Indecision and Analysis Paralysis

I received the following question from a reader this week:

“My manager is a constant procrastinator, who seems to always fail at making decisions. It’s not that he makes bad decisions, he simply won’t ever make any decision. Whenever I approach him with a suggestion, he always wants me to go back and get more data. What do you suggest?” – Amy P. from Cincinnati, OH

I feel like Amy is not alone out there, so I decided to post my reply to her in this blog. Here is what I shared with Amy from Cincinnati:

Amy, wow, what a great question! If it’s any comfort to you, please understand that the situation with your manager is not unique. (I actually don’t take comfort in knowing that, because it means there is a rash of inaction stifling corporate America.)

It sounds to me like your manager could be suffering from a number of ailments, including unclear goals, low self-esteem and very little business acumen. While all of these present a great oppotunity for leadership development and management training, I can’t really teach business acumen via an email reply, nor can I deal with your manager’s “mommy” issues; I can, however, address his inability to understand your company’s goal (singular) and apply that knowledge to decision making.

What is the goal of Microsoft? How about your local dry cleaner? What is Home Depot’s goal? Finally, what is the goal of your company?

If you think the goal of Microsoft is to create innovative software solutions, you’re missing the big picture. If you believe the goal of your local dry cleaner is to get your shirts cleaned and pressed, you’re not seeing the forest for the trees.

There is only one right answer for all four companies. What is the goal? To make money for the owners of the company. (Amy, this is something that your manager probably struggles to comprehend.)

All “for profit” businesses share the same goal – to give their shareholders/owners a return on their investments. While this may seem insensitive or unfocused, I assure you, it’s not. The fact that Home Depot sells lumber is irrelevant – and it’s certainly not their goal. Selling lumber could be Home Depot’s profession, industry or expertise; but it’s certainly not their goal.

Why is it important to so narrowly focus the goal on only providing owners with a financial gain? Because placing your attention on the most important aspect of your business provides you and your team simplicity in making management decisions. By understanding that the goal of your company is to make money for the owners, your manager can begin to weigh all decisions against this standard, rather than trying to assess decisions against some key performance measurement (KPM). There’s nothing wrong with KPMs – they tell you how you’re doing in specific areas of the business that, collectively, are meant to drive dollars into the pockets of the owners. However, we’ve all witnessed examples of companies chasing a particular KPM only to see net profits decline.

Amy, have you ever seen a situation like this at your company?

Was there ever a time your company worked hard to reduce some inconvenience like customer support hold times, only to increase labor costs resulting in slimmer margins?

(Feel free to insert your own KPM in that question, I’m sure you can find plenty of instances where you chased some metric at the expense of profit.)

The reason that unilaterally driving down customer support hold times in this question drove expenses higher is simple: it was unilateral. The changes made only considered the relatively minor issue of customer support hold times, while completely forgetting about the overriding goal of making money for the owners. We could achieve a zero seconds hold time for customers if we hired a thousand operators, but that would be too costly. There is an equilibrium that exists where we can maximize profits and minimize hold times, but I assure you, we will still have customers on hold.

Using the goal of making money for the owners – whether it’s increasing share value or providing better EBITDA – to help you make decisions is so simple, it’s almost silly. Here’s how it works: take any decision, situation, problem or issue you’re faced with and ask yourself this question: Does deciding to do “Y” lead me closer to the goal of making money for the owners? If yes, then do it. If no, then don’t. If you’re unsure, then don’t do it or go back and get more data.

More data? Are you crazy? My manager is awash in data. It’s why he never makes a decision. (At least that’s what I assume you’re saying, Amy.)

If this is how you reacted to my call for more data, then your manager could be suffering from the clichéd “analysis paralysis.” Why does he do this? I’m not sure, though I do believe that most managers who require more and more data and still never make a decision suffer from a lack of understanding about the true goal of the company. The only analysis necessary is this: does it make more money for the owners versus the alternative?

The real harm with analysis paralysis is two-fold: first, decisions are put off until they become irrelevant; and second, the cost of perfect information is too great to require it for virtually every decision you’re faced with in your first twenty or so years of management.

At the end of the day, someone needs to sit down with your manager and explain that there are no perfect decisions, and that if we do “Z” we expect to make “C.” Fortunately for you, Amy, that person is you. You recognize the problem and you are the person most likely to solve it. (You cared enough to contact me, anyway.)

Don’t worry, take a breath and do the following with the next issue: do a little analysis on what the company can expect if you choose “A” or “B.” Take the findings to your manager and provide him with a recommendation. Here’s an example:

“Mr. Manager, I analyzed our problem with ‘X,’ and I think we need to either do ‘A’ or ‘B’ right away. If we do ‘A,’ we can expect a 10% decline in customer satisfaction and a long-term hit to our profitability. If we do ‘B,’ we expect to see no change in customer satisfaction and steady profitability. I think we should do ‘B,’ wouldn’t you agree?”

The tie down at the end of that statement is an old salesman’s trick that should work for you. You are, in fact, selling your manager on the decision. If your manager still tries to pause for even a second, say something like “I really think it will hurt us to wait on this, ‘B’ is clearly the right choice, don’t you agree?”

I would be surprised if he didn’t agree.

Best of luck,