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In The Three Value Conversations, Erik Peterson, Tim Riesterer, Conrad Smith, and Cheryl Geoffrion present an alternative sales technique. Instead of pushing their products or services, salespeople should have value conversations with their prospects to engage them more effectively. They must do their research, understand their buyers’ business needs, and present solutions that speak to the buyers’ values and interests. For the conversations to be successful, salespeople must differentiate themselves from the competition, justify their solutions, and emphasize the value for themselves and their customers.
The Three Value Conversations
Most selling occurs during casual conversations in places like elevators or parking lots. Great conversations with customers should sound casual, yet be well planned and practiced. They should include the following three elements:
- The right message, which is relevant to the customer.
- The right tools, which are effective vehicles for delivering the message.
- The right skills, which impart comfort and confidence when delivering the message.
There are three types of customer conversations, each of which has specific objectives and outcomes:
- The differentiation conversation, which creates value.
- The justification conversation, which elevates the value to the right decision maker.
- The maximization conversation, which captures the value and maximizes opportunities.
Mastering these customer conversations will help salespeople create more opportunities and move deals through faster with fewer concessions.
CREATE VALUE: THE DIFFERENTIATION CONVERSATION
Create a Buying Vision
A salesperson’s biggest enemy is the status quo and the safety (though not necessarily satisfaction) it offers the buyer. To overcome this challenge, a salesperson must convince the buyer that the status quo is unsustainable and there is a clear need for change. He or she must shake up the status quo and help the client establish a buying vision. One survey revealed that nearly three-fourths of executives stated they award business to whomever helps them establish their buying visions. They want salespeople to not only help them see the need for change, but to clarify the solution. An effective way to accomplish this is by using the concept of loss aversion, which theorizes that change is motivated more by the fear of loss than the anticipation of gain. Rather than telling a buyer how much the company will benefit, the seller will more effectively motivate the buyer by convincing him or her that adhering to the status quo is unsafe for business and means the company is losing out, thereby creating a sense of urgency.
Speak to Situations, Not Dispositions
Business buying decisions generally involve multiple buyers or influencers. Customizing a conversation with each of these individuals would be challenging. However, early-stage conversations are more about the company’s situation than about individual buyers’ dispositions. It is essential that a salesperson understand this concept, referred to asfundamental attribution error, to keep from overestimating the influence of a particular buyer.
The real power in affecting behavioral change comes in being able to connect with a person on a situational level. The salesperson must intimately understand, and develop a profile for, the buyer’s status quo, by answering some key questions:
*How are prospects currently addressing challenges that the seller’s products of services can help resolve?
*Why does the company think what it is currently doing is working for them?
*With its current approach to solving problems, has the company missed any challenges, threats, or opportunities?
*Where are the missing pieces of the company’s current approach to solving its own problems?
The seller can use this profile to help the buyer realize that his or her approach is not working and that the seller’s product or service is needed to change the status quo.
Unconsidered Needs Drive Unexpected Opportunity
The discovery process is a sales approach that has been used for more than 30 years; the seller asks the potential buyer a series of questions designed to find the customer’s pain points. However, because every salesperson seems to use this approach, it does not add value to the selling process.
Today’s seller must find the buyer’s unconsidered needs. Most buyers know what their companies’ problems are before salespeople have differentiation conversations with them. An effective seller needs to uncover the needs the buyer is unaware of. To do this, the conversation needs to be fresh and different, digging beneath the obvious. Sellers must deliver the insights buyers need by telling them some things that they did not already know, and telling them about problems they did not know they had–problems the sellers can solve in ways the competition cannot.
To initiate this conversation, sellers must ask themselves:
*What are potential buyers doing now that may be harmful to their businesses?
*What evidence can the sellers present to show buyers that their current assumptions are obstacles to their businesses?
*What facts and statistics can be presented to confirm this evidence?
*How can sellers present this information to buyers in the form of an engaging story?
Uncovering a buyer’s unconsidered needs will differentiate the seller from the competitors, who still use the same discovery process.
Keep Claims Limited and Focused
Salespeople naturally want to offer their prospects choices; however, offering too many choices is counterproductive and results in choice overload. Including an option that was not part of the purchasing criteria often influences a buyer to reject a seller’s offering; the buyer may view any additional feature as weak or irrelevant.
Likewise, when presenting claims about the solution being offered, the fewer the better. Three claims about a solution’s benefits enables the prospect to process the message and instills more confidence in the seller. Any more calls into question the validity of the information being presented. Salespeople tend to want to include too much information in presentations. Limiting the discussion to three relevant, focused points helps the prospect remember the information and have a positive perception of the seller.
Finding those three key points is a matter of categorizing and prioritizing the offering to determine:
*If the product or service is truly unique to the seller’s company.
*If the product or service is one that the competition has, but the seller’s company’s is better.
*If the competition has basically the same product or service.
Starting with the truly unique offerings, the seller must identify which solution can be connected to the prospect’s unconsidered needs.
Whiteboard Conversations Versus PowerPoint Presentations
How the conversation is delivered is as important as its content. Most people only remember 10 percent of what is said in a meeting, just two days after the meeting. Visuals can increase that retention to 65 percent. For example, drawing concepts on a whiteboard helps the client, or prospective client, engage in the presentation, find the information and the speaker to be more credible and trustworthy, understand the information more clearly and enjoy the presentation more fully, and better recall the information after the meeting.
There are three critical components to the whiteboard approach:
1. Context. The visual must demonstrate the deficiencies in the buyer’s status quo, setting the context of urgency to change.
2. Contrast. To increase the perceived value of the offering, the drawing must clearly contrast the buyer’s status quo with the solution being offered.
3. Concrete. The decision-making side of the buyer’s brain must see the specific need and the opportunity for a resolution. Clear, simple graphics will help convey this message in a concrete manner.
ELEVATE VALUE: THE JUSTIFICATION CONVERSATION
Overcoming a Fear of Heights
Executive decision makers want to have conversations about business issues. Salespeople are usually trained to have product and services conversations. To reach higher-level decision makers, therefore, salespeople must do three things:
- Increase their competence in discussing business and financial issues.
- Increase their confidence in meeting with upper-level business executives.
- Increase the quality of their stories to be more compelling.
If a salesperson is fearful of going over a current contact’s head to meet with a higher-level executive, he or she should involve the current contact in helping to secure the meeting. Many higher-level meetings are actually facilitated by someone else in the organization.
Developing Customer Insight
Upper-level executives are crunched for time, so a salesperson must be able to convince them that the discussion will be valuable and not just a rehash of product knowledge. The conversation must be focused on the buyer’s perspective, creating a “buying vision for business change.” The salesperson must have an understanding of the business situation, including the external factors and the business initiatives affecting it.
Most external factors affect the particular industry as a whole, so they should be easy to research. The key is to address an external factor before the potential buyer has been able to find a solution to it. If the salesperson is able to present a possible solution, the executive will welcome him or her into a conversation.
Business initiatives can be responses to external factors or triggered by internal issues. These initiatives involve the organization’s priorities and vision for its future. A salesperson would be wise to attach his or her solution to a business initiative, particularly one that the executive is personally involved in moving forward.
