The magic touch in Business

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How do you protect businesses from the brilliant decision makers who end up getting it all wrong?

The human mind is a pattern recognition engine.  It is an excellent learning tool.  When you spot a situation you have been in before, the mind tells you “oh yeah, I know this, here is how we moved through this situation the last time”.

There are positives to this, and also negatives.

The positives are that we learn rapidly from each other.  Spend an afternoon trying to learn a video game on your own, and then try it with your 14 year old son beside you.  With the benefit of his experience, and his bank of knowledge, built from games played by his social network, you very quickly pick up the things you need to know, and learn the distractions that you can safely ignore.

In business it is vital to have people in the room who have been there before, who saw the situation before, and can tell the strategies they used to work through it.  That is not to say you should slavishly follow an old strategy.  Remember, the competition also have a guy in the room who was there last time around.  If they lost the last “match” chances are they are going to adjust strategy this time round.  But the starting point is to know what happened in the last war.

The biggest danger in the “pattern recognition” engine is the way it craves order in chaos.  The human mind abhors uncertainty.  When faced with pure chaos it scrambles for anything that might make sense.  Derren Brown, the UK “magician”, illustrated this with a very funny episode “Trick or Treat” where he wired a sensor to a goldfish tank.  Each time the goldfish swam past the sensor a counter added a score.

In a separate room he assembled a group of people, who were told they could win an amount of money if they managed to get the counter to 100 in a given time.  They did not realise that they had no control over the counter.  They jumped, shouted, ran about, organised themselves, disorganised themselves, and sometimes it seemed to work.  The counter moved.  So they would repeat what they did, and fail.  Their brains were trying to make order out of chaos.

It is this struggle to make order from chaos that has led to some of the worst episodes in human history.  When things are at their worst, the pressure to find an answer is more acute, and we do some really bad things or make some really bad decisions.  Aztecs harvesting thousands of heads, Celts burning people in wicker men, burning witches, self immolation, sacrificing virgins, anything that might work.

Then into this space you get people with an agenda, who see that the time is right to lay blame on a section of the community.  God is displeased with us because we tolerated  Jews/Gays/Irish/Blacks/Dancers/Gamblers/Alcohol whatever.  Now the time is rife to rid ourselves of this evil and set ourselves straight with some made up divinity who seems to have a pretty nasty and narrow minded agenda.

Of course this would never happen in the business world.  When we operate in the workplace we make rational decisions, based on logical analysis of events, and we don’t allow demagogues to hijack the agenda and drive us collectively to construct a new tower of Babel…..do we?  Well, sadly we do.  We see success and we see the guy who causes the success and we assume that he must have the “secret”.  OK he isn’t slicing off heads and rolling them down the front steps, but he may be doing the business equivalent.  Look at Enron, Nick Leeson in Barings Bank, Lehman Brothers, Bear Stearns, securitization of sub-prime mortgages, contracts for difference.  The truth is, the more confusing a derivative is, the more magical it seems to those who cannot understand how it works.  Many senior managers in banks failed to spot the magic tricks for what they were, because they were working at first.

In World War 2 both Churchill and Hitler interfered with military strategy.  The lucky thing for the British was that some of Churchill’s early interventions were disasters, and he bowed to sound military analysis later in the war.  The unlucky thing for the Germans was that all of Hitler’s early interventions were successful.  His cabinet believed that he had a magic touch, and his interference became more pervasive and more damaging

In the workplace if you have senior managers who are seen as having a magic touch, that in itself should be a warning sign.  These managers should be subject to MORE monitoring and analysis to ensure they are making commercially sound decisions.  Instead the opposite holds true.  The manager who delivers a big win is given more latitude than his non-performing counterparts.  He may buy into the belief that he has that bit of magic, and he may carry out less and less analysis on his own decisions.  He is given more and more resources to “gamble” on the next big move.  If he is given enough rope he will ultimately make the bad decision that costs the company dearly.

A worse situation is that the manager is someone with an agenda.  His agenda is not aligned with the corporate goals.  His decisions are being made to line his own pocket, at the ultimate expense of the business itself.  The greater the flux in the market, the greater the uncertainty, the easier it is for this person to make the call that can collapse the business.

In Ancient Rome a triumphant general was made up to look like a God for the day of his triumph.  He rode through the city in a chariot at the head of his army.  A priest in the chariot had the job of repeating constantly, in his ear, “Remember, you are only a mortal”.  In business we need those kinds of priests.

 

What can we do to protect businesses?

  1.  Operate the same decision control procedures for all managers.
  2. Ensure that charismatic “stars” have grounded detail analysts on their teams.
  3. Make sure everyone understands how an investment works, there is no magic money.
  4. A solicitor on the decision team to ask “is this legal?”
  5. Post-decision analysis.  Something that appears in every textbook, but seldom exists in reality.  We are all focused on the next big thing and it seems wasteful to analyse what is over.  We should bring in a cold resource, from outside the decision team, who will demonstrate what elements of the success were due to team decisions, and what elements were down to general market movements.  The winning teams hate these guys, but they can separate the myth from the reality, and greatly change the way you will approach the next opportunity.

