Hind-sight is not 20/20. Most people only remember the traumatic or the unusual. They often interpret yesterday’s data based on today’s understandings. “I knew that was going to happen,” is the classic response. We were uncertain then, and claiming less uncertainty now because we know the outcome doesn’t help us make better decisions when we are under uncertainty again. In fact, sometimes it makes our decision making worse.

The real question is how we decide when we are uncertain; when we don’t know the outcome. Any sort of analysis should include the level of uncertainty we had when we made the decision. It is possible to make a bad decision and have a good outcome. Likewise, it is possible to make a good decision and still have a bad outcome.

For those looking to improve their decision making, it is important to review and analyze past decisions and do it with a clear understanding of the conditions the decision was made in.

• How clear were the criteria for making the decision?
• What were the margin-for-error assumptions?
• What was the perceived level of urgency? Was the perception accurate?
• Did we see all the options? Were the options properly assessed?

Dietrich Dorner is a Professor of Psychology at the University of Bamberg and has received several awards for his research on decision making. He concludes in his book The Logic of Failure that analyzing your own decisions is a far better way of improving your decision making than taking a workshop on decision making!

I used to enjoy playing basketball and I got involved with a local team not because I was good but because I enjoyed the exercise. In one of the games we played our opponent had an extremely good player who had played professional basketball. I wasn’t good enough to get on my high school basketball team let alone compete with a former pro. But somehow I was assigned to guard the star player. He was taller than me, stronger than me, faster than me, and much more skillful than me. He was the Michael Jordan of our league and clearly had the attention of everyone on the court.

Unfortunately, because I was guarding him, I also had everyone’s attention. I was getting trounced. He scored effortlessly and at will against me. The pressure to compete was high and my only hope was to keep him from getting the ball. I made desperate moves and fouled him often just hoping to slow him down a little bit. We were obviously mismatched and we both knew it.

After the game I approached him and congratulated him on the win and specifically on his playing. I also felt a tinge of guilt for my sloppy aggressive play against him and part of my approach was to apologize for the frequent fouls. He very graciously complimented my determination and with a smile he acknowledged that in my situation, “the best you can do is get in the way, argue with the refs, and foul a lot.”

In the world of business I am seeing the strategies of “getting in the way, arguing with the refs, and fouling a lot.” Some companies are choosing to compete not by getting better at what they do, but by suing the competition, manipulating their customers, and juggling the books.

A few months ago the WallStreet Journal reported that some retailers were hiring full-time protesters to go into communities and organize protests against building a competitor store. These protesters would also initiate legal action against the competitor as though they were residents.

Manipulating customers is now common in the form of “price discrimination.” This is the practice of charging your best customers more rather than less. It relies on their best customers not finding out about the price that everyone else gets.

It made headlines when Galleon hedge fund manager, Raj Rajaratnam was convicted on all 14 counts of securities fraud, trading on insider information to get ahead. But the talk was about how the ruling would change how business is done on Wallstreet. Since when was it ever okay to trade on insider information?

Talent is hard to develop and takes time and patience; a price that most companies aren’t willing to pay. No wonder markets are being described as “hyper-competitive” with “cut-throat” competition. They are competing in the only way that you can when you don’t have talent; by “getting in the way, arguing with the refs, and fouling a lot.”

Timothy R. Clark writes a weekly column on business and has authored several books on leadership. I respect his work and enjoy his writing. But I have to take issue with one of his recent commentaries on how leadership is more important that management. “Leadership can surround itself with managers to be effective but it can’t be done the other way around.” He goes on to suggest that leadership is a virtue and management is a vice because leaders are the ones to change the world, change business and are the ultimate saviors of the economy. Managers are the ones who lobby for the status quo and get in the way of progress.

Back in the 90‘s my old boss, Stephen Covey was one of the first management consultants to draw a distinction between leadership and management as a way to illustrate the difference between two concepts:

1) efficiency and
2) effectiveness.

He used the analogy of climbing a ladder efficiently when the ladder is leaning against the wrong wall, which would be ineffective. Or efficiently cutting a path through the wrong jungle. He then taught that it was better to be going in the right direction inefficiently than efficiently going in the wrong direction. His advice was leadership first, then management.

Splitting the two concepts up was a brilliant academic device to emphasize the importance of strategic thinking to be successful. His book was called, The Seven Habits of Highly Effective People and taught the importance of effectiveness in business. It is important to note, that he never excluded management from the equation of success, he simply put it after leadership. In the seven habits hierarchy, habit 2 was the leadership habit, and habit 3 was the management one. Both play a distinct and vital role.

But separating leadership from management was too seductive of a concept to leave in the classroom. Business leaders and other authors grabbed hold of the notion and started to advocate the separation of leadership and management. Good leaders no longer had time for mere management. Their role was to be the visionary, to contemplate the larger meaning of the organization and the potential impact on the world stage. A leader didn’t have time to actually do anything. That’s what you hired others to do. Rather than leveraging their work, leaders started delegating their work.

Of course, thats when you started seeing accountability as the new crisis. If the work wasn’t getting done, or the organization wasn’t hitting its’ goals, it was management’s fault, not the leader’s. It is an “execution problem.” Now the lofty leader had to contemplate how to hold the managers accountable for achieving the leader’s goals. Success was credited to leadership, failure was blamed on execution (management). Even compensation started to reflect the “heads I win, tails you lose” philosophy. Roger Martin, calls this “The Execution Trap” and goes on to document the damage that the separation can do to a company (HBR August 2010).

But in spite of the rhetoric and consulting salesmanship, management is just as important as leadership. Good management is the execution of good leadership. Both are important. One is first, the other second. Leadership without management fails just as management without leadership does. And with all due respect to Mr. Clark, leadership can’t change the world unless someone is willing to do something!

I flew into a city that was a 2½ hour drive away from my client. Flights were extra expensive on short notice so driving for an extra 2½ hours to save $400 seemed reasonable to me. This was a week of work for a client that I know is very cost conscious and under a lot of economic pressure. Even though my work was a sizable investment itself, I felt like they would appreciate my cost conscious gesture to save on expenses.

I was right. When my office manager sent over the invoice and expense report they had looked over every inch and saw the savings. They were impressed and thanked me during a follow up conference call.

The trouble started after the expense report left the executive team and got into the finance department. Apparently there was a missing receipt for a meal at Arbys, a $6 value. They flagged it and sent an email notice to my office manager, Devan, rejecting the entire invoice.

The receipt was originally with the expense report but somehow after scanning them it was misplaced. No problem; the charge was on the company credit card. Devan got a copy of the credit card receipt and sent it over. Not good enough; the expense was rejected and the invoice with the reimbursement was held up again.

At this point, Devan felt like the $