Financial Statements and ROI
The research involved in discovering external factors and business initiatives includes reading financial statements in annual reports and earnings statements. Income, expenses, and sales trends are usually revealed in these documents. Trends that show up on these reports will help a salesperson identify changes in the business that might be relevant to his or her solution. It is best to look at three-year trends, of both the business and the entire industry, to gain a complete picture and to be able to put the trends into context.
Once the salesperson has completed the research and analysis, he or she can make a better case in conversation with the higher-level executive. The salesperson can identify specifically how the solution will have a positive impact on the financial growth of the company, either by increasing revenue or reducing expenses. The seller must identify the return on investment (ROI) for the executive buyer, rather than presuming he or she will compute it. The seller can then demonstrate how the solution will contribute to real and effective business change.
Even if the salesperson has done the research and prepared an engaging conversation relevant to the executive’s needs, the greatest challenge will be to secure the meeting. Without an inside contact, a seller can turn to the executive’s assistant, who is often the first point of contact The assistant often serves as a gatekeeper, trying to both keep people out and get the right people in. The assistant can also offer the salesperson insight into what is most important to the executive.
Executives are always searching for new ways to improve their businesses. The salesperson must be able to present a business solution, not just push a product or service. The solution should be clearly presented, tied to the external factors or business initiatives, and be one the executive has not thought of or cannot produce internally.
Meetings are usually broken down as follows:
*During the first five minutes, the salesperson must grab the executive’s interest.
*In the next 15 to 30 minutes, the salesperson conducts an engaging conversation and asks deeper questions.
*In the final few minutes, the executive may decide to bring more key people into the conversation.
The meeting needs to end with a commitment for the next step, whether that is a follow-up meeting or a plan to move the effort forward.
CAPTURE VALUE: THE MAXIMIZATION CONVERSATION
No Last-Minute Saves
When a salesperson can develop a customer conversation so that his or her products or services are differentiated from the competition and shake up the prospect’s status quo, the shape of the conversation will change. The seller will be able to take more control of the conversation, garner more respect from the buyer, and increase his or her status in the relationship. However, there will still be instances when the customer controls the conversation and make demands of the seller’s time or resources. When this occurs, the salesperson can give in or use negotiation skills.
Learning to negotiate requires some counterintuitive skills. By its very nature, negotiation involves tension; there is a gap between what the customer wants and what the salesperson wants. A skilled negotiator is able to use the tension to generate more creative and profitable outcomes.
The Conversation Before the Conversation
Negotiation begins in the seller’s own mind, with inner dialogue about how the conversation with the customer will go. This conversation before the conversation is the first step to getting the customer conversation right. It is not simply an attempt to get psyched up for the meeting; rather, it involves the seller understanding and believing the story her or she will tell, being prepared, and being confident. The seller must trust in his or her preparation and win the negotiation in his or her own mind before having the conversation with the buyer.
Late-stage negotiating tactics are no longer relevant in the business-to-business selling process. Instead, successful salespeople know what they want from their customers, and win critical moments throughout the selling process. They can capture maximum value through the entire process by achieving pivotal agreements, rather than waiting until the end of the process to strike one grand bargain. Salespeople must identify the pivotal agreements early in the sales process and prepare to secure them at the appropriate time. Pivotal agreements must be specific, will create tension, will improve the final result.
Ask for More
Potential customers may not easily consent to the seller’s pivotal agreements, which will usually cause tension. However, salespeople must continue to set high targets–that is, stretch and ask for more. Some salespeople can be uncomfortable asking for more, since it is traditionally believed that the customer has all the power. However, they must be confident enough to embrace the tension caused by setting higher targets; asking for more helps to demonstrate their conviction.
Dealing with Price Pressure
Buyers will often say their only focus is price, particularly a price that beats their competitions’. While this is rarely true, a conversation about price does need to take place. Rather than sidestepping the price conversation, a seller should acknowledge and defer–that is, he or she should validate the buyer’s concern by acknowledging the price issue, and get the buyer to agree to defer the conversation about price until later in the process.
Once the seller has gained agreement, he or she can focus on the value conversation, mapping the value directly to the buyer’s needs. In this conversation, the seller must “listen to learn” rather than “listen to sell,” focusing the attention on the customer and gaining valuable insight into the customer’s needs and priorities. Listening to learn is another tactic that will differentiate the salesperson from his or her competition.
Price concessions must be planned before the conversation to prevent the salesperson from making the common and costly mistake of conceding too much. In addition, the salesperson must be prepared to ask back, to only give something away or make a concession if he or she gets something back in return.
The Last Mile
Salespeople can act as trusted advisors to their customers. Buyers will react positively to sellers who tell them what they should want if it is based on research and understanding of the customers’ business needs. Salespeople must increase their confidence, go into the conversations with the proper mind-set, approach prospects as peers, and convey the true value of what they have to offer.
FEATURES OF THE BOOK
Estimated Reading Time: 4-5 hours, 256 pages
The Three Value Conversations by Erik Peterson, Tim Riesterer, Conrad Smith, and Cheryl Geoffrion outlines the three types of conversations salespeople need to have with their customers in order to differentiate themselves from their competition. The authors provide specific strategies for each type of conversation, including securing the conversation, conducting the conversation, negotiating, and dealing with tension and customer demands. The book is relevant to salespeople and managers who want to reach their customers, connect with executives, present their value, and negotiate more effectively. It book should be read from start to finish, as one chapter leads into the next
The Women’s Leadership Blueprint serves as a bridge between the competencies expected of leaders and the behaviors expected of women. Women can lead, but they have to build their leadership styles differently than men. The blueprint is based on the vast experiences of successful women executives and provides a foundation upon which others can build. It is composed of nine key competencies that women must demonstrate differently than men to “break through cats.”
Self-assurance is a hallmark of leadership, but stereotypes of women set expectations that they should be seeking the validation of others. Successful women leaders have found that they can exude confidence and competitiveness when they frame those two characteristics differently. Rather than using confidence to emphasize and defend their position of authority, they use it to underscore confidence in their teams, show their willingness to rise to the occasion, or share and distribute power to others.
When women are confident in a strategy, they frame it in terms of “we” instead of “I.” Men can afford to be more confrontational and state, “This is the way it’s going to be.” Women strive for a more egalitarian approach that says, “This is what I believe needs to happen, and here’s what I am willing to do about it.” Collaborative leadership is not only a more natural style for many women, it is also increasingly believed to be a superior style of leading modern organizations and driving innovation. Women must be confident in the tones they set for their companies, but be willing to give authority and credit to others.
2. ACHIEVEMENT DRIVE
Girls are conditioned from a young age not to brag about their achievements. Men are more comfortable candidly taking credit for something. Women are not only less comfortable taking singular credit, but are penalized for doing so. This makes demonstrating ambition even more difficult for women to do than displaying confidence. However, passion and drive are required to get to the top of an organization and be effective. Women must gain visibility and prove themselves in order to rise higher in a company.
Women can show their achievement drives without looking threatening by rallying others behind their passions. Some executive women find that when they take on a major challenge, success requires bringing many people together. Rather than viewing a project as a personal achievement, they make it something inspiring and engaging to others. Women can also make their achievement drives less threatening via self-challenge. In this way, the drive is not about being the best, but about doing better than the last time.
