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Old CEOs and bold CEOs

A recent HBR articles hints that those who make it to CEO fastest aren’t always the best case studies.

Geoff Wilson

Perusing the business press recently I came across an article on the Harvard Business Review website by a couple of partners at talent advisory firm ghSmart.  I’m partial to a lot of the tools and techniques that Geoff Smart and his firm have developed over time. And, I have found that management teams I work with who employ those techniques generally improve their approach to talent evaluation and elevation. This one left me…wanting, however.

The article is titled “The Fastest Path to the CEO Job, According to a 10-Year Study.” In it, the two authors outline how pedigree isn’t really all that for those who rise to the CEO role the fastest.  These so-called “CEO Sprinters”–the people who get to be CEO faster than the average time-to-office of 24 years–get there by taking big risks. The authors’ insight into these “sprinters” amounts to this:

“We discovered a striking finding: Sprinters don’t accelerate to the top by acquiring the perfect pedigree. They do it by making bold career moves over the course of their career that catapult them to the top.”

And to follow that up, the article outlines three archetypal “bold” moves: jumping to a much smaller role or company, jumping on a much larger role than they were nominally prepared for, and inheriting and sorting out a big mess.  It’s very tough to call that a blinding insight. I would go so far as to call it a dangerous one because it ignores all the potential outcomes of such risk taking.

The reason it’s dangerous goes all the way back to an old saying in the aviation world that goes something like this:

“There are old pilots and there are bold pilots…but very few old, bold pilots.”

That is to say, that for every CEO who is lauded for the career-making “bold” (risky) move to something smaller/bigger/messier before it was time, there is likely a vast number of mid-career managers sitting around wondering why they took that kind of risk.

In other words, when we evaluate CEO Sprinters for what made them successful, and point to bold moves, we have to account for the risk inherent to such bold moves and for all the “sprinters” who never made it. Or else, we are just evaluating a gamble.  We aren’t evaluating a skill.  That’s, after all, what a great–truly seasoned–CEO does in real life.  They don’t take bold leaps willy nilly. They evaluate risks and returns…and make decisions accordingly.

I liken the HBR article referenced to a never-written article on how to play winning blackjack that points to how the “big winners” in blackjack made very large bets at very opportune moments.  Sure they did.  But a lot of people who followed that strategy–in fact if you believe in statistics almost all who follow that strategy–lose…bigtime.

If you are reading this post and thinking about your career “catapults,” I’ll encourage you to think about taking calculated risks, not gambles. That means that the core insights of the HBR article are, in fact, pretty cool; but they need a healthier dose of realism to be actionable.

So, don’t just look at anecdotal CEOs who have “made it” as role models for how to make it. Just because your CEO made his name be moving his family to Myanmar and turning around a manufacturing plant there doesn’t mean that the path to CEO is through malaria and dengue.

He might have survived a really stupid career move.  Sure, you can make it to CEO quickly by making a series of risky, possibly stupid, but lucky career moves…but you won’t necessarily stay there long.

And, that’s just it: survivorship bias is endemic to evaluating those sitting in such rare roles. You might say that there are old CEOs, and there are bold CEOs, but very few old, bold CEOs.

What do you think? 

Welcome to the real, messy world

Like the real world, real business isn’t as simple as you’d like it to be.

Geoff Wilson

I’ll confess, I’m a bit of a strategy junkie. You don’t have to be one to do what I do, but it helps. However, if you read my writing much, I hope you come away with a sense of the practical bent that I bring to the topic. The real world is the real world. Just as any engineer will tell you that lab scale processes rarely translate directly to production facilities, financial and strategic models rarely reflect reality—at all.

The below image was shown at a recent annual meeting of a private equity firm we have the privilege to serve. It shows indexed revenue and EBITDA performance over the life of a fund’s portfolio. Each line is a portfolio company. Lines that trend upward are green. Downward lines are red.

Keep in mind, this is a top-performing private equity fund. Returns for this portfolio were excellent. What do you see? The real world.

Each of those lines depicts the outcome of an actual business. It’s the result of some management team’s hopes and dreams. Those businesses were probably planned using relatively linear models and margins. But what you get is actual sausage making. And I’ll say it again: This is a top-performing portfolio.

The real world is sausage making. Real business comes with randomness, particularly in companies that are working to make things happen.

If you consider it failure that some parts of your portfolio might not stay in lockstep with your linear growth expectations, you probably don’t understand the nature of risk taking and enterprise building. You might be more comfortable investing in CDs.

The real world is messy. This is good to keep in mind when you’re futzing with a financial model that implies a precision that your business outcomes will never achieve.

What do you think?

Accelerate decision cycles to increase competitive advantage

The pace at which your organization makes decisions may outrank the quality of your choices.

Geoff Wilson

Imagine you and I are playing a game. The type of game doesn’t matter, but assume it requires taking turns or possessing a ball. It could be innings in baseball, possessions in soccer, or even turns in a basic game like checkers.

Now, imagine there’s a wrinkle: I get two turns for each one of yours. I get to make two moves in checkers for your one move. I get six outs per inning in baseball against your three. I get the ball twice for every possession you have in soccer. Here’s the question: Can you win?

