desires is often the difference between quality and shoddy work."

via Rob Hyndman

Who makes the decisions?

Decision Rights: Who Gives the Green Light? from HBS Working Knowledge  discusses the steps required to ensure that a company decides who is authorized to make what types of decisions.

Putting decision making in the right hands can involve organisational and personal issues.

Do the decision makers have the right information?

Is decision making too centralised?

Is there ambiguity about who makes the decision?

The article concludes: "As a company, we've recognized that good decisions don't just happen... "There is a science to it—a bit of art but a lot of science."

When "yes" is the wrong answer

HBS Working Knowledge's article "Don't Listen to Yes" argues that when your organisation is making a decision there needs to be some conflict, that getting "yes" answers all the time may not achieve the best result. Of course, having a culture of "no" or a culture of "maybe" has its own problems.

Some key quotes:

the lack of good conflict—constructive conflict—within an organization makes it that much harder to accurately evaluate business ideas and make important decisions...

By inducing vigorous and open debate, leaders avoid the guessing game of trying to discern whether or not people truly agree with a choice that has been made...

To be effective, leaders need to ensure that conflict remains constructive. That is, they must stimulate task-oriented disagreement and debate while trying to minimize interpersonal conflict. Leaders can accomplish this by taking concrete steps before, during, and after a critical decision process.

Designing new products or services

A key aspect of creating a new product or service is determining whether the customers will buy it.

In this excerpt from MarketBusters: 40 Strategic Moves That Drive Exceptional Business Growth  management professors Rita Gunther McGrath and Ian C. MacMillan describe the process of mapping a product's attributes against those of your customer's expectations and competing products.

The goal is to identify differentiators which customers value (and hopefully don't cost you money) and which will influence the decision to buy. At the same time sellers should not offer features that customers don't value and are expensive.

It is also important to identify features that customers dislike or are neutral about or are non-negotiable.

UPDATE: This article from Fast Company is a great case study on a new product with a social benefit. What does it take to make a better bed net? It's no small matter: Bed nets are a critical defense against malaria, which each year kills 1 million people and makes another 300 million ill in developing regions. The solution, it turns out, is no small matter either.

Blink: one view of decision making

Malcolm Gladwell's latest book Blink: The Power of Thinking Without Thinking has received a lot of attention over its proposition that "decisions made very quickly can be every bit as good as decisions made consciously and deliberately."

To quote the author:

"How can thinking that takes place so quickly be at all useful? Don't we make the best decisions when we take the time to carefully evaluate all available and relevant information?

Certainly that's what we've always been told. We live in a society dedicated to the idea that we're always better off gathering as much information and spending as much time as possible in deliberation. As children, this lesson is drummed into us again and again: haste makes waste, look before you leap, stop and think. But I don't think this is true. There are lots of situations--particularly at times of high pressure and stress--when haste does not make waste, when our snap judgments and first impressions offer a much better means of making sense of the world."

The author argues that what happens in the first 2 seconds of the decision making process is not intuition or gut feeling but "rapid cognition" or "thin slicing", drawing upon the expertise of the decision maker.

The book gives examples of different decision making scenarios: from art experts through to firefighters, emergency doctors, soldiers and police. In some cases the quick decisions are effective, in some they are not (eg where police shoot an innocent person).

How does that explain sportsmen who make split second decisions on, for example, where to hit a speeding ball ?

In this article Gladwell discusses his thoughts on decision making in sport. But it's not until he makes this comment about sportsmen making the wrong decision that he makes an interesting point:

"I use "momentary autism" to describe those moments when otherwise normal people become autistic -- that is, like people suffering from that disorder, they lose the ability to mind-read, to make sense of the intentions of others. An autistic person can follow the literal meaning of words, for instance, but cannot interpret gestures. They can understand flirting, in other words, only if one party says to another "I'm flirting with you."

I think all of us become momentarily autistic when we're under extreme physiological stress. For instance, when our heart rate gets above 145, our ability to make sophisticated judgments and to engage in this kind of mind-reading begins to erode very rapidly."

In addition to discussing fast deliberate decision making, I would have been interested if the book had discussed what's required for "effective" decision making. Apart from the above reference to "momentary autism" there is no mention in the book of the physical and mental well being of the decision maker or the preparations made by the decision maker. Surely, for example whether the decision maker has been working for 17 hours straight and is under physical or mental stress is relevant?