Influence is an area in which women demonstrate greater strength than their male counterparts, so it is particularly important to women leaders’ success. One of the reasons women are more effective at influencing is because they naturally show more empathy toward others. Fortunately, displaying this type of emotional intelligence aligns with people’s expectations of women; it is therefore a competency that is easier for women to exhibit than confidence and achievement drive.
Persuasion at its most basic level is a three-step process. A person needs to:
*Understand the goals/values/motivations of the person she is trying to persuade.
*Find a personal connection to the other’s goals/values/motivations.
*Share stories and dialogue that highlight the connection.
By establishing a shared vision or connection, women can influence people in positions above them. Finding a shared agenda or goal helps women present themselves as collaborators instead of as people who are pushy or trying to steal the limelight. While men may persuade others in one-on-one conversations over a meal or casual interaction, women are more adept at using emotional connections during a presentation or critical meeting. They are more likely to modify a presentation or approach to suit the audience and connect to a shared set of values or interests.
4. INSPIRING COMMITMENT
Inspiring commitment concerns how leaders engage the people around them, facilitate people’s sense of ownership about their work, and foster people’s sense of belonging in an organization. By focusing on interpersonal relationships, inclusiveness, and democratic leadership, women inspire greater commitment from others because these behaviors are positively associated with women in general.
Male leaders tend to focus on building community through question-and-answer forums, sharing the company vision, and drawing on metaphors to establish group cohesion. Female leaders tend to look for more than just dedication and cooperation from others. They are more likely to involve others in problem solving and seek emotional bonds that go beyond employees simply trusting their executives’ expertise. Women set up a two-way dynamic that invites involvement, whereas men set up a one-way dynamic that asks others to form an allegiance to them and/or the company. Two-way engagement has repeatedly been shown to positively influence employee dedication, innovation, and ultimately a company’s bottom line.
5. STRATEGIC CONTROL
The final form of executive influencing is strategic control, or a leader’s ability to direct initiatives while simultaneously delegating implementation to others. This can be a major challenge for both men and women because, as executives, they are expected to cede some control over the very efforts that have enabled them to reach positions of leadership. Women face the additional struggle of delegating work without appearing bossy. Male leaders who exercise their authority and explicitly take complete control over a project’s implementation may be able to do so without questions or consequences, but women must use more subtle ways of maintaining control.
Female leaders are most effective at strategic control when they articulate their visions in such a way that managers and direct reports will make decisions that align with those visions. It is also important to maintain a collaborative and empowering spirit with others. When people feel that they are partnering with a woman leader to achieve goals instead of being given orders, they do not view her as being controlling. For instance, one female executive established a structure whereby a male manager would attend negotiations and always report the highlights of the meetings to her by a given time each day. She could make suggestions and course corrections during the negotiations, but she was able to do so in a way that felt collaborative instead of controlling.
6. CONCEPTUAL THINKING
Conceptual thinking is a leader’s ability to make connections between disparate concepts and information, to think creatively, and to see the big picture. From a purely biological standpoint, women leaders have an edge over their male counterparts in this area. Research shows that women have a greater capacity for “web thinking” because there are more neural connections between the two hemispheres of their brains. Practically speaking, this means that female decision making is informed by a greater amount and variety of data. While this tends to be more time-consuming than male decision making, it enables female leaders to see parallels and alternatives that can lead to surprising and innovative solutions. It also tends to mean that their solutions are more sustainable in the long term.
Successful women executives use this ability to their advantage but are careful not to boast about it. They offer their solutions or ideas as “helpful offerings” to others. Women must be careful not to present their thinking with an air of superiority or intimidation.
7. CULTURAL AND POLITICAL SAVVY
Women’s natural abilities in conceptual thinking also aid their cultural savvy. They are able to pick up on patterns, cultural cues, and nuances that together give them a better understanding of their work environments. This broad understanding includes things such as how people interact, who interacts with whom, when people speak and when they do not, and how people dress. Girls develop greater cultural savvy from an early age not only because of how their brains are wired, but because their socialization requires that they adapt to their surroundings to a greater extent than boys must. Women leaders are therefore more adept at altering their communication styles to their audiences, being aware of how changes in one department will affect another, reading subtle and nonverbal cues, and mapping specific actions they will need to take to reach a goal in a given cultural context.
In contrast, male executives value political savvy more than cultural savvy. While the two are similar, political savvy is more about the power dynamics in play among individuals in an organization. Men tend to value power and status within a hierarchy and are politically savvy in a way that either protects or enhances their degree of authority. In contrast, female political savvy relates more to how women work in groups and with individuals.
8. TEMPERING ASSERTIVENESS
The double standard that permits men in leadership to be assertive but labels the same behavior in women “bitchy” is not fair or right. However, women executives find it better to succeed and make others comfortable with their demeanors than to insist on mimicking men. They remain confident without being aggressive and “soften the edges” through a variety of styles that suit their brands.
For some women, humor–particularly self-deprecating humor–is an easy way to put the audience at ease. The goal is to be authentic and remove any hint of superiority or pretentiousness.
A second strategy is to practice showing empathy. This means not being afraid of the role of emotions in the workplace and acknowledging the feelings of others. When women executives genuinely strive to help and encourage people on their teams while demanding excellence and accountability, they move “beyond bitch.” Female leaders report that they receive more respect when they are empathetic than they do when they attempt to demonstrate their power or status.
Finally, women can look for ways to build or acknowledge areas of common interest. For one executive, an interest in local sports enabled her to connect better with colleagues. Another focused on using a different joke each meeting to quickly connect the group. Ultimately, the goal in finding areas of common interest is to create a springboard for trusting relationships that benefit everyone.
9. SELF-DEVELOPMENT SAVVY
Men typically reach the top of organizations faster and more directly than do women. This is often because men are “pulled up” by other senior men, whereas women must forge their own paths. Women who aspire to be leaders must be vigilant and proactive about their self-development and establish strategies for reaching the executive level.
Many of today’s successful female executives reached the top because they actively looked for jobs in their companies that would be stepping-stones to leadership. Rather than focus on the frustrations of taking a less direct route to the top, these women used a greater breadth of experiences to their advantage once they reached a position of leadership.
Women must be wary of jobs that can derail their career aspirations. Jobs in staff departments, such as human resources, communications, and legal, tend to be dead ends on a path to leadership unless they are explicitly negotiated upfront as being otherwise. Line jobs with operations responsibilities are viewed as vital to progress toward leadership.
Most importantly, women must actively look for people in the company who will advocate for them. While male leaders rarely like to admit it, most people in the upper echelons of a company had people sponsoring them on their way. Successful female leaders actively seek out mentors and sponsors to enable their progression. They look for people who allow them to access important networks, who give them greater visibility, and who will advocate for their promotion.
USING THE BLUEPRINT TO DEVELOP LEADERS
While the Women’s Leadership Blueprint is particularly important for women, the collaborative leadership style it emphasizes is an asset to both men and women. Men do not need to “break through bitch,” but they should recognize that organizations are changing to be flatter, more dependent on innovation, and more focused on employee engagement. Male leaders can benefit from developing competencies such as empathy, self-awareness, inclusiveness, and conceptual thinking.