I don’t think so—at least not consistently. If I get two chances for each move you make, and if I get to work from basically the same information you have, my probability of winning is greatly enhanced. This example may seem absurd, as you’d likely scoff if I dared propose such an unfair contest. But it’s analogous to how some companies handicap (or, conversely, advantage) themselves.

Strategic decision cycles are too often internally driven

Companies the world over operate as if their internal decision processes are all that matter. They do annual strategic planning, quarterly account planning (if they’re lucky), and maybe monthly resource planning. For many of these companies, big decisions—such as introducing a new product line or building a new plant—can take years, while seemingly small decisions—hiring a new salesperson, for instance—can take months.

Their decision cycles are internally driven—even when managers know that the outside world is moving faster than their own company’s internal cycle. This pace lagging restrains opportunity in the best cases, and paves the road to ruin in the worst cases. The worst cases are when the world is rapidly changing, or a shifty attacker emerges in the market.

Fast decision cycles are advantageous

We all want to make good decisions, and doing so requires reasonable deliberation time. However, if you are caught in a scenario where your competition is able to make decisions faster than you can, your slower-paced good decisions eventually won’t matter.

Why? Because the organization that can multiply its capability via a faster decision cycle will have a substantial advantage in avoiding risks and capturing opportunities. The company that moves through decision cycles faster than its competition—the one that can make multiple decisions while the competition makes just one—is an advantaged organization.

For decades, Toyota has been constantly lauded for its production system, but its product development system is only occasionally celebrated. Toyota captured substantial share in the 1980s by introducing products and product refinements on a development cycle that was significantly faster than its competition. This system gave Toyota a major advantage over the slower pack.

One could argue that Tesla is doing the same thing in today’s market with its “platform and upgrade” approach to auto ownership. In some ways, Tesla is able to operate inside of its competition’s decision cycles.

So what? Cycle faster!

Companies with faster cycles are advantaged. Such advantage doesn’t eliminate failure, but it increases the probability of success (and of killing off failures quickly) to overwhelm missteps. Would you rather be a baseball player with a .500 batting average who gets two at-bats per game, or a player with a .300 batting average who gets to the plate six times a game? If you’re playing for hits, you want to be the latter, not the former.

Fast cycling allows you to multiply your force. It enables you to disrupt and dismember the competition. Done well, it allows you to lead—even with less talent, capital, and “perfection” than larger, slower competition.

But beware the alternative: When your competition is inside your decision cycle, you are going to lose—eventually. If you drive at a tempo slower than your competition, you might find yourself on the slow road to oblivion.

What do you think?

Yeah But, Yeah But, Do!

With an overabundance of data and information, we have to find a way to get past “yeah, but” and get to “do!” 

 

Did you know that some poor soul on the battlefield at Gettysburg left behind a rifle loaded with 23 projectiles? It’s true. When you understand the vast effort required to load a muzzle-loaded rifle, you start to understand the peculiarity of this anecdote.

Now, do you know any poor souls who toil under a leader who is great at loading but never pulls the trigger? You know him… He’s the guy who, no matter what, needs more analysis. He needs more information in order to make a decision. You get the sense that if he were in the middle of the road with a semi-truck bearing down on him, he would ask for an estimate of its speed before deciding to get out of the way.

I’m betting you know this guy.  He is the Fred Flintstone of business… Only he’s always “yeah, but” and never “do.”  Don’t be this guy…

Our current overabundance of data and information allows us the benefit of knowing so much in so little time that we can forget the need to actually act.  Decision makers make decisions.  That means they take information, perceive it, process it, and decide on it.  When you spend too much time perceiving and processing, the battle passes you by.

You end up with a rifle loaded 23 times and never fired.

Not to mention you end up with an organization that is exhausted by all the loading…the constant analysis and responding and delaying and dithering.

As a provider of strategic insight and analysis, I personally wage war against analysis paralysis in keeping to a philosophy of practical strategic impact. Sometimes, this means helping clients acknowledge when they know enough to fish or cut bait.

When is enough enough?  Well, that depends.  In one of my first blog posts, linked here, I went into a bit of detail on Bayesian Inference as a powerful tool for strategic (and interpersonal) analysis. Knowing when you have enough information to make a decision is a critical skill in all leadership positions. In leadership positions that come with the luxury of delay, determining whether to do more analysis really comes down to the return on investment:  Will the new analysis prove or disprove what you substantially already know?

A lot of times, the answer is “no.”

Make a decision.

Yabba Dabba Doo!

I’m curious what you do to ensure you are acting vs. analyzing… Please share.

Perspective Is The Spice of Strategy

Quick: How many phone calls or conversations did you have last week that dealt purely with understanding how to think about your job, company, or market? I’m betting not many. We get into the drudgery of actually doing work, and that prevents us from considering whether we are doing the right work.

This is visible in sales organizations of all kinds when customer service (fighting fires for existing customers) crowds out new account sales activities. A certain kind of salesperson actually likes that arrangement, but that type should be in customer service, not sales.

The question is, who is thinking about it?

In 15 years of working with companies big and small, I’ve yet to meet a professional–from the shop floor to the boardroom–who goes to work thinking, “I’m going to spend my time on the wrong things today.”

