Since entering managerdom, I’ve spent a lot of time thinking about how people make decisions and how to figure out the value of those decisions. The way I figure it, any given decision you have to make has a theoretical maximum value. No matter how good a job you do picking the right long distance carrier, for example, that choice alone isn’t going to propel you to the cover of Fortune magazine.
So from that theoretical maximum value there are two ways you can subtract value: get it wrong, or take a long time making up your mind.
The real challenge in making decisions is that time and correctness are fundamentally opposed forces. And not only that, but different kinds of decisions value time and correctness in sometimes drastically different ways.
For example. You’re an engineer designing a nuclear power plant. You’re (hopefully) going to take as much time as you need to make sure you get the design right because if you don’t you personally could be responsible for the deaths of tens of thousands of people. Yes, taking that time isn’t free and will upset people, but not nearly as much as a mushroom cloud.
An example on the other end of the spectrum. You’re a burger cook at McDonalds. You could take a long time carefully cooking each burger to a tender, juicy picture of perfection, but then you’d have a line of people out the door and angry because you’re wasting their limited lunch hour and you’d have an angry boss because his business has razor-thin margins and depends on volume to survive. All of those people would rather have timely, but imperfect burgers.
So if you had to distill it down to a formula, it might look something like this:
Value = MaxValue – ( f(wrongness) + g(time) )
In the nuclear plant example, the slope of f() is very, very steep, to a point where the slope of g() is almost irrelevant, even if it is also somewhat steep. In the McDonalds example, the slope of g() is the steep one. Some kinds of decisions have very steep slopes for both (like, say, decisions fighter pilots make), and people who make those kinds of decisions for a living make a lot of money, or get a lot of glory, or simply end up with high blood pressure and ulcers.
I think really talented and successful people are very good at optimizing that equation. They realize they’ll never reach the maximum value because it’s impossible to make a perfect decision instantly. But they have a good instinctive feel for what f() and g() look like in any particular situation and they are good at articulating what they feel to others. In words, though, not an equation. And they are also good at defending their choices when it becomes apparent later they didn’t make the perfectly correct choice.
March 21, 2006 at 10:45 am
Very good idea. The practical implementation is that the decision maker needs to estimate the slope of f() and g() when making a decision for the first time. I think it’s obvious it doesn’t need to be done every time, i.e. not for every burger but for the first couple of burgers the new Cook cooks.
A very important point to understand is that f() and g() are not smooth. The example of the burger cook being more concerned with time is true until the shape of the curve f() changes. Food poisoning happens when the time is too short. Killing a couple of children as one burger chain did about 5 – 10 years ago really hurts the bottom line. In this case the time g() was shortened until getting it right f() took a sharp turn and became more important. The decision makers didn’t notice they’d crossed this inflection point.
An example where the current culture over-considers f()is NASA. The current space program is so paralyzed with fear of not doing “the right stuff” that they’re grounded. Time g() has become so stretched out that the program has lost its relevance; we’ve outsourced our human space transportation to Russia and find they can do it cheaper.
Well, for the short term anyway. Businesses need to remember what their function is. What is IT they’re trying to get right? NASA is an example of the function f() being made up of sub-functions. NASA’s prime function is to promote and advance the nation’s interests in aeronautics and astronautics. A sub function is “don’t kill the crew.” The primary function is being held hostage over a concern for a sub-function. Each sub-function needs to be appropriately balanced, but remain sub-servant, to the primary function.