The thinking to win (TTW) method is more than a business process–it is a mind-set anyone can develop and apply to any situation, whether professional or personal.
NEW THINKING FOR WINNING by PRISM
The distinguishing characteristic between businesses that succeed and those that fail is the ability of top leaders to think, plan, and act in a way that moves their companies forward. The thinking to win (TTW) method creates that kind of capability.
Strategic TTW is based on asking what-if questions and taking a long-term view rather than focusing on short-term results. The ultimate determinant of business success is the ability to identify and deliver solutions that delight customers both in the present and into the future as their needs evolve. Narrow thinking that is stuck in the present and based on repeating familiar patterns despite a changing market is a recipe for failure.
TTW is transformational for both organizations and the individuals within them. By equipping individuals with analytical skills that allow them to contribute to the success of their organizations, they will become more empowered and increase their ability to make valuable contributions. An organization that is well-versed in TTW is one in which people have a common goal, feel excited and energized by their work, and share in the organization’s success.
To be effective, TTW must be instilled throughout all levels of an organization. Companies such a Keurig, Jamba Juice, and Procter & Gamble have all generated dynamic growth by creating cultures of strategic thinking that drive business activities.
PRINCIPLES FOR WINNING
TTW is a habitual mindset that can be mastered by anyone and applied to any aspect of life. The process begins with applying the following five foundational TTW principles to every situation:
1. Challenge assumptions. In TTW, nothing is a given. Individuals must approach every issue with an open mind.
2. Scope the issue. Situations must be properly scoped so that people understand and are in agreement upon exactly what they are addressing. Inadequate scoping means wasted time and energy and opens the door to scope creep, which occurs when a project becomes larger than it was intended to be.
3. Rely on facts and data. Facts and data (rather than assumptions or persuasive presentations) must provide the foundation for any plan. Individuals must explore the depths and breadth of evidence to ensure there is enough of the right data to make informed decisions.
4. Focus on the vital few. Taking on too many issues at the same time can result in goals not being accomplished properly. Working off the 80-20 rule, TTW postulates that addressing the most critical 10 percent of issues will positively impact 90 percent of the whole.
5. Connect the dots. Individuals must recognize the interrelatedness of factors and elements within a whole and make sure all connections are addressed. A narrow approach is rarely a successful approach. “Linkage, linkage, linkage” should be the mantra for TTW.
WHAT IT TAKES TO WIN
Talent, charisma, and serendipity are all great qualities, but they are not the key to winning in today’s marketplace. Rather, the key to winning is effective strategic thinking. TTW drives this type of thinking by integrating the above five foundational principles into a process that results in a winning strategic plan.
The TTW process can be envisioned as an hourglass into which information is funneled, inspiring more specific and focused questions. As data flows through the narrowing of the hourglass, it is refined for specificity, leading to key insights and implications that inform the goals and objectives as well as possible strategies and courses of action that expand into the bottom of the hourglass. The entire process is geared toward answering the following questions, in order:
- What facts are known?
- What is most important to address?
- What is the key competitive differentiator?
- What are the key insights that emerge, and why do they matter?
- What is the organization’s purpose and position?
- What should the goal be?
- What choices must be made to achieve that goal?
- Was the effort successful?
The first step in the process is creating an umbrella statement, which addresses what the issue is, why the issue is important, the implications of not addressing the issue, and who should be involved in the decision-making process. Effective umbrella statements are clear, focused, and compelling, and they direct the rest of the process.
Once an umbrella statement is defined, data related to the umbrella statement flows into the hourglass. This data can be categorized for manageability according to the seven Cs:
Once data is categorized, a SWOT analysis can be performed on the results to analyze strengths, weaknesses, opportunities, and threats relative to the data and the issue. The goal of the SWOT analysis is to identify the strategic competitive advantage (SCA) that undeniably sets a company ahead of its competition. Examples of an SCA include a breakthrough product, superior supply chain, special knowledge or capabilities, or even strong brand equity.
Unearthing key insights takes place at the halfway point of the process (the narrowing of the hourglass). These insights inform the rest of the process and often appear as aha moments, which will not be forgotten once they are realized.
Key insights must be actionable and address the umbrella statement. These insights are critical to identifying the key issues and setting the direction for the remainder of the TTW work. For maximum effectiveness, there should be no more than four to six key issues addressed in the TTW process.
Once the key issues are defined, the implications of those issues must be defined as well. Implications explain the what and why of the key issue and create a bridge to taking action.
VISION: SEEING THE FUTURE OF WINNING
A vision is a view of the future–the end state the organization hopes to achieve through its strategic plan. Creating a vision marks the entry into the bottom half of the hourglass, where the convergent thinking that led to key insights and issues transforms into divergent thinking that results in goals and plans.
An effective vision addresses how to position an organization for success. Visions should be simple, concise, clear, and compelling–and ideally come in the form of one sentence that everyone can easily remember. Good visions are unifying and serve to shape an organization’s values and culture.
Governing statements are visions that apply to parts of a company, such as a division. Good governing statements similarly unify efforts in one strategic direction. When Procter & Gamble unified each of its divisions under governing statements, rather than managing products as separate entities, the company was able to achieve 30 percent growth.
Visions and governing statements are living entities, derived from the situation assessment that takes place in the first half of the hourglass. As such, they should regularly be revisited and adjusted to respond to changes in the business environment.
Goals are the natural outgrowth from visions and governing statements. Goals stimulate the action component of the TTW process. It is very important for goals to be balanced across the four elements common to most businesses and institutions:
All too often companies focus on financial goals almost exclusively, even though the other three elements can have just as strong of an impact on their success. A balanced scorecard model can help ensure all four elements are addressed.
Once goals are established, there must be methods in place for assessing progress toward achieving those goals. Goals can be assessed through the following three Ms:
1. Measures: What will be assessed, such as sales or earnings.
2. Metrics: The relevant quantifying data, such as growth percentages or financial targets.
3. Milestones: The timeframe for achieving specific targets.
Goals and the three Ms must be explicit. The goals themselves must be challenging, but not unrealistic. Setting too low of a bar will not achieve the desired results. Setting too high a bar will be demoralizing.
STRATEGIES: MAKING THE RIGHT CHOICES
Choosing a winning strategy can be risky, but that risk is minimized when a sound strategy development model is used. TTW provides such a model, allowing strategic choices to naturally unfold as a consequence of asking three questions:
- Which of the business’s key competencies would be most valued in the marketplace?
- What are other unanswered marketplace needs the business could respond to?
- What is required to become the market leader?
Even with the answers to these questions in hand, there are still a number of strategic options to consider when it comes to executing in the marketplace. Brainstorming is one method for identifying various strategic options, as are aha moments and spontaneous insights.
Once a number of strategic options have been defined, the next step is further refinement through inquiry. Considerations in choosing which strategies to follow include the level of difficulty in following through, enablers and barriers to execution, and which strategies are critical and which would simply be “nice to do.” Even if a particular strategy is discarded, it is worth documenting in the event it becomes more relevant in the future.