It just doesn’t happen.

Misallocation of resources happens, as the economists say, at the margin. You walk in the office focused on selling that big account today, and you walk out at the end of the day wondering why you never got to it. Your day was filled with urgent distractions that removed your focus from important activities.

Maybe it was more important answer that call from that customer at that time. Maybe it was more important to talk at that time with that particular employee about that pending vacation. Maybe it was more important to answer those emails, make that pot of coffee, catch up with your old college friend, read that newspaper, etc., etc., etc.

Sound familiar yet? That’s why this article is about perspective.

If you find that you’re not focusing on what is strategic, you must bring in other perspectives. You will rarely find the solution by “trying harder” to focus. You know why? Your values are already reflected in where you spend your time. Trust me.

So what do you do?

Well, the solution too many managers come up with is to seek advice from someone who really knows their role well; they seek an expert opinion on how to focus on more strategic things. And this can be good, but it can also fall short. So I’m going to suggest a different approach: Find someone with a wildly different background from yours, and open your books to them.

If you’re a chemist, find a poet. If you’re a senior manager in a public company, find an entrepreneur. If you’re a poet, find a potter. And here’s a good one: If you’re a guy, find a woman’s perspective. You catch my drift?

Why? Well, because hard problems call for varied perspectives. When a team of organic chemists searching for a better way to synthesize a compound reaches a problem-solving roadblock, the answer is rarely to add another organic chemist: It’s to add an engineer of a different type, or even a layperson. That’s how hard problems are solved…through adding orthogonal perspectives.

These perspectives are the spice of life for hard problems, and strategic focus is a hard problem.

So, think about the problem you or your organization face and consider whether it makes sense to bring in a poet or two to help you think different.

What do you think?

Is Your Executive Team On Tilt?

Avoid going “on tilt,” and it will be ok.

 

It was a card room in downtown Stockholm, Sweden.

I did a bad thing–playing poker with only a finite amount of time available. I had a little time on my hands and wanted to play some hands, so I was “loose,” as they call it, firing out bets at a healthy clip just for a little entertainment. It’s a good way to lose money, but it can also be fun. Except then I suffered a bad beat–I think it was betting hard into a full house with a modest pair in my hand in a mid-level limit hold’em game.

I stayed with it and was crushed by a guy with a higher pair, and then I did something that is all too common. I took the aggravation of that hand and bet hard into the next hand with it; I had nothing in my hole cards, but I raised a couple times, and I was soundly blown out by the Swede sitting to my left. And under his breath, this guy who had spoken not a word of English for an hour or more said:

“Tiiiilt”

And despite wanting to jump up and take a swing at the guy, I took a second and realized he was right. I was “on tilt,” which is to say I was making stupid bets after losing a bad hand. Emotion got the best of me.

But you know what? The term applies in business as well: Managers and executives frequently go on tilt; they suffer a minor loss and then seek more risk to offset it.

We are not good at maintaining an even keel during times of rapid changes in risk; if we suffer a loss, we have a pernicious tendency to double down the next time around to make up the loss, and this leads to much stupid.

Case in point: a management team misses out on a highly strategic M&A transaction by bidding too low. They make a perfectly rational bid, but they lose. So the next time a deal comes along, the same management team goes on tilt, shading their bid not just to their economic disadvantage but often to the point of irrationality. They may win, but they suffer the winners’ curse: they pay a value that no rational actor, even one with a big strategic premium, would pay.

Another manager, in the midst of negotiating a deal, ignores rational advice that the deal is off the rails; he has to get a deal done, so he caves in to his counterpart’s demands after the counterpart walks away. He gets “played” in the negotiation because he perceives the walk-away not as a tactic but as a loss.

Another manager, on losing a highly talented potential new hire to a different offer, spends millions on upper-tier consulting support on the topic the new hire would have been expert on.

All of these are examples of being on tilt. The managers above have all made irrationality out of rationality.

How do you avoid it?

The first and best way is to avoid artificial constraints. In an uncertain world, constraints that have no bearing on value are dangerous. My artificial time limit at poker, the need to “make” quarterly or annual metrics, or the need to please management are all technically reasonable, but they don’t relate to value: You may get a deal done within the constraints, but chances are low that it will be a good deal.

Second is to seek advice.

Third is to understand your culture and the culture you are dealing with. How risk balanced are you? Rookies go on tilt far more often than pros, and so do insecure executives vs. seasoned ones.

Finally, know when irrationality is a possibility–and know what it costs.  You, like me in my poker game above, may be able to absorb some losses due to taking a flyer here and there, but you also might not.

All this is to say that you are likely to encounter circumstances in which you, your manager, or the executive team whose board you sit on is on tilt. They may be irrational to the extreme due to losses or perceived losses they’ve suffered, and this is especially true when it comes to good governance.  Management teams who have not made their numbers or moved the stock price in a while will have a tendency to up their risky behavior.

So watch out for examples of this type of behavior. Avoid going on tilt, and it will be ok.

 

Shark Tank And Manufactured Choices

Always, always, always ensure you understand your real set of choices. 