As Richard Posner points out a judge may make his decision in "a flash" but will support it with well thought out reasons. This does not mean the decision was made in "a blink" or was a snap judgment. It was based on a hearing of all the facts combined with years of legal experience.

Certainly in business, the expectation is that any decisions must be capable of rational explanation even if they are quick.

The first suggested decision is not always the best. What are the alternatives and consequences of each?

Whilst this book is an interesting read, anyone looking for a shortcut method to making good decisions will be disappointed.

UPDATE: 8 April
I've found this link to a post by Slacker Manager on managerial decision making where a process is described for deciding on who to hire for a position.  This is a scenario where  deliberate, unbiased,  rational and transparent decision making is essential.

The Hidden Traps in Decision Making by Hammond, Keeney and Raiffa looks at the psychological traps and personal biases that can result in bad business decisions such as product development, mergers and acquisitions and hirings.

Listen to an interview with Gladwell (via SXSW Interactive)

Why are there so many Codes of Conduct?

Codes are part of a series of regulatory reforms designed to improve compliance as well as reduce costs to Government and business. At the same time regulators are being asked to “do more with less”.

Codes of Conduct were created as a compromise between Governments’ reluctance to impose detailed legislative regulation on industries that were changing and not having any regulation at all. The compromise offered by a range of industries from financial services through to franchising was self-regulation.

Governments now consider industry self-regulation as a prime regulatory option. In fact, by 1997 a staggering total of 30,000 codes of practice were identified in a  review.

Whilst it is possible for consumers and regulators such as the ACCC to take individual action against companies to enforce the law, court actions always take time and are costly. Even when the law is clear, its actual application depends on the facts. Lawmakers are reluctant to prescribe detailed procedures and industry always resists such prescription.

So the view of the Government and regulators was that if an industry could develop a code which met certain criteria, they would be satisfied.

Full article (pdf)

Links:     ACCC Guidelines on voluntary codes
            ASIC policy on approving codes of conduct

Directors' decision making limited by understanding of risks and strategies

A recent McKinsey survey (free registration required) found that directors sometimes lack the information needed for sound decision making and may not understand the objectives and risks of their companies.

The principal finding of a McKinsey Quarterly survey of more than 1,000 directors is that having focused for a time on accounting-compliance issues, they are now determined to play an active role in setting the strategy, assessing the risks, developing the leaders, and monitoring the long-term health of their companies.

The article also has some interesting results on Board approaches to financial performance and CEO succession planning.

Some key quotes from the article:

To achieve as much involvement as directors say they want, they will have to use their time in meetings more effectively and develop a new understanding of their roles and responsibilities; otherwise, they will give management the impression that they intend to take on day-to-day roles. Moreover, the composition and culture of boards, as well as the agendas of board meetings, will require fresh thinking.

To understand the long-term health of a company, directors should monitor not only its current financials but also a broader range of indicators: market performance, network positioning, organizational performance, and operational performance. Risk—including credit, market, regulatory, organizational, and operational risk—plays an important part in each dimension. Without this knowledge, directors will have only a partial understanding of a company.

Surprisingly, more than a quarter of the directors have, at best, a limited understanding of the current strategy of their companies . Only 11 percent claim to have a complete understanding. More than half say that they have a limited or no clear sense of their companies' prospects five to ten years down the road. Only 4 percent say that they fully understand their companies' long-term position. More than half indicate that they have little or no understanding of the five to ten key initiatives that their companies need in order to secure the long-term future.

Similar gaps emerged on the question of risk. Only 11 percent of the directors claim to have a complete understanding of the risks their companies currently bear, while 23 percent have a limited understanding or none. When it comes to long-term risks, just 8 percent claim to have a complete understanding, and 37 percent say they have little or none. Likewise, since more than half of the directors admit that they have no way of tracking changes in risks over time, boards are vulnerable to unforeseen shifts.

If directors want to become more involved in developing strategy and assessing risk, they will have to start by working with management to grasp the current strategic position more clearly. In turn, management should draw up and propose a number of different long-term strategies. Boards should test and challenge them before choosing, with management, the most appropriate ones.

Difficult Negotiations

From time to time I have to deal with someone who appears to be completely irrational. Or are they just playing tough?

What's the best approach for someone like that?

In this article,  Lawrence Susskind suggests the following possibilities:

1. Your negotiating partner is perfectly rational; it's just that you don't understand how the world looks to him. Try asking directly what problem your new partner is trying to solve.

2. Your partner is perfectly rational but has adopted a seemingly irrational stance as part of his hard bargaining strategy. He may just be pushing to see what he can get away with. If you don't push back, he'll keep "claiming" even more.