CONFRONTING THE ELUSIVE: MOVING FROM PLANNING TO ACTING
Successful execution depends on a firm grounding of strategic initiatives in the situation assessment component of the TTW as well as strong, coordinated teamwork. Strategic initiatives must be specific in defining what people are supposed to do. Good strategies are not only about asking the right questions, but also about putting the right people in place to do the work. Thoughtfulness in team composition as well as ensuring a collaborative mind-set are essential for driving action that accomplishes strategic objectives.
After objectives are selected, they must be managed to meet scope, time, and costs. These three components must be kept in balance. A change in one variable will undoubtedly create change in the others.
Defining responsibilities ensures the right work gets done by the right people. An accountability matrix can help label individuals in terms of their roles in particular actions. This matrix helps identify whether individuals are accountable, collaborators, or stakeholders.
BRINGING EVERYTHING TOGETHER: FROM THINKING TO ACTING TO WINNING
Successful strategy execution depends on getting everyone in the organization aligned with the process and moving in the right direction to achieve organizational objectives. Compelling and timely communication is essential in accomplishing that alignment and action.
Key messages provide the foundation for strategic communications by answering a few questions:
*What is the current challenge?
*What is the business going to do about it?
*What will the results of these efforts be?
Messages must capture attention, convey a sense of urgency, and clearly describe not only what needs to be done, but also the expected results. Therefore, every key message must address the situation, the action to be taken, and the impact of that action in a compelling way that engages the audience. Key messages should be able to relate back to the SWOT analysis and target only the most important critical initiatives.
Visions are the highest level of strategic messaging. Like key messages, visions must be engaging and compelling, but they must also be unique and concise so they are easily remembered and internalized. Visions can be linked with compensation to ensure people are focused on them and applying them in their performance.
It is very important for leaders to become good communicators so they can provide direction to their organizations. Additionally, communication must be managed on an ongoing basis, beginning with annual meetings and working downward into quarterly and weekly updates. Communication should be an ongoing loop of consistent and aligned information-sharing that informs and engages organizations.
THE WINNING NEVER ENDS: ANCHORING CHANGE
TTW is not simply a process to be cycled through in order to achieve a specific objective or end state; rather, it is a mind-set that should be embedded into every level of an organization. The change TTW brings about is anchored within organizations through unifying symbols and rituals that reinforce its principles.
By providing training and sharing the TTW experience, leaders can create a common language and frame of reference for its principles. Making more productive use of meetings, championing accountability, recognizing TTW successes, and empowering the Human Resources (HR) function to assist in transforming the organization are all methods for anchoring change.
TURNING OVER THE HOURGLASS
TTW is ongoing. Once one issue is addressed, the process invites leaders to address the next issue, plan for the future, or revisit a previous issue. As TTW competency develops within an organization, the process of asking critical questions becomes second nature. TTW is especially useful in today’s multi-generational work environment. By providing a common language and approach, TTW easily bridges generational differences.
TTW’s fact-based, structured approach encourages creative thinking and can be transformational in the annual strategic planning processes, which traditionally are often not much more than a rehash of previous presentations with a focus on minimizing risk. TTW works well with both for-profit and non-profit organizations and is as useful for individuals in making personal decisions as it is for business professionals charting strategic corporate paths.
The promotion to manager is one that many individual contributors look forward to with much anticipation, hope, and planning. They cannot wait to get the recognition for their hard work–to finally have authority and autonomy to get things done. But most are in for a rude awakening. So stark is the transition from individual contributor to manager, many new managers are surprised to discover just how much they have to learn. As one new manager put it, “I never knew a promotion could be so painful.”
In Becoming a Manager, 2nd Edition, Linda A. Hill offers readers an inside look at the stressful, often frustrating, realities of the managerial journey, chronicling the tribulations and triumphs faced by new managers in their first year on the job. When new managers speak for themselves, they learn that becoming a manager is more than a demanding intellectual exercise–that it actually requires profound personal transformation. Released 10 years after the original publication of Becoming a Manager, this revised edition also addresses the toughest challenges new managers face, and offers insights for those seeking to embark on a managerial journey of continual self-discovery and development.
LEARNING WHAT IT MEANS TO BE A MANAGER
Most new managers have a simplistic and incomplete picture of what it means to become a manager. Their expectations are often shaped by the rights and privileges they associate with formal authority, as opposed to the duties and obligations management entails. They often have limited appreciation for what it means to be managers of people as opposed to “doers,” to focus on getting things done through others as opposed to managing a task. Many struggle to reconcile these misconceptions with the realities of managerial life, and initially they feel overwhelmed by the myriad expectations of subordinates, bosses, and peers.
While new managers often see their direct reports as “very needy and demanding,” in fact it is subordinates who typically have a more accurate picture of managerial rights and responsibilities. They expect their managers to create environments that support individual and team success, both professional and financial. Subordinates are keenly aware of new managers’ tendency to cling to a “doer” role instead of appropriately delegating. Subordinates have legitimate concerns about the limited attention new managers proactively pay to managing peer and superior relationships in order to secure resources or solve conflicts that inevitably arise.
Superiors expect new managers to assume full responsibility and accountability for the welfare of their unit. In addition, they make it clear that it is the manager’s responsibility to align the unit’s agenda with that of the organization. Many new managers describe these conversations with superiors as simultaneously “exhilarating and scary.” Although they crave the autonomy to make decisions, they often do not feel on top of their jobs. Most are also surprised by the variety–and seeming subjectivity–of the metrics by which they are evaluated. As one put it, “I am paid for making the [financial] numbers . . . but my boss devotes a disproportionate amount of attention to other issues. . . . 50 percent on people and 30 percent on administration and compliance.” Few understand that their role also requires managing relationships with peers outside the unit and other superiors in the organization.
Many new managers feel unprepared to manage the expectations of a diverse range of peers. Although new managers are expected to be ambassadors for their own unit, peers still expect them to appreciate and account for the particular interests and concerns of other units. Like superiors, peers see new managers as network builders, whose job is to ensure not only that the unit’s agenda is fulfilled, but also the organization’s mission.
Finding a Managerial Identity
It is by confronting these conflicting expectations, and working through them on a daily basis, that individuals learn what management really entails. Instead of gaining new authority and autonomy, new managers describe feeling constrained by interdependencies, enmeshed in a web of relationships with people both inside and outside the organization, over many of whom they lack formal authority. As their daily routines become pressured, hectic, and fragmented due to relentless competing demands, many new managers find themselves missing the relative freedom of being an individual contributor.
As new managers work to reconcile these competing demands they begin to redefine their responsibilities. They come to realize that their role is to set an agenda, make choices and manage tradeoffs, and to build the network of relationships necessary to fulfill that agenda. Addressing these new responsibilities takes considerable time and attention, but once new managers face making decisions–even some inevitably unpopular ones–most begin to find their own voice and point of view. Still, even as they begin to assume the dual role of “people manager” and “business person,” many focus their network building responsibilities on managing down, at times perilously neglecting superior and peer relationships.
DEVELOPING INTERPERSONAL JUDGMENT
Exercising authority can be challenging for new managers because it requires developing the interpersonal judgment needed to influence people. No longer individual contributors, they cannot rely on their stellar track records as doers and technical competencies as their primary sources of power. Learning how to build an engaged team and get things done through a significant number of people represent challenges that new managers must master through trial and error.