I will humblebrag this:  I don’t watch much TV. On one level, it’s embarrassing to be so out of the loop on TV entertainment, but on another level, meh.  Even when I do watch, it’s usually in snippets, which is where this post comes from.

A week or so ago, I caught the last few minutes of an episode of “Shark Tank.” The pitch was by a woman named Lindsey Laurain–leader of a company called EZPZ.  That’s “easy peasy” for those of us who are phonetically inclined.  Laurain’s company makes a line of all-in-one plate-placemats for the toddler dining scene.

All of that is well and good, and as a father of four, I can appreciate the invention, too.

But what was interesting was this:  Laurain asked for $1 million in exchange for 5% of her company, and she received two offers.  The offers were not without “hair” as we call it, but they put the value of her company at $20 million.  Not a bad indication.

And you know what?  She walked away.

The “sharks” were perturbed.  Why would she do such a thing?

Why? Because it was a bad fit, she had a good product, and there are other options for her to capitalize her company.

Which brings me to the point:  We all get into manufactured situations where others offer us options, sometimes even good ones, which you might even call opportunities.  Ms. Laurain certainly had an “opportunity” to tie into the sharks and gain the potentially increased promotional benefits that can come from their support.

But such situations are often manufactured in such a way that we are led to believe they are our only options. You see this everywhere from real estate (agents constantly extol how “hot” the market is when trying to get you to make an offer on a house) to elite investment banks (bankers will pull out all stops to ensure that the buy side ponies up and the sell side keeps their feet warm).

I’ve got news for you:  You will be a better decision maker if you learn how to take a breath–take time to think and then make a decision that avoids the manufactured circumstances entirely, a decision that evaluates all the outs, not just the cards on the table.

For instance, suppose HR says you need to accept the job before next Tuesday or else, and they question your loyalty because you decide to look their gift horse in the mouth. What kind of company looks to coerce people into roles they aren’t sure about? In a healthy company, career choices are made by the individual, without ultimatums or undue pressure, so take a breath.

Or suppose that the guy making the offer on your business thinks you’re an idiot for rejecting it. Of course he does…that’s his position in the negotiation.  But take a breath and realize your options.  You may still be an idiot, but at least you’ll know where you stand.

The “Shark Tank” anecdote was a great example of an entrepreneur who knew what was right for her team, and we should all learn from her example.

Take a breath, think it over, and always, always, always ensure that you understand your real set of choices.

 

When Hard Choices are Easy

Sometimes, things we call “hard choices” are easy…If you look at them the right way.

So much is made about hard choices.

I’ve had it posed to me by a few people as I made the decision–with the encouragement of a couple of close colleagues–to set off on new adventures over the past year:

“Wow, that must have been a really hard choice to make.”

Hmmmm…

Well, okay, it came with some anguish because I had fallen in love with the people and mission of the organization that I worked within and had at least partly helped to build and lead…

…but it wasn’t a really hard choice.

The truth is, the segment of society that I live within only faces really hard choices intermittently.

Sometimes, easy choices are lauded too much.

Within the past week or so, a couple of good examples come up.

Example 1:  When moral choices are viewed as “hard.”

Last week, David Boren, former U.S. Senator and current President of the University of Oklahoma, made a decision to shutter the Sigma Alpha Epsilon fraternity chapter at the university and to expel a couple of its members after an almost unbelievable display of racist ignorance was caught on tape and revealed.  Students were filmed chanting a little ditty that invoked not only racist exclusion, but also imagery of lynching.

It was as disgusting as it was unbelievable, and I write this as a middle-aged guy who grew up in the deep south of the U.S.

Boren acted quickly, and correctly.

Reactions were interesting on this one.  People have been impressed with how quickly Boren acted.  Here’s one example (and I emphasize, example… no endorsement or disparagement implied):

Now, this tweet is an honest expression that arises no doubt out of many kinds of frustration with prior examples of foot dragging in the face of such decisions. However, look at the words:  Awe, moral, steadfast.   Wow. David Boren had the easiest moral decision to make.  He threw a couple of ignoramuses who just might be racists off the campus of a university, and he shuttered a student organization that had clearly propagated the chant and the mindset to deliver it with impunity. We are in awe at the morality of his decision because it’s unusual, but shouldn’t confuse that with hard. 

Example 2:  When personal resource tradeoffs are viewed as “hard.” 

Also last week, Google’s CFO, Patrick Pichette, announced his resignation with a candid and interesting memo.  The gist?  It’s time to spend time with family. I get that. I also applaud the tone of the memo. But, it has been, once again, interesting to see some of the reactions to the announcement.

The language:  Honest, refreshing, and heartwarming.

Let’s be clear, the choice to leave a high profile leadership position at one of the world’s “great” companies to spend time with one’s family may be a tough one for a given individual.  But, what we are seeing is simply a guy making a different choice in life.

He has made a fortune as an executive, has watched his kids leave the house, and has had an epiphany that he just might need to allocate his resources (read that: time) differently before it’s too late.

differently

Perhaps, unusually.

But this isn’t a “hard choice.”

We hold up people making “unusual” choices as if they are heroes, and confuse “unusual” with “hard.”

Perhaps these are roads less traveled, but they aren’t “hard” choices in the traditional sense of the word.

