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Managing in Uncertain Times, Part IV

Our series on management techniques used during times of
uncertainty continues. Last month we looked at four reasons
why or how owners/senior managers make Bad Decisions and
Bad Strategies1, and this month we discuss five more.

Baby Steps

People tend to resolve problems or seize opportunities by taking
baby steps. They think in small increments rather than in
the bold steps that must be taken to bring about substantive
fundamental changes. People tend to think in terms of modifying
past behaviors and minor variations of past practises. As
we saw last month the future seldom replicates the past. I am
not suggesting that caution be thrown to the wind as there are
times when one must be cautious. However, when it’s time to
move, do so quickly and boldly.

Looking for the Good News

People look for the good news which supports their chosen perspective
and action plans. They fail to, or choose not to, look
for the bad news, such as information that points out the flaws
in their plans and programs. There is an important role for the
Devil’s Advocate. If there is no one looking for the flaws in the
plan, process or approach, remember that the market place and
the competition will not only find those flaws, but will exploit
them to your disadvantage.

Words Mean Something

Prospect theory2 shows that people make different decisions
about whether the words used to describe a situation, especially
in terms of profits or losses, are positive or negative. They tend
to take more risks when the potential for gain is great or for loss
is small; they tend to take much less risk when the potential for
gain is small or for loss is great. Therefore, it is important to pick
words carefully and to be more neutral in language.

Poor Metaphors/Analogies

“We want to be the Microsoft of the construction industry” or
“We want to be the GE of the construction products industry”
English professors have a saying that all analogies limp; in other
words, they are not particularly useful. This is even more true
when the metaphor or analogy is not apt or worse, misdirecting.
If your company cannot mirror Microsoft’s or GE’s approach to
the market, using them as models is not only inappropriate but
can be disruptive of, and possibly destructive of, critical thought
processes. If you need a model, consider creating your own. In
other words, if you could design the ideal company, do so, and
then model your company on your ideal. Surprisingly, it is likely
that the company will turn out like the model.

Good Money After Bad

Research done by the Academy of Management shows that
managers tend to invest even more if the plan or project is going
downhill.3 This is often the case in spite of new information or
because they fear the loss of station, money or reputation if they
fail or quit. Too many companies fail to jettison losing programs.
The only reason to keep a product, project or program
is because it contributes its share of revenues and profits.

1 Adapted from E. Olmsted, HBSP, 9-391-172 (1991)

2 D. Kahneman & A. Taversky, “Prospect Theory: Analysis of Decision Under
Risk” Econometrica, vol. 47 (1979)

3 B. M. Staw, ‘The Escalation of Commitment to a Course of Action’ Academy
of Management Review, vol. 6 (1981)

About the Author

L. Douglas Mault is president of the Executive Advisory Institute,
Yakima, Wash.

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