3. Your partner really is irrational. All rules of normal discourse go out the window. You're convinced that you are dealing with a truly irrational negotiating partner, someone willing to risk everything to make sure you get nothing. What can you do?

The article discusses a hypothetical situation and suggests a solution.

Mind Mapping benefits

I've previously mentioned mind mapping as a tool for recording your own ideas or ideas from a group  here and here.

Dave Pollard has written an article on his use of mind mapping in project management.

I liked these quotes:

recently I've started playing with mind maps as a personal 'thinking out loud' tool, to organize my thoughts and think creatively all by myself. I've always learned best by writing, synthesizing and distilling books and other voluminous materials down to their essence: the message, the meaning, and the necessary actions. So perhaps this 'learning by writing down' style is the reason I find mind maps useful.

I always found developing sequences of PowerPoint slides with bullets on them, which is mind mapping in a rudimentary way, useful for organizing my thoughts for presentations. Now I've learned that they're boring for the audience, so I use them to organize my thoughts but then transform them into a story, and show only graphics on my slides. With mind maps, I can dispense with PowerPoint entirely.

He also links to this article on the topic from Innovation Tools.

James Hardie settlement and the front page test

Without going into the legalities, the settlement by James Hardie of its long term funding of claims by asbestos sufferers, shows that decisions made on a strict legal basis aren't always good decisions.

It's always worth subjecting a proposed decision to the "Courier Mail test": "how would I feel if that appeared on the front page of the (insert name of leading local paper)"?

In James Hardie's case, its original decision to not provide further funding simply did not stand up to the public's perception of the company's obligations.

Project Management and Lean Thinking

For anyone involved in creating or running projects, I recommend Reforming Project Management.

The blog has tips on leading projects, running meetings and lean thinking.

Hal Macomber's comments  encouraged me to read Lean Thinking by Womack and Jones.

Starting with the Toyota model, it is based on 5 principles:

"All businesses must define the "value" that they produce as the product that best suits customer needs. The leaders must then identify and clarify the "value stream," the nexus of actions to bring the product through problems solving, information management, and physical transformation tasks. Next, "lean enterprise" lines up suppliers with this value stream. "Flow" traces the product across departments. "Pull" then activates the flow as the business re-orients towards the pull of the customer's needs. Finally, with the company reengineered towards its core value in a flow process, the business re-orients towards "perfection," rooting out all the remaining muda (Japanese for "waste") in the system."

What does all that mean in practice?

Womack and Jones say that the traditional "batch and queue" method of production is wasteful. By changing to continuous flow , labor productivity is increased, production throughput times are reduced, inventories are reduced, errors are reduced and time to market is reduced and customers get what they want.

Lean Thinkers practice "kaikaku" (radical improvement) as opposed to "kaizen" (continuous incremental improvement).

Worth reading.

101 emerging ideas

Fast Company asks What's Next?  and starts the list off with Acting on Intuition.

It suggests Malcolm Gladwell's new book Blink: The Power of Thinking Without Thinking will be the "next big thing". It argues that we form our judgments in the first two seconds that we interact with something; we need to distill that two-second interaction into useful decision-making information. How? By teaching ourselves to slow down the moment, redirecting our attention to meaningful cues rather than the subconscious biases that often cloud our perceptions.

What else? Corporate chaplains to promote spirituality in the workplace.

And Sydney and Wellington as economic hotspots!

Lots of interesting reading.

Values and morality in the workplace

In his 2004 Griffith Lecture (pdf), Australian social researcher Hugh Mackay addresses concerns aired by people in his research that there was no longer a sense of community, no longer a sense of morality.

He gives examples of this and possible reasons. Worth reading!

Some key quotes:

• Listening to Australians talking about their lives, there seems no doubt that our sense of community is under threat
• When we feel as if the social fabric is unravelling, it is tempting to believe that the correct solution is to impose a kind of ‘regulated morality’ on society. This has led to the spate of so-called ‘educative laws’ which take matters previously thought to be the province of private consciences and individual moral choice, and put them squarely into the province of the law.
• Everything from anti-vilification laws or tougher regulation of corporate boards all the way down to dog-walking laws, can be seen as a sign of our emerging vulnerability to the idea that we can’t trust each other to acquire a sufficient degree of moral sensitivity, or to teach our children to act responsibly. No, we must take the short-cut to ‘good’ behaviour: we must ban; we must regulate; we must legislate; we must control : communities are becoming less stable and less cohesive than they once were.