What hard choices really are

Hard choices are more like:

– Do I make payroll or pay the bank?

– Should I send my last $20 to the power company or the water company?

– Do I quit my job to take care of my sick relative?

– Do I leave this abusive marriage?

– Do I blow the whistle on corporate or executive malfeasance, or just leave?

– Do I really need to go to the doctor to get this back pain and cough figured out?

– Should I opt for treatment, or for quality of life?

Those are hard choices.

See what I did there? Hard choices are about choosing between two different forms of pain.  There is no clear outcome.  Hard choices come where there isn’t enough to go around, or there isn’t a clear moral, ethical, or [insert standard of judgment here] win.

Choosing between two different forms of pleasure or choosing to do the patently right thing may sometimes be difficult, but it’s not a “hard” or “moral” choice as the implications tend to get noted.

Let’s not confuse the notion of opportunity cost with the notion of making really hard choices.

I write this because I have personally failed in making this distinction too many times.

How this applies to the world of business leadership and this blog…

Somebody reading this is facing a dilemma, and they are posing it as a “hard” choice to themselves.  It might be the dilemma of leaving a toxic culture or relationship, or taking a personal risk to make a big strategic move on behalf of the themselves or a company.

I encourage that person to reflect on the choice in, perhaps, a different way:  Is the choice hard because there is no morally or painfully clear outcome, or is it hard because doing the morally clear thing is simply difficult?  What happens if you don’t make the choice?

It’s important that we avoid confusing clear but painful decisions with truly ambiguous “hard” choices.

This matters in business, and it matters in life.

One Habit to Create Action From Every Meeting

By focusing on three simple post-meeting reflections, anyone in a professional environment can drive for better action orientation…

I wish this post was based on a blindingly original insight about how to be action-oriented.

It isn’t.

Instead, it’s based on a blindingly effective one.

The situation

I have walked the halls at dozens of companies over the years.  I’ve observed that one of the most pernicious yet obvious problems of strategic management at organizations large and small is the inability to drive action from meetings.

Some organizations I have been around have highly structured, up front requirements for meetings…They include things like lists of “desired outcomes” or “purpose and process” or “meeting objectives” written into the meeting agenda.

Those things can help.

Still, even those companies with strong meeting discipline struggle to avoid the “meeting to meet” habit that can come up.

Over the years of working on relatively ambiguous strategy and operational issues, I’ve found one leadership habit that has allowed me and a lot of my teams to go beyond objectives and process and toward a more action oriented approach to work.

It works in concert with good meeting planning; and leads to even better meeting planning for the next day, week, and beyond.

The habit

The habit I’m talking about is a 5 minute post-meeting reflection on most every professional interaction.  It focuses on three elements of action.  They are:

1. The insights gained in the interaction.  You just met for an hour.  What did you learn?  Those insights may be about facts presented and discussed, motivations of different parties in the interaction, or interpersonal dynamic in the room (or, sometimes, not in the room when unhealthy things like backbiting come into focus).  The focus on insights is a focus on what I learned.

2.  The implications of the insights and of the meeting overall.  It’s not enough to know what you learned.  You have to know what it means in the context of your organizations or team’s macro-level agenda, the path of work that you may be following, and the objectives of the given meetings.  Often, studying the implications of a meeting brings you to drastically alter course on objectives, agenda, and problem-solving approach.  The focus on implications is a focus on meaning.

3.  The next steps implied by the insights and next steps. What actions will we take based on the things we learned and the meaning that they bring to the problem solving approach? The brief reflection on next steps in light of the insights and implications drives action orientation. It drives it–more importantly–based on the facts on the ground.  Many professionals are great at putting the next steps they think are going to come out of a meeting into the meeting agenda.  I’m saying that the next steps should be written on reflection, not strictly based on the agenda.

That’s it:  Insights…Implications…Next Steps.

Those three reflections, done personally or in team format for maximum of 5 minutes after a meeting, can drive toward more effective action in most any environment.

The more ambiguous the environment (factual, interpersonal, strategic, etc.), the more useful these reflections.

Parting thought

I received a part of this habit many years ago through good coaching from a manager early in my career.

I don’t see it as some groundbreaking insight.

I do see it as a way to increase speed and effectiveness in most any professional environment.

It is fundamentally action oriented…

But…

It requires a leadership approach that is grounded in vision and a hypothesis about direction and context.

If you have that, then Insights, Implications, and Next Steps will allow you to gain more from every interaction you have.

Try it out.

When Enough is Enough…

Know how to really know when to say when.

Last week, I posted (here) about grace as an under-appreciated leadership trait. Given the very positive response to the topic both online and off, I thought it timely to discuss the other side of grace.

I’ll refer to the other side of grace as judgment because it is a term that is applicable across disciplines and into the professional realm. Some might say that the opposite of grace is justice. I won’t quibble with that interpretation; but justice implies an abundance of objective truth, and judgment implies an abundance of ambiguity.

The business environment offers far more ambiguity than truth.

So…Judgment.

Get your thinking cap ready for this one. It’s bit of a climb, but there’s quite a view.

First, an anecdote.

