Reasoned Results
by Ronald C. Lazof

Reasoned Results follow when decisions are fact based, probable of occurrence, and made promptly. Success follows from Reasoned Results when decisions once made are more often right than wrong. When a course of action taken is no longer advantageous, reason mandates the abandonment or modification of that course and the laying of a new and updated course of action.

Success in business does not occur by accident. It is about making more timely right decisions than wrong decisions. In addition to being timely made, and right, each decision must be based on the best and most current information then available, viewed dispassionately without emotion or prejudice and be based solely on facts or "the facts, nothing but the facts," as Joe Friday always said.

A "right decision" is any timely choice made in the course of the business process whether by action or inaction, that advances the business in the general direction of the company's vision. A "wrong decision" is a decision that causes the business to stand still or to lose ground in movement toward its vision, or is not made when first "timely."

These definitions, of course, assume the existence of a known, communicated, specific, reasonable and achievable set of corporate goals which together form the corporate vision. The corporate plans and goals collectively form the company's vision of its future performance.

Clearly the definitions above contemplate the beliefs:

  • that a decision is not a "right" decision even if substantively correct if it is not timely;
  • that a decision that merely maintains the status quo ante is not a "right decision";
  • that most decisions do not move the company, even when correctly made, in a direct line to the company's vision;
  • that a decision made by default or omission is nonetheless a decision made; and
  • that no decision, right or wrong, when made is final in the sense of being inviolate, or so cast in concrete that it is not amenable to course correction.

Each of these belief sets will be discussed in the light of the company's reasoning process. It is by reason alone, not instinct, natural ability, or the alignment of the stars, that decisions can be made in a fashion that will:

  • most adroitly manage the risks attendant on making a decision; and
  • best direct the company's course towards its vision while minimizing the odds of a "wrong decision."

Managers often talk of the present value of money (P.V.M.) i.e. a dollar today is worth more than that same dollar in one year (at 10%, about $0.90 P.V.M.), but no one seems to talk about or the present value of a decision, or "P.V.D." Time is money, or said another way: "time is of the essence." When a decision is ripe and ready to be made it won't wait! Either the decision is made or it makes itself! A decision deferred is a decision made, because management will never again have the opportunity to make that specific decision at that specific time.

All decisions have a shelf life and, like milk, a decision is sweeter, or more valuable, the earlier it is made. Over time a decision loses its freshness, its value, eventually spoils, and becomes valueless.

Decisions are most valuable when they are accompanied by the highest risks - risk equals the absolute, but opposite in sign value of a decision. Over time the company will accumulate more perfect information from its available data sources and become more certain of making a right decision. But the value of the decision diminishes proportionately with the diminished risk of making a wrong decision until the point of complete information and perfect knowledge, or zero risk - at which time the decision has zero value because the clock has run out and management is talking in the past tense about history!

The object of business is to increase stakeholder (shareholder, employee, creditor, vendor, customer) value, by means of the timely execution of the company's plan to achieve its vision. This therefore requires movement and change in position over time as well as the taking of acceptable risk.

As Deepak Chopra has said, more or less, the area of opportunity is congruent with the area of uncertainty, or risk. If the result of a decision causes a retrograde movement in a business direction or merely maintenance of a current position, over time it is "wrong" in that it has not moved the company forward toward its vision in keeping with its plan. The time and opportunity to make a decision at its most valuable point to the company will have forever been lost if it is not made when it first ripens. In other words, the same decision made correctly at a latter time will have a lower P.V.D.

Any decision that moves the company even generally closer to the direct line of march from its then current position to its vision, even if oblique, is a right decision. Because the next decision point will be ahead in time, where the company will have more perfect knowledge and there will be a shorter distance to realizing the vision. Then, with the aid of a new, changed, amended or modified plan based upon the updated forecast, the company will have an opportunity to course correct at the earliest possible time, and therefore maintain the highest possible P.V.D.

No stakeholder ever expects its company to be free from errors and misjudgements. In fact, the freedom to err is a valuable perquisite of enlightened management. If employees are not free to err, they are not free to experiment, to innovate, to try, to improve, and to create, and the company will stagnate and eventually die. To err is therefore okay, and in some respects, even to be encouraged as error adds value, provided that error, when recognized, is followed by prompt acknowledgment and correction and then not repeated.

Of course, step one of any course correction is recognition that although the company is moving in the general desired direction, it is not on the direct path required by the plan. Once recognized the second step is to acknowledge that the directional error is movement off plan, and communicate this knowledge to the company so that the company and all concerned can start to prepare for the next directional change, or tack, even before anyone knows the new course direction.

Following prompt communication, the plan is amended, in turn communicated a new decision made, forward momentum maintained, and speed and direction refocused on the original vision from the new, present position. This constant decision, recognition, acknowledgment, communication, modification, decision wheel sometimes referred to as the continuous improvement process is present in all successful enterprises.

Communication is a key component of the decision wheel. The communication must be clear, direct, positive and heard. A communication is clear if it is understandable by its intended audience. It will be direct if it is free from extraneous information, commentary, and value judgments. It will be positive if it is presented in a manner that first acknowledges the value of the audience and finishes with a reminder of the company's vision and the audience's participation as stakeholders in the enterprise. And lastly, the communication will be known to the speaker as being heard by the audience when the audience has acknowledged and provided oral, written, or physical feed back acknowledging the message as having been understood and accepted by them. It must also be made in a manner that acknowledges both the forward momentum of the company, as positive, as well as the need to modify the plan quickly, so as not to move further away from the originally planned line of march.

The communication should seek the participation and input of the entire team as to how to best select a corrective course of action. Management must then promptly analyze all of the alternative opportunities presented, select the decision most in line with the company's values and vision and renew the cycle of the decision wheel.

Even in the event of a "wrong decision," prompt corrective action may move the business in a positive and acceptable direction though it will never be able to gain the original position in time and value, P.V.D. Since a company only need to make more right decisions than wrong decisions prompt acknowledgment of a wrong decision will move the wheel forward and give the company a second opportunity to thrive. Obstinate adherence to a course of action proven wrong by actual market experience will delay potentially remedial action and exacerbate the off course, or retrograde, motion and deprive the company's stakeholders of additional P.V.D.

By maintaining a reasoned decision process and eliminating emotional and other bias dealing with what "is" rather than what you wished "was" and making decisions timely at the point of highest practically achievable P.V.D. Reasoned Results will be achieved. Once the company has a destination - its corporate vision and a roadmap, its budget plan and forecasts in place, and it is ready to commence its journey - the company must still continuously monitor the reasoning process and its progress in the light of then currently known market conditions in order to turn Planned Performance into Reasoned Results.


Ronald C. Lazof currently serves as a managing director of Prism Advisors, LLC, a management advisory and consulting organization. Prism focuses its attention on the entrepreneurial, emerging growth and mid-sized privately held corporate markets. Mr. Lazof served as President and Chief Executive Officer of Behr Process Corporation from 1996 to August 2001, playing a key role in the company's move from a private family held business to a publicly held multi-plant manufacturer and distributor of paints and coatings. Contact Ronald by e-mail: rlazof@zirkel.us and visit http://www.prismadvisors.com/ .

Many more articles on Competitive Strategy in The CEO Refresher Archives

   


Copyright 2002 by Ronald C. Lazof. All rights reserved.

Current Issue - Archives - CEO Links - News - Conferences - Recommended Reading