Life As It Goes By

Recently, I have been put into a position to make some tough decisions. Though I have yet made any, I try to recall all that I have learnt from my business school not too long ago. It was there when I was reminded of the word “decision”.

The meaning of the word is clear and straightforward. It’s not difficult to draw a reference or give an example. Since young, we are already trained to make decisions: what color or food we liked, what subjects to take up and which vacation to go. Some of them (decisions) were easy. Some were really tough; even until today I still have no clue of how to decide. Then, there is this issue of right and wrong decisions. The only way to judge is to see what is the outcome of the decision. If there is no outcome or it’s impossible for you to find out, then you would be kept in the dark forever.

Let’s say you know the outcome. It does not guarantee that a judgement can be made. Especially when your decision plays only a small part of the overall outcome. Even if your decision is a bad one, the result might still be the same. Sometimes, the outcome came too late before you could learn from that bad decision and avoid making the same mistakes. This could also be that the decision has to be reached in a short period of time, even in split seconds.

Factors that affect decision making can be: emotions, pressure,impact of the decision,  knowledge & experience. There could be more but I personally feel these are the more critical ones. There is a common belief if you are emotional, you can make a good decision. You always need to be calm first. If you are under pressure to make a good decision, naturally your decision might be skewed, depending on the type of pressure. Example, if you are under the pressure of time, you would most likely pick a decision that will buy you more time (not scientifically proven, at least to my knowledge). If you face peer pressure, you might succumb to their demands and make a decision based on that.

On the other hand, if the impact of your decision matters little, you would probably decide without a second thought. If it turns out to be a bad decision, it is highly possible that you have overlooked the impact of this decision. Knowledge plays a part too. An acceptable example would be in workplace. If you are told to decide, say …, the color of the product. You can then make a decision based on your knowledge of your customers. You may debate that it’s instincts but I still prefer to use the word, “knowledge” because it’s similar to how you would explain to your colleagues on your “instincts”: you just “know” it. Of course, some of that decision may come from your past experience with the customers. Knowledge and experience are 2 different things though they are connected. Just like concepts and practical applications.

Back to school, I think of 3 approaches. There might just 2. You’ll decide. One concept I can remember is the multiple criteria decision making. You are supposed to list all the criteria for that decision and grade them with weightage and probability. A score for each criterion is produced as graded. This then gives a clear picture of which path is desirable . I know I have simplified the model here (there should be steps before such as creating paths for each criterion, so that a tree diagram can be visualized with the options for the decision as endpoints) but the gist of the model is to allow the decision maker to be unaffected by emotions or pressure. There might still be some pressure coming from your peers on giving scores to each criterion but at least knowledge and experience can be used to debate or qualify the scores (assuming there is no dominant power in the group).

Another model comes from the IT industry. Ever heard of dashboards? Yes, you put metrics all over your company operations and connect them to your company IT infrastructure, so that the executive on top can grab a snapshot of the company anytime and anywhere he or she wants it. Due to the accuracy and clarify of the figures and numbers, a better decision can be made at the executive desk. This no doubt comes at a price: it’s expensive to build up such systems and take a long time to fine-tune and improve. Conceptually, it should be the way to go for all companies.

Lastly, we learnt about a tool called scenario planning. Though it is more commonly used for strategy making, I feel it can be applied in decision making. Depending on the impact of the decision, you make scale scenario planning accordingly. Fundamentally, the tool is used to help you to understand the issues and uncertainties involved. They might be too much for you to handle. So, you should forget about them for a while. Keep them at surface level. Now, try to go by another approach. Think about what are the main forces that drive these issues or uncertainties. Then, try to group them so that you have less problems to dealt with. Then, consider carefully which has the highest impact and plausbility. You should be interested in the 2 groups that has the highest impact and the lowest possibility of happening. Then, you can formulate 3-4 scenarios based on the contents of these 2 groups. You can plan for the worst scenarios and something normal (not a must), so that you can be prepared for the worst condition and check whether what happens next is close to any scenario. If you are lost somewhere along the way, that’s fine. It’s not something easy and you need a lot of focus and probably assistance from the professionals. It’s not really rocket science. It’s a way to structure your thoughts and make use of your knowledge and experience in the industry and society. The projection can be for 5 to even 15 years. More could overkill. Some companies do a new exercise after every 5 years. Anyway, to make an important decision in a not too short time, you can try to shorten the process. The main point, I think, is  to prepare yourself for the worst scenario and lay the path down in your head to check if things are really going the way you predicted and then decide how you can act at each juncture.

If all these sound more troubles for you, then don’t sweat it. Just forget about everything. Gut feelings, as Jack Welch would tell you, prove to be effective as well. It is equally important that you have guts in the end to execute your decisions (not really linked with gut feelings) and to live on the consequences of your decisions. So don’t procrastinate, make some decisions (apply to me as well)!