Recently, pundits and fans expended a tremendous amount of energy on the NFL’s Ray Rice domestic abuse incident, and rightfully so. While there is plenty of nuance to the discussion, one thing became clear: Once video of a grown man striking his soon-to-be wife with enough force to knock her unconscious became public, it was enough.

He was fired and roundly vilified.

The NFL’s Neanderthal and perhaps cynical decision processes aside, the case of Rice’s dismissal is a study in decision making.

To wit: Plenty of people can logically argue that grace in this instance might be merited. Mr. Rice has been an upstanding citizen and model representative of his NFL club (until he beat his significant other…that is). In fact one need not look too far to find plenty of people blaming the victim and justifying Rice’s actions as forgivable if not acceptable.

Others, particularly those in higher profile positions in the professional community, know the score. They know that one highly deviant data point is all it takes. When a person breaks a social contract in such an egregious manner, the evidence is sufficient to pass judgment.

The application of evidence, from the mundane to the shocking to the stealthy, to judgment and decision making is what this post is about.

When is enough…enough?

We deal with ambiguity in all sorts of situations. How do we know when to go full speed ahead with a plan, when to cut ties with a boss or business partner, or when to at least alter approaches with others based on the evidence we see?

Most of us want to give people and plans the benefit of the doubt… Some of us do it to such an extreme that we lead ourselves into professional peril or, worse, purgatory. Grace for grace’s sake. The benefit of the doubt as a rule vs. an option.

When do we know enough to make a decision?

The answer? When we see one or two powerful indicators, or many, many subtle ones. The art is in knowing the indicators and their strength and in avoiding errors of intuition around them.

I’ll explain that in a moment.

Probabilistic thinking, when applied to situations at home and work, can allow you both to give the benefit of the doubt AND to maintain a meaningful level of decisiveness in the face of ambiguity. The concepts in this post are just as applicable to human relationships (both personal and professional) as they are to strategic plans.

Let’s dive in.

The Foundation:

Depending on your disposition, you would have either been fascinated or bored to tears if I went into detail on the foundational subject matter for this post (in short: Bayesian Inference); but others have done it better than I can. So, I won’t. I will give a short overview instead.

The basis for the rest of this article is a formula for probabilistic thinking known as Bayes’ Rule and a method using it known as Bayesian Inference. I’ll work with a slightly bastard interpretation of both. For those of you who know better, bear with me to the end.

Bayes’ Rule was formulated by a man named Thomas Bayes…a thinker ahead of his time (and behind his own thinking, some would say–he never published his work). If you have no idea what Bayes’ Rule is, you might study it elsewhere (links to good, popular/accessible summaries are out there. Here is one).

Bayes’ Rule is a formula for evaluating the impact of evidence. It is the foundation for Bayesian Inference, which is a process that provides a quantitative method for combining new evidence with prior beliefs–for “objectifying the subjective.” It is, at its most simple, a formula for taking:

  1. A “prior” hypothesized probability that something is true or false–“I’m 80% sure Johnny has ADD.”
  2. An observation that provides evidence (the “test” –> “Johnny sat for 30 minutes reading a book.”)
  3. And a set of 2 conditional probabilities based on the prior assumption and the observation (1. “If Johnny has ADD, there’s a 5% chance of Johnny sitting still that long.” and 2. “If Johnny has no ADD, there’s a 60% chance of Johnny sitting still that long.”)

These things come together to create a “posterior” probability that the hypothesis is true. The formula looks like this:

The term “P(A|B)” is the posterior probability that A should be true given that B was observed. Enough said, right? To make it simpler for the practical uses I’ll put together later, the calculator I’ll use (here’s an online version) looks like this:

Based on the posterior probability that Johnny has ADD based on this test (the green box, which is now 25%, down from the prior of 80%), Johnny’s parents can rest a bit easier.

If you are still with me, you are wondering “So friggin what?” Right. Well, this little primer is necessary because the power of Bayes’ Rule in your everyday life is real. It’s a way of updating your thoughts on a strategy, a relationship, a bet you want to make in Vegas, and any number of other things, by just applying evidence and judgment. And it doesn’t require you to sample forever in order to increase or decrease your conviction.

More importantly, it’s a way of battling a sympathetic and highly anchored intuition. Almost all of us have it. For example: I’d bet you dollars to donuts that Johnny’s parents, when asked what their “posterior” should be after the observation above, might update from 80 percent to “oh, ah, about 60 percent.” The reality was a fraction of that (25%).

Your intuition isn’t great when it comes to judging the meaning of highly deviant events or behaviors, and that can cost you. It can cause you to write people off based on a bad streak when it isn’t warranted, or it can cause you to be far, far too forgiving to someone or something (like a plan) that looks nice but isn’t performing.

Thus…Bayesian Inference.

Constant updating with new information can make you a better professional (and poker player), and frankly allow you to live a better life.

But…How?

Let’s apply it to a situation like the NFL’s with Ray Rice.

Case 1: Ray Rice and Firing Decisions

Take the Ray Rice example. Imagine you have a high profile employee in your organization who does as Ray Rice did. There are really two considerations that come into play in a case like this. Call them Reputation and Values.