Leadership material

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Leader or manager, general or colonel? What is the difference and why does it matter? In war or in competitive business we face a twin dilemma.

Let’s focus on wars, simply because they have a better documented history. Throughout history the (seemingly) simple act of getting your army to a battlefield, wearing clothes, in a state of health, well fed, well shod, well-armed and well-ordered has often delivered victory. This is the job of the staff officers of the army, the managers. They must recruit, train, equip, feed, transport and manage the soldiers.

In the same way company managers must recruit, remunerate, monitor and direct the staff or the organisation to deliver a workload. They must ensure the correct tools are available to do the job, the right computers, the right lathes, the right cleaning fluids etc.

Where things get interesting is where you have two armies, or two organisations, that are well managed, so that both of them arrive on the ‘battlefield’ in good order.

This is where the need for good leadership cuts in. The good leader is creative, surprising, unexpected, not a plodder, not predictable and pedantic. The Duke of Wellington defeated every French Marshal thrown against him. At last he met Napoleon at the battle of Waterloo, and Wellesley described him as “just another plodder”. What he did not realise is that Napoleon was ill and the battle was mismanaged by Marshal Ney. Napoleon was in fact a brilliant general, and on his day Waterloo would have been a very different battle.

If a “leader” becomes too operational, too involved in the day to day running of the business, then they are probably just interfering in the work of their managers. The leader needs to be assured that the management is happening, but should not be too involved in it. The leader needs to be aware of the capabilities of the organisation, so that when they craft their strategic masterstroke it is within the reach of the staff. So reports from managers to the leader should keep the leader up to date on what is possible.

The failure of the Bay of Pigs invasion is attributed to a reporting failure within the CIA. Local operatives were telling Langley that the Cuban exiles were motivated and committed soldiers, well trained and gunning to win their country back from the Communists. In fact they were a drunken, feckless rabble who were unfit to participate in any military action. Had Kennedy been aware of this he could have avoided a huge embarrassment for the USA, and potentially have avoided the Cuban Missile Crisis altogether.

The leader can challenge the managers to build capabilities in weak areas, tell them “what” he wants, but should refrain from telling them how to do it. Good examples are of Churchill in the Second World War. He challenged the army to develop special forces groups so that he could take the war to the Axis. The army developed commando units, paratroopers, long range desert squadrons, SAS etc. These specialist “tools” were then available to factor in to strategic plans. The Rhine bridges campaign (Operation Market Garden) depended heavily on paratroopers holding the bridge and Arnhem. They did the job for three days longer than they were asked, and the failure of the campaign was down to other factors.

In a business context, what are your special forces? What are the tools in the market that can give you a strategic advantage over your competition? Where is your source of competitive advantage and how are you factoring this into your strategic planning?

Some writers point to a personality difference between a leader and a manger. Many great leaders are very uncomfortable in management positions. They play a poor second fiddle to another leader.

Dr. Brian Leavy in DCU humorously used Star Trek to describe the difference in one of his strategy papers. Captain Kirk is the brilliant leader of the Starship Enterprise. He is a flawed human, at times emotional and petty, jealous of others, physically violent when things don’t go his way, he comes across like a spoilt child. But he constantly thinks outside the box and finds solutions where none seemed to exist. When he was faced with a no-win game scenario at Starfleet academy he refused to be beaten and instead reprogrammed the game so that he could win. He is a motivational leader who inspires great effort and loyalty from his team. His passion and drive are attractive to the opposite sex too, as he always seems to get the girl (or the prettiest alien species).

By contrast Mr Spock is a paragon of self-control and emotional discipline. He is logical, correct and brilliant. He is the perfect foil for the mercurial leader, as he keeps everything on an even keel. But he is cold and passionless and does not inspire those around him. If anything his perfection is demotivating to others who know they can never gain his approval. For Spock perfection is simply adequate, anything less is unacceptable. This makes him a poor leader in the eyes of humans.

The analogy often seems to hold true. Famous leaders do appear to be mercurial characters, Lord Alan Sugar, Lee Iacocca, Steve Jobs, Richard Branson, Churchill, Bill Gates, Howard Hughes, Sir Alex Ferguson, Michael O’Leary. But how much of this is the visibility of leaders who are mercurial? There are many great leaders who shy away from public attention. Terry Leahy, Paul Polman, Robert McDonald, Rex Tillerson, Peter Voser, Peter Swinbburn, all very influential people, how many can you place?

IF: by Rudyard Kipling

IF you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream – and not make dreams your master;
If you can think – and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,
Or walk with Kings – nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And – which is more – you’ll be a Man, my son!