To be frank, I was and still am hit down with cold, sore throat and a bit of fever. They always come together, don’t they? I have fought them for the past 2 days and today I have finally succumbed to visiting a doctor. I believe I did well. In fact, I have never won a battle with sore throat. It makes you cough so hard at night that you can rest well to combat it. And worse still, its companion of cold and fever will give a harder time. Sometimes, you just forgot how sick you are when you look at the speed of your hands in covering the mouth, nose and every other part of the body that is feeling cold.
I am proud because I manage to survive my weekend class as well. To my surprise, my team (not that I am playing a dominant role here) emerged champions. This will be what I would like to talk about today.
Heard of this game, Topaz? No no no, it’s not a website for games, not the silicate mineral and definitely not the 1969 movie. Don’t blame you though. It’s first time for me as well and it took me a hard time to find it online as well. It ended up to be from a company named Edit 515 Ltd. Apparently, the company decided to do some website (www.edit515.co.uk) “maintenance” over the weekend and there’s no hints available while we play the game (nothing much as well though now that it’s up and running).
This is a management game which allows teams of 5 to compete. Each team acts as a company with roles in Marketing, Operations, HR (that’s me!), Finance and the Managing Director. Every team or company starts off with the same data and each team shall decide what to do next to improve the situation in the next quarter. There are only 5 deciding quarters before the champion is decided. The one with the highest share price at the end of the 5 quarters will be the winner. I must say the amount of data is handful for an amateur or even trained management student. Probably not for practical managers. But the rules and key indicators could be slightly different from the real world, so there are still some difficulties involved. To make the game more realistic, the outcomes of the data input by each team may not go totally in line. For example, if there is a request to purchase 2 machines in the quarter, there may only be 1 machine available. Based on quite a handful of formulae (I believe), the data from each team is calculated with the effect from one another and some injections of the surprise elements. But nothing drastic is observed and this keeps the game real.
So, the teams are basically competing with one another on resources such as people, market shares for the 3 different products in 4 different markets and share prices with the pressure to give dividends in the 1st and 3rd quarters.
We started off well by topping the others with the highest share price due to some tweaks we made on the marketing front as well as giving reasonable but good dividend. In the background, we are jumping up and down to solve our production problems to meet the required backlogs. We purchased 2 machines and only got 1. Backlog is still high. Marketing is complaining. Operations and me are at his mercy and the MD and Finance are at ours. So, we went on to buy the second the machine. As the machine will only arrive 2 quarters after purchase, we have to hire more and that’s where I have to come in. Oh shit! Job market has been shaken by competitor who raise wage by 50 cents per hour! No wonder my salespeople are leaving. I have no choice by raise wages across the board and try to recruit more. And then, I made a mistake. I recruited twice more than projected, having misunderstood the rules of employment. But I think it was a good mistake. It was enough to sustain the growth we need in boths sales and operations.
So, to cut it short, our share price dropped in the 2nd quarter and came in 5th place as our backlogs still creates problem for us. When the machine arrives in the 3rd quarter, we were in the 2nd position and with better financial position. We were fighting to purchase the 3rd machine but it’s dividend time and our overdraft amount is running low. We have to forgo the 3rd machine and stick to the 3 work shifts (part of the reason why my people are still leaving). The 4th quarter turned out to be a beauty as our share price rocketed to 172, beating the worst company by 117. We expected it as we knew this quarter (based on previous trend) will be the quarter with the most purchase. This is also when we have 8 machines and the most staff. But we still have backlog!! This still keeps us (Ops and HR) restless. We are already not having the largest market share in 1 or 2 products and half of the markets but there are still many orders to meet. And most importantly, it is time for final decision. So, we decide to hold our balls and give our best dividend payout and keep current staff strength. We raise our prices to keep our orders within what we can produce. FInally, I push for a raise in management budget (though only about 8 or 9%).
It turned out we survived the competition with the lecturer’s pick (team 5) falling behind to 5th position. We kept our reserves highest among them and we maintain the demand with less backlog. But our share price plumment 156, edging the seconds by 3. Maybe we have paid too high a dividend but our high reserve saves our ass.
The debrief was really good as well. We got to learn about what happened to the other teams and realized there are many ways to tackle the issues. There is always a risk in each decision. Some took it lightly and paid for it. Some are too adventurous while some are too cautious. Finally, there are also some where things really go haywire, are fighting their lives to get things back in shape. And it just gets worse.
On my part, I learn about how decisions are made in the management team. How these data are so critical and how scary they can be. When the panic button is pushed, many wrong decisions can happen and when everyone loses their instincts and their ability to stand up to defend their decisions, failures are not far away. And for those who are chasing, there is always an added pressure. This pressure will lead to the above situation and a supposedly good performing company will run into troubles of its own.
If you are interested in more of this, you may also visit the Global Management Challenge (GMC) website (www.worldgmc.com) for the annual event, held in April. The game is also designed by the same group of geniuses, just that it is more tailored to the current needs of the business environments.

(dated: 10/12/2007)