  • Reputation: Given the evidence available, prior experience, and the profile of the person, what is the likelihood your organization can weather the reputation storm?
  • Values: Given the evidence available, what is the likelihood the individual’s actions could be reconciled to your organization’s values?

The NFL, at first, applied the reputation question to its calculus; and it looked something like this:

Round 1: Evidence available was an ugly video of Rice dragging his fiance out of an elevator car. Ugly, yes, but who knows what happened in there. Right? The NFL has weathered many, many of these similar storms in the past without indefinitely suspending a player, so experience was on Rice’s side. The NFL took the intuitive view that Rice wouldn’t hurt its reputation because his actions were on a continuum of behavior. Bygones and all that. 2 game suspension.

Then? Video of the actual incident leaks. Woah. A firestorm. What happened?

Round 2: Well, let’s consider the values case, which is what the NFL was ultimately forced to do after video of Rice actually cold-cocking his soon-to-be-wife comes out. It results in more of a binary conclusion. Here’s a simple calculation based on the hypothesis that “Ray Rice is aligned with the values we espouse.”

See what happened there? A guy punches his fiance, and suddenly there’s no way he can represent the values that some people expect the NFL to protect (simple things, like “don’t beat up your girlfriend”). Rice goes from “model citizen” to “persona non grata;” from a 2 game suspension to fired with indefinite league suspension. It’s not a continuum, it’s a cliff.

Keep that in mind: Powerful evidence deserves a powerful response–a cliff, not a slope.

A case of an employee filmed publicly beating his significant other is probably too egregious and easy for most leaders to judge. It’s pretty much binary. Still, cases of legal or moral misconduct and how we handle them hold the mirror up to us in ways that few other cases do. The outward appearance of when enough is enough for you as a leader or follower reflects on your morals more than you’ll ever know.

What’s the equivalence point between grace and judgment when it comes to an employee’s misconduct? You have to make that call, and I’m offering one set of tools. Even the most “pure as driven snow” of ethical leaders probably has an expense or two that could be called into question even if just via poor recollection (let’s see, was that 15 miles to the airport or 18…?). In the case of small deviations, it takes a lot of them. In the case of big ones? not so much.

Let’s move the cases a little closer to issues you probably face in your workplace.

This is where these approaches get juicier.

Case 2: The Change Leader Who Doesn’t

People are keen observers of behavior. When a leader declares a change, and doesn’t change behavior, people know it; even when the leader INTENDS to change. Intentions don’t matter. Observations do.

Let’s say a leader declares a tremendous new initiative for his organization that is going to require all parties to think and act differently. Problem is, his behavior reveals no real substantive indication that anything has changed.

Some people will say “yes, sir” and attempt to implement change.

Others? They will assess the conditional likelihood of change given their observation of the leader. They won’t necessarily use math, but if they did… Applying Bayes’ Rule, it goes something like this:

Situation: I’ve been told by my leader that things are changing.

Prior Probability of Real Change: Let’s say the organization has been quite good at implementing change, so 60%.

Observation of the Leader: Once he announced the change, my leader does nothing to reinforce or role model the change (probability of observing this given real change? Let’s say its 10%. Probability of observing this given no real change is actually going to happen? Let’s just say it’s 90%).

The calculator looks like this:

See how easy that was? We go from an announced change effort that had an estimated 60% chance of success to a quick, mathematical assessment that change is only about 14% likely to happen given the leader’s lack of change.

In short? Why bother changing? Nobody else is. This from a single assessment of the actions of the announcing leader.

By the way, this gets worse the more case history there is. The more “flavors of the month” get launched and abandoned, the more fatigued and rational people become about change. “Going through the motions” and “why bother” mindsets are real things.

Case in point: If I had started with a 20% likelihood of real change as my prior estimate, the calculator outputs 2% as the posterior probability.

Yeah, that’s right, if you are bad at implementing change, people may qualitatively stop believing you; but the reality is that their cynicism is justifiable with numbers.

Such assessments show why role modeling by leaders is so critically important in transformational change environments. While people in the rank and file won’t typically do the math; they will, in most circumstances, read the clues. The math just reinforces it.

If anything, in my experience leading change, I’ve observed that people get on or off the bandwagon quickly based on their assessment of commitment and consistency of senior executives in charge of the change in a fashion very similar to that presented here.

Let’s look at another case you might find familiar.

Case 3: The Stretch Role

The age-old question of when a person is ready for a promotion can be tackled with a Bayesian approach in order to avoid “has-to-have-been-there-itis” where nobody is good enough for promotion to a role they’ve never held before.

Let’s say you have a budding manager who wants to step into a more senior role. What do you need to see from her in order to gain confidence in placing her in a stretch role? Pick a few triggers and use them as tests.

Maybe the triggers for her to be considered ready for the stretch role are (keeping it bland and general) organization, acumen, and foresight; but all people have some doses of each of them without being ready. So, how do you handle it?

This is where the compounding or iterative approach to Bayesian Inference matters. The “Posterior” of your first test becomes the “Prior” of your next. The analogy here is a poker player updating his assessment of his probability of winning as each card is played.

Let’s say your “prior” probability is 60% that your charge will be ready for the stretch role, but that you really need to get to 80% to pull the trigger. What do you do? You keep track of how she does on the “trigger” criteria.

