In the realm of business, there is a tendency to believe that every decision must be the result of a rational and explicable process, that is based upon a proper review of all the essential factors.
Would that it were so.
Many large bureaucracies and corporations appear to be managed on the basis of avoidance of regret or blame. As long as one does not stand out, one cannot be blamed or held responsible for an outcome- hence the tendency for “herding” in much of the financial industry. Similarly, what are actually emotion-driven decisions (the “gut” gone rogue) are rationalized ex post facto, because that is a classic human behaviour. Impulses become “decisions”.
And yet, ironically, if an entity miraculously, and after huge effort, becomes completely rational and efficient, it runs the risk of becoming too predictable in its behaviour and thus vulnerable to being out-competed and ultimately superseded by others. “Keep them guessing” is actually quite an effective tactic. So, there is a paradox (which may also have ramifications in the realm of Artificial Intelligence) in that human beings, no matter how rational they may appear or claim to be are somewhat random in their behaviour and decision-making; and if they become too rational and predictable they become more vulnerable.
This is not to excuse “corporate decision-making” that has no explicable basis; but rather to point out that, given that almost all corporations are still formed of individuals, with their own prejudices and biases, one should not expect, nor even desire “perfection”.
What then is any self-respecting CEO to do to reconcile the several contradictions? Should one be orthodox or heterodox?
If one looks at the nature of really successful organizations, they tend to have a structure, business model or culture which differs from that of their perceived peers or competitors, and which is focused on the longer- rather than the shorter-term, while also being adaptive. In many publicly-quoted businesses, the so-called shareholder value movement is actually detrimental to the business’s sustainable performance, because it tries to place constraints on the management of a business, and can lead to what amounts to sociopathic, or even psychopathic behaviour on its part. Ultimately, value is destroyed, not created.
So, the thoughtful CEO has to create a structure in which the rational, process-driven, more formal approach to decision making is combined with a less structured more creative one, while managing the inevitable tensions that will arise, as different interests compete for dominance. While structure matters, flexibility and adaptability are essential. Of course, the less confident CEO may feel the need to call in the consultants to “validate” his or her approach, which ironically almost invariably leads to the outcome that should be avoided; namely, conforming to the consultants’ belief that “their” approach works, because it is “best practice”- thus creating an unfortunate “orthodoxy”.
At Awbury, we believe that the only real test of a particular approach is whether it demonstrably creates sustainable value; and differentiation from the crowd. We have built a business on being heterodox, not orthodox; because the latter approach has a tendency to produce “orthodox”, or mediocre outcomes.
The Awbury Team