In their first year on the job, most new managers quickly discover the need to build and nurture relationships with their subordinates. They discover, the hard way, that relying on their formal authority and the financial incentives they control to exercise influence can have unintended negative consequences. Eventually, they come to appreciate the benefits of empowering others in order to establish commitment, not only control. Still, as they attempt to build emotional bridges and connections, many new managers find that they have much to learn about how to motivate or inspire subordinates to pursue mutually agreed-upon goals.
Managing individual subordinates’ performance presents another set of interpersonal challenges. When new managers discover the vast range of talents, motivations, styles, and temperaments that exist within one team, effectively managing that diversity is inevitably a puzzle. They realize tactics that work with one subordinate can fail dismally with another. Over time, new managers learn that to treat people fairly is to treat people differently. By accepting and discerning these key differences, they discover that each person needs and wants something different from a boss.
Even experienced managers find working with subordinates who are not performing to standard time-consuming and frustrating. It is not surprising, then, that new managers can find all their time and energy consumed by a problem subordinate and the related impact on their group. Diagnosing the root cause of poor performance, and figuring out how to give constructive feedback and coaching, is challenging for new managers, as is learning how to hold subordinates accountable while tolerating reasonable missteps. And firing a subordinate is often one of the most taxing events of a new manager’s experience.
Delegation and Control
It is an unfortunate fact that while many new managers recognize the value of delegating, few are particularly gifted at it. Many new managers have difficulty shedding their identify as doers and experts, not to mention letting go of the tasks they enjoy and already do well. Delegation involves a number of complex judgments–figuring out who can be trusted to do what, and when and how to constructively follow-up–and learning how to do it effectively, as one new manager described, is often a torturous “weaning process.”
As the months go by and new managers find it ever more difficult to keep their technical or functional skills on the cutting edge, most find themselves forced by circumstances to delegate more. But new managers still have much to learn about balancing delegation and managerial control. They have to practice giving the correct length of rope to different subordinates–too short and one will feel over-controlled, too long and another will feel supported and neglected.
Confronting the Personal Side of Management
New managers are often caught off guard by the personal transformation that is required of them during the transition from producer to manager. At first, most do not appreciate that in consenting to new job responsibilities they are also making a commitment to form a new professional identity. “Will I like management?” and “Will I be good at management?” are the questions they ask themselves early on. But very soon, as they confront the realities of their new role, they become plagued by a more unsettling question: “Who am I becoming?” Only through on-the-job experience do they learn the answer.
Many managers discover new sides of themselves during their first year in management, gaining insight into their motivations, abilities, and shortcomings. Although like most of us they find it difficult to admit shortcomings or recognize their own limitations, over time they are relieved to see that they are getting better at matching their intent with their impact. Most find it affirming to discover new capabilities and motivations–how satisfying it can be to develop others, for instance.
This transformation does not come about without psychological or physical symptoms. The first year of management can be a time of anxiety, isolation, and emotional upheaval. Some managers even begin to question their career choices. They realize it is far from easy being the person with ultimate authority and responsibility, the one with power over other people’s lives and careers. Some of these negatives emotions and stresses may never truly recede, but learning how to cope with them is one of the most important lessons new managers will learn.
By the end of their first year on the job, most managers begin to feel more capable in their role. Although on bad days many find it easy to regress to the familiar and comfortable role of doer, the stresses of management no longer seem so debilitating. At this stage, most new managers are pleased by their personal growth and adaptability, their resiliency and capacity to learn. However, most recognize that there is still much work to be done.
MANAGING THE TRANSFORMATION
As companies come to understand that executives are shaped profoundly by their first management positions, many are beginning to offer new managers more training and access to developmental relationships. New managers are as desperate for training that addresses the intellectual and emotional challenges of becoming a manager, as they are for help in making sound business decisions. Since on-the-job experience counts so heavily in acquiring managerial knowledge and skills, they need to live it in order to learn it. Still, training opportunities, strong developmental relationships, and candid feedback from trusted superiors and peers can help to alert them to some of the common misconceptions and missteps to avoid.
All too often, rightly or wrongly, new managers are reluctant to ask for help lest they look like a “promotion mistake.” They believe there are few safe havens in which to admit their deepest fears and insecurities. It is no surprise that they often view the current boss as a threat, not an ally in their development. However, soon managers learn how difficult it is to navigate the transition to management without constructive feedback and social support. Over time, they learn how to rely on trustworthy peers and former bosses for coaching and mentoring.
DISPELLING THE MYTHS OF MANAGEMENT
After one year on the job, most new managers can begin to tell the myths from the realities of what it means to be a manager. Importantly, they realize their experience is not unique–overcoming doubt and insecurity is something all new managers must do before they can thrive. Nevertheless, many continue to struggle with some common challenges.
Exercising Influence without Formal Authority
When solo performers step into a management role, they lose the luxury of worrying mostly about their own concerns. Many new managers experience a rude shock when they discover that their expertise and track record no longer carry the same clout–that they must establish their credibility anew. And in order to reconcile the competing interests and interdependencies that exist in the organization, many times they must learn how to exercise influence without formal authority. In a sense, they must become “political”–to diagnose and understand the political dynamics at play in their organizations, and then develop and exercise the sources of power necessary to navigate them.
Managers should be neither naïve nor cynical about organizational politics, the reality being that all organizations are inherently political to some degree. When conflicts arise, new managers need to understand that their ambition is not to eliminate the conflict, but to determine the most effective way to manage it in the best interest of their organization.
For new managers, identifying interdependencies is one key to accomplishing an agenda and building credible, productive relationships with peers and superiors. And having no formal authority over these key players, new managers have to work at developing other personal and positional sources of power and influence.
Building an Effective Team
One of the most important managerial tasks is ensuring that the team’s collective work is greater than the sum of each individual member’s contribution. However, many new managers think of their group of direct reports as a “team” by name only. For much of their first year on the job, many new managers fail to recognize, much less address, their team-building responsibilities. Instead, they conceive of their role as building the most effective relationships they can with each individual subordinate, and erroneously equate managing the team with managing the individuals that comprise it.
To move from managing many individual subordinates to building a true team, new managers need to acquire a basic understanding of effective team dynamics and processes. They must learn how to manage the team’s context (make sure the team’s agenda is aligned with that of the organization and secure necessary resources) as well as manage the team itself (design, facilitate, and coach the team). Too often, new managers rely solely on one measure for assessing team effectiveness, team performance. They pay less attention to two other key criteria for sustained team success: whether team members are satisfied and whether the team has the capacity to adapt and learn together.
One thing new managers struggle to learn is how their style or preferred ways of behaving can impact team culture and effectiveness. The most effective managers are aware of their style and its impact. They are versatile and have the ability to adapt their behavior to the specific needs of the team at any given time, a skill that can only be acquired through experimentation, feedback, and reflection. Developing this capacity requires considerable empathy, practice, and commitment–in short, lots of hard self-work.