• A key implication of what I am saying is that, if Australians wish to recapture some of those ‘traditional values’ which we believe enrich our society, we are unlikely to do this by preaching about ethics, or by vaguely hoping that the divorce rate might come down, or by hand-wringing of any kind. The only way we are likely to re-develop our sense of morality is by re-developing our sense of community.

• The life of the community is the key to its moral sensitivity, and its moral sensitivity is the key to its values. The challenge is not to teach people ‘values’: the challenge is to put people back together. Nowhere is this challenge greater than in the workplace. One of the saddest things I ever hear from young Australians is their account of a collision between their personal values and the values they encounter when they enter the workforce.

Tests for a new CEO

This article in HBS Working Knowledge identifies 7 things a new CEO needs to know.

The extract focusses on number 2: "Giving Orders is Very Costly."

The key quotes:

it is rarely a good idea to unilaterally overrule a thoughtful decision that has cleared several other organizational hurdles. Indeed, a key indicator the CEO subsequently used to judge the health of the company's management processes was how enthusiastically he could approve the decisions that came his way. The need to overrule something is a sure sign of a broader organizational failure. Or, as hard as this is to admit, it may reflect the CEO's own failure to clearly communicate his strategy and operating principles. There are certainly some circumstances in which the harm done by moving forward with a major strategic decision that the CEO considers a serious mistake—a large acquisition, say—is greater than the harm done by issuing orders.

A new CEO may need to put a stake in the ground to show that he's in charge and to let the organization know what he stands for. Giving a direct order (and especially undoing someone's work) is rarely the best way to do this, however. Instead, a CEO should look for ways to include senior managers and to promote agreement about decision-making criteria.

UPDATE:  Here's the full article from AFR Boss.

Product Development

In this article (pdf) I explain how changing existing products or introducing new products without proper planning can lead to compliance, marketing and financial disasters.

Outsourcing

Rather than reducing risk, outsourcing brings its own special risks.

This paper (pdf) outlines the issues you should consider when entering an outsourcing arrangement.

Journalling

Johanna Rothman has observed how journalling has helped her in project management.

Journalling is one way you can force yourself to reflect on what has been going on before you go to the next project. All too often we fail to evaluate our last job to take advantage of what we have learned, sometimes making the same mistake again.

I found Living Words by Stephanie Dowrick a useful journalling tool.

Who makes the tough decisions?

Via Fast Company, comes this link to an article in Darwin on Tough Decisions.

The key quote:

"In a nationwide survey over a base of 2,000 senior executives and managers, NFI Research found that 62 percent of executives and managers deal with making the tough decision at work right away, and 58 percent after getting opinions from others.

However, a third of those same businesspeople say their superiors defer the tough calls and a third wait until absolutely necessary. Almost 40 percent of managers say their superiors defer the tough decisions, while a fourth of them say their bosses either avoid the tough decision or focus on those that are easier. "

In my view, the important thing is to make a decision, even if the decision is to not do anything. Provided if it has been a conscious decision based on facts then mistakes are not unlawful.

Strategy Mapping

This article from Harvard Business School discusses Board planning using a strategy map.

Using the example of First Commonwealth Financial it discusses how the Board developed its own strategy map based on Balanced Scorecard principles. The article includes a copy of First Commonwealth Financial's document.

The map "portrays, on a single page, a company's strategy. It includes the financial outcomes expected; performance with targeted customers and the organization's differentiating value proposition; the critical internal processes that will create and deliver the value proposition; and whether the organization has the right people and systems in place and the right culture for its strategy to be successful."

No value in copying

This chart from McKinsey shows how copying competitors is not a strategy in itself. It can lead to falling margins and market share.

Whilst it is good to benchmark against best practice, businesses need to reach their own decisions about which products and services they offer to their own market and adopt their own pricing and marketing strategy.

Analysing Data

One of the hardest things to do when presented with masses of data is to draw the correct conclusions, rather than a predetermined conclusion based on selective facts.

When this is done in a team, the KJ Method is very helpful in reaching a consensus decision.

This is different from an Affinity Diagram which allows a team to generate ideas or issues and then group them in order to understand a problem and devise a solution.

Essentially the ideas are brainstormed and then recorded on sticky notes which are subsequently moved around on a board and grouped.

Directory of MindMapping Software

LOOSE wire has compiled a directory of mind mapping software.

Anything to help the brainstorming process.