So, you use the calculator in an iterative way this time…

Reading from left to right, you can see that you’d be justified in placing the person in a stretch role (85% confidence) after observing the confluence of 3 observations on the triggers. The addition of evidence for organization, acumen, and foresight support the decision. This is overly simplified, of course.

There could, in turn, be a column here for evidence that is contravening, and it would be factored in. That’s right: The iterative power of this mode of thinking is real; and it works in both directions.

Let’s have some fun with one that demonstrates the bi-directional nature of Bayesian Inference along with the asymmetric power of different types of observations.

This time I’ll use an unpleasant but all too common situation.

Case 4: The Asshole*

Let’s say you establish a “No Asshole” rule in your life. Perhaps this means that you will do you best to either remove them from your team or, failing that, remove yourself from contact with them.

Some assholes are easy to identify (in a Lloyd Christmas kind of way, they’re obvious). But sometimes, especially in a professional setting, you have to figure out when enough is enough through evidence and observation. The issue is this: Assholes can act like good people at times–sometimes even better than good people. They can be charming, or attractive, or smart and polished. But, deviant behaviors stand out.

I’ll demonstrate.

Imagine a new colleague comes into your organization. Let’s say that your No Asshole radar is completely inactive. They might be an asshole, but you see no reason to think so. You assign a 10% chance of asshole-dom at the start (perhaps the base likelihood of encountering one of these animals in your professional experience). Then, over the course of six months, you observe the person being actively deceptive, politically pitting people against each other, backbiting, and bullying.

Taken individually, these actions could come from anyone. Even a great executive could backbite once in a while. For that, I’ve used 10% to 20% as the probability of a “bad day for a good person” in the “Behavior|Not an Asshole” line below. But, as observations mount…it becomes clear:

The person is an asshole. 100%.

Get away.

But wait, you say? They are nice, have a warm smile, have charisma, are active in the community, and are great with their family.

That’s the issue, so are people who aren’t assholes.These aren’t deviant behaviors like the first set of observations, so they really don’t count for much. It’s the old “I’m just an intense person sometimes” or “my job requires it” shibboleths that assholes like to trot out. The person is already over the cliff. Statistically speaking, adding in nice but common behaviors has no power in the assessment.

All the goodness in the world can’t overcome a multitude of highly deviant behaviors that tag your colleague as an asshole. Find a way to get away and preserve yourself and your organization.

Here’s why this matters: Outlying behaviors are huge signals, and should be taken as such. In-lying behaviors (like smiling and acting nice, for instance) are actually not all that big a signal. Even the biggest assholes in the world smile and act nice frequently, just like “normal” people. It’s simply a posture–like crossing and uncrossing one’s arms. Observers of actions know that it’s much harder to hide deviant behaviors over the long run.

This is why true acts of deception and bullying, especially within a purported culture of integrity, should sound the alarms…now…loudly. Enough is enough.

So What?

It all comes down to this: When considering evidence in order to make a judgment or decision, a series of small signals can add up to a lot of conviction, but it takes a lot of time. A single, clear, outlying signal can remove any doubt, even in the presence of small signals to the contrary. When it comes to judging people’s actions (like in Case 4), it’s a cliff that can’t be walked back up.

After the presentation and consideration of some types of evidence, no amount of earthly grace is indicated.

Here are 5 practical ways to apply this kind of thinking everyday:

  • Have a point of view going into any interaction, particularly those with significant ambiguity. Be vigilant. And, update your point of view as you judge events and actions, to the good and to the bad. Your “posterior” estimate of reality is what matters.
  • Place checkpoints on strategic plans that call for evidence based tests of whether the world is what you thought it would be. Update!
  • Hold performance reviews with people that allow you to mutually update your understanding of how things are going and ideally to steer away from misunderstandings of performance or inference. Get intentions out on the table to match with actions.
  • Remember that your actions are what people see, not your intent. The best thing about using Bayes’ Rule is that it relies on observation and evidence. The worst thing about it? When others use it. You can’t weasel your way out of being an asshole once people are onto you and get over their tendency to let you slide.
  • Tolerate, but only to a certain degree, bad behavior. That goes for bad behavior from your superiors or from your subordinates. Everybody has a bad day. A bad day is not an indicator of a bad person. A single data point can’t indicate a trend, but it can indicate a probability of the underlying personality, which has been the point of this post.

A friend recently related to me an adage from his years in the U.S. Army: “Once is happenstance, twice is coincidence, three times is enemy action.” Such is the type of thinking I’m encouraging here, with the slight adjustment that sometimes, once is enough.

Grace is a critical element of leadership, except when it’s time to use judgment. Using the concepts in this post can allow you to know when enough is enough.

Now, go mind your posterior.

* I would like to thank Stanford University professor Bob Sutton for popularizing the notion that the word “asshole” has no polite substitute. I am using it here as professor Sutton would. If you have not read it, Sutton’s book The No Asshole Ruleis worth a look.

Geoff Wilson hopes that this overlong and somewhat technical article did, in fact, provide a view that was worth the climb. Offer your comments or critiques below or offline.