Learning for a Lifetime
Managers must be proactive and entrepreneurial in developing their talents over the course of their careers by seeking and creating developmental opportunities, experiences, and relationships from which they can learn. They must figure out which experiences will help them acquire critical new competencies. The unpleasant truth is that people often learn the most from stretch assignments, experiences involving some degree of adversity that require them to go beyond what is comfortable.
To conceive one’s career strictly as a ladder to be climbed is a mistake. Those who are best at managing their careers approach them strategically. They know where they are and where they want to go. They set goals, periodically reevaluating and revising them; they continually scan the environment to anticipate what their organizations will need and hence what knowledge and skills they should strive to develop. Instead of focusing primarily on achieving their personal ambitions, they are willing to take risks and seek assignments from which they can learn and thereby contribute to the organization’s objectives–opting for a lateral as opposed to vertical move to broaden their skill set, for instance.
Reaching out for help is never easy, but building a network of developmental relationships is essential for new managers. Instead of searching for one “perfect mentor,” those who are most effective at managing their careers cultivate multiple and diverse developmental relationships–a “personal board of directors” consisting of coaches, sponsors, protectors, role models, and counselors. They spend time on critical relationships according to the needs of their work and development, rather than on the basis of habit, convenience, or comfort. As social learners, people need feedback and coaching from others in order to learn most productively from on-the-job experiences.
Organizational and educational institutions play important roles in helping individuals learn how to manage and lead. But the bottom line is, those who aspire to move into ever more responsible managerial positions need to take charge of their own development. No one can teach another person how to manage and lead–it has to be learned through first-hand experience. Management is hard and getting harder. Even the most gifted managers must commit themselves to lifelong learning and self-development.
Decision making is rarely taught or honed as a skill, yet it is a vital component of success. People’s most important decisions often require making difficult tradeoffs among a set of options. Rather than systematically assessing what the best choice is, people resort to common and ineffective strategies, such as defaulting to the status quo, letting others or time decide for them, or procrastinating (which limits their options). In Harvard Business School Publishing’s Smart Choices, decision-making experts John S. Hammond, Ralph L. Keeney, and Howard Raiffa lay out a systematic method of reaching optimal decisions regardless of dilemmas. They demonstrate how learning and practicing decision making can accelerate people’s progress toward their goals and give them control over their lives.
DEFINE THE DECISION PROBLEM
Making a smart choice first requires forming an appropriate decision problem. A poorly phrased decision problem can set a person down the wrong path at the outset of his or her journey. For instance, a person asking, “Which unfurnished apartment should I rent in the city?” may or may not be starting with the right decision problem. Perhaps that person should rent a furnished apartment and use a storage unit until he or she is more comfortable. Perhaps the person should buy a condo. Perhaps he or she should move outside the city and commute. In short, people should not be lazy about this important step. They should take time to define and refine their decision problems using the following steps:
*Write down the trigger to the problem. This could be a request from a boss, a discussion with a spouse, a change of job, or just about anything. The key is to not let the trigger bias how the problem is stated.
*Question the constraints. Constraints are often helpful in narrowing choices, but they can also blind people to some of their best options. Identifying what constraints are assumed and pretending they do not exist at first can help expand people’s thinking.
*Identify key elements of the problem and examine related decisions. Key elements of a problem might involve a deadline, money, future opportunities, or other limits or benefits. The scope of the decision should not be too broad, but it should somewhat account for related decisions.
*Get others’ insights. A person who has already thought through the decision problem independently may want to then get alternate perspectives for fresh insights. It may be worthwhile to write multiple decision problems and then reexamine them during the process.
The second step requires listing the objectives, or the standards against which the subsequent alternatives will be measured. Making a thorough list of objectives protects people from overemphasizing one value, such as monetary compensation, over another, such as schedule flexibility. Objectives can also help guide a greater set of alternatives to explore in the next step and help clarify what additional information might need to be gathered. Objectives will ultimately help justify decisions to other people. Decision makers should take the following steps when listing their objectives:
*Write down the concerns the decisions should address. The process should begin as free form as possible. What are the worst outcomes possible? What should their decisions accomplish? How do they imagine justifying their decisions to others?
*Convert the concerns into more concise objectives. Having thought thoroughly about concerns, the decision maker should be able to see patterns and clear desires emerge that can be stated more succinctly.
*Establish fundamental objectives by separating means and ends. The list of concise objectives should be organized into two groups: objectives that are ends themselves (e.g., have a comfortable and aesthetically appealing living room) and those that are a means to an end (e.g., get leather couches).
*Ask “What?” questions to clarify meaning. People must be sure fundamental objectives are phrased in a meaningful way. For instance, a person desiring a “prestigious” job should ask, “What do I mean by prestigious?”
*Test the objectives. If people cannot make decisions with their given objectives or they find that their alternatives are not meeting many of their objectives, they may need to reexamine their lists.
Creating a list of alternatives means establishing a range of options from which a decision will be made. People tend to fall prey to some common pitfalls at this stage, which can narrow their opportunities and lead them toward suboptimal choices. These include:
*Defaulting to the status quo. It is always easier to maintain business as usual (e.g., reapprove last year’s budget for this year), but this is rarely the best course of action.
*Incrementalizing. Only slightly more work than defaulting to the status quo, this involves making small changes to an existing alternative (e.g., making minimal adjustments to last year’s budget).
*Choosing the first possible alternative. People are more likely to default to the first option presented to them rather than researching alternatives (e.g., using a supplier someone recommended without considering other suppliers).
*Choosing among a range of alternatives presented by others. A person that is content in his or her job may receive an offer from a recruiter for another job. Considering only the two jobs, the current one and the offer, is a choice framed by others. There may be other job alternatives that could be even better.
*Limiting options by waiting too long. Often the best alternatives disappear due to procrastination.
The following techniques can help people avoid the above pitfalls and generate more and better alternatives to their decision problems:
*Look at objectives and ask “How?” Asking “Why?” helps people move from a means to an end when listing objectives, but asking “How?” helps them define their next steps.
*Challenge constraints or assume they do not exist. Some constraints are real (e.g., the office space is 1,500 square feet) while others are assumed (e.g., the job is not available because the company always hires internally). When first listing alternatives, constraints should be ignored so that the range of alternatives is not too narrow.
*Set the bar high. When people set high expectations for themselves, they are more likely to avoid defaulting to the status quo.
*List alternatives independently before consulting others for suggestions. People who are uninvolved with the problem are likely to see it from a different angle and will not have the emotional barriers that the primary decision maker may have.
DESCRIBE CONSEQUENCES FOR EACH ALTERNATIVE
Decision makers must evaluate what the consequences would be of pursuing each alternative and how those consequences would meet or miss their objectives. Consequences are best expressed in a consequences table, which can be made by following four steps:
1. Imagine having chosen the alternative, not potentially choosing it. This practice helps people focus on what the consequences of alternatives would be in the long term. By doing this, they understand the consequences in context and are better able to conceptualize and feel what those consequences would be like to experience.
2. Describe the consequences using words and numbers. Describing consequences requires using some type of scale that captures each one of the objectives. For example, a measure of the objective “work flexibility” might be the percentage of hours that can be shifted without authorization from a boss. Subjective scales (e.g., A through F grades, 1 through 10, green circle/blue square/black diamond, etc.) can be used for objectives such as “job enjoyment” where hard data would not apply.
3. Eliminate clearly inferior alternatives. People can evaluate alternatives by making comparisons in pairs. If one alternative is clearly superior to another, the inferior one can be eliminated. The “winning” alternative can then be compared to another alternative. In pairs where there is no clear superior option, both can be kept.
4. Organize remaining alternatives in a consequences table. A consequences table is made by listing alternatives along the top row to form columns and objectives along a left column to form rows. At each intersection in the matrix, people should succinctly describe the consequences that a particular alternative would have for a particular objective. Consequences may be described numerically or with words, but the scale should be consistent across each row (i.e., the same scale per objective). Using a consequences table and forcing all relevant information into a single graphic is essential for examining and comparing alternatives.
When a decision maker cannot eliminate all but one alternative from the consequences table, his or her choice requires making tradeoffs. This means determining which objectives have relatively greater importance to the decision maker than the others. Sometimes this simply requires complimenting the different scales used in the consequences table with a ranking table. For instance, in a ranking table with 5 alternatives, each would be ranked 1 through 5 by each objective. This second table makes it easier to spot which alternatives dominate others.
If the decision maker still does not feel that the choice is clear, he or she should use a systematic method for making tradeoffs, referred to as the even swap method. This method is based on the simple concept that if all the alternatives for a given objective have an identical rating, that objective can be eliminated from consideration. The even swap method forces the decision maker to create equivalencies for a given objective to help narrow his or her focus on the remaining objectives. This requires increasing the value of one alternative’s objective while decreasing its value by the same amount in terms of a different objective. This method of making tradeoffs clarifies the value judgments that must be made to determine relative importance and allows the decision maker to concentrate on one value judgment at a time.
In some cases, the consequences of each alternative are known before making the decision, and the process ends after making tradeoffs. However, in many cases the consequences cannot be known before deciding. Decisions involving uncertainty about future outcomes are more difficult, but they can also benefit from a systematic approach that uses risk profiles and decision trees in addition to the above process. A risk profile summarizes four key components of uncertainty:
- What the key uncertainties are.
- What the potential outcomes of those uncertainties are.
- What the chances of each outcome occurring are.
- What the consequences of each alternative given each outcome would be.
For example, if a person is considering submitting a proposal to win a contract, the key uncertainty would be whether he or she will get the contract. The potential outcomes might be: getting no contract, getting a partial contract, and getting a full contract. He or she could then estimate the chances of those three outcomes occurring and the subsequent consequences, financial and other, for the business.
For decisions with a greater number of outcomes and uncertainties, it can be helpful to depict risk profiles on a decision tree, which is a graphic representation of the connections between choices among alternatives, the uncertainties, and the consequences. From left to right, the tree starts with a decision one faces. It is shown like a fork in a road where each branch represents an alternative. For example, submitting a proposal or not submitting one. Following each alternative is another fork that represents the uncertainty which follows. Each branch represents a possible outcome. If a person submits a contract, he or she will win, get a partial contract or lose. Each outcome is labelled with the likelihood of occurrence. Finally, the consequences are listed at endpoints on the right. This type of graphic can aid decision makers by focusing their attention on the most relevant uncertainties and forcing them to think in a thorough, logical progression.
ACCOUNT FOR RISK TOLERANCE
Two people examining an identical decision may appropriately reach different decisions, if each has a different level of risk tolerance. A person’s level of risk tolerance is essentially how heavily he or she weighs the downside of consequences against the upside. There are three straightforward steps to assessing risk tolerance in a decision:
- Consider the relative desirability of the consequences listed in the far right of the decision tree.
- Weight the desirability of the consequences with their chances of happening.
- Choose the most attractive alternative.
Naturally, assessing risk tolerance is easier said than done. Desirability scoring can introduce greater precision into the process by shifting the analysis from a qualitative to a quantitative assessment. Desirability scoring mirrors the process outlined above but uses numbers to help clarify the decision. There are four steps in this process:
1. Assign desirability scores to all consequences. Consequences must first be ranked from best to worst. The best receives a score of 100 while the worst receives a score of 0. The remaining consequences are given scores that reflect their desirability relative to one another.
2. Weight the desirability scores of the consequences by the chances they will occur. The lower the chances are that a consequence will occur, the less it should influence an alternative’s desirability score. The scores assigned in the first step must therefore be weighted by the chances they will occur. For instance, if the best consequence (with a score of 100) had a 30 percent chance of occurring, its contribution to an outcome’s desirability would be 30 (100 x 0.3 = 30).
3. Calculate each alternative’s overall desirability score. Once all the consequences have been given desirability scores, the decision maker can get an overall desirability score for each alternative by adding up the contributions of the relevant consequence desirability scores.
4. Compare the desirability scores of all the alternatives and make a choice. At this point there is a clear and quantifiable basis for making a decision. The alternative with the highest desirability score is the smart choice. While this process is not necessary for most decisions, it can be invaluable for the most complex and important ones.
COORDINATE CURRENT AND FUTURE DECISIONS
Some decisions cannot be made independently of other decisions. When decisions are linked, alternatives selected in the present can change which alternatives are available in the future. The key to making linked decisions is to plan ahead and map out a decide-learn sequence that depicts movement from information decisions to current decisions to future decisions. The authors use the analogy of a skilled chess player to describe this process. Successful chess players choose their moves (the current decision) based on what they know now (information decision) and what they may want to do several moves from the present (future decisions). They have mapped out their plans several moves in advance, but may change those plans depending on what other players do next (new information). They will subsequently choose new moves (basic decisions) and again plan several moves ahead (future decisions).
Linked decisions require an iterative process of deciding and learning that mirrors making decisions under conditions of uncertainty, but with a more extensive decision tree. The crux of making linked decisions is narrowing the list of uncertainties to one or two. For instance, a company trying to decide between two products to launch may find that the critical uncertainty is how well the products will sell, not what the production costs or marketing budget will be. Learning is the key means of reducing uncertainty, but it may not always be worth the investment. As before, decision makers should draw a decision tree to better inform decision making.
AVOID PSYCHOLOGICAL TRAPS
While this decision-making approach outlines a method for avoiding process mistakes, it does not protect people from the psychological mistakes that are imbedded in how their minds work. The human brain relies on routines and assumptions, or heuristics, to help cope with the complexity and fast pace of life. While heuristics generally enable people to operate more effectively and block out unnecessary information, heuristics can also bias them toward poor choices. For example, people often fall into the sunk-cost trap, where money spent in the past influences their decisions in the present. People tend to make choices that would help justify their decisions in the past as opposed to choices that would better their futures. For example, money spent on unsatisfying college degrees should not factor into decisions about what to pursue next, but many people consider the money they would “lose” if they did not apply the skills from their degrees in their decision-making processes. The best defense against falling victim to these types of psychological traps is simply for people to increase their awareness of them.
BECOMING A SMART DECISION MAKER
Smart decision makers use this process consistently on important decisions, hone their skills to use it over time, and are proactive about resolving decision problems. When people create their own decision problems, these are not problems but rather decision opportunities, giving them a chance to discover and live out their core values. Smart decision makers know that to take control of their lives they have to take control of their decisions and make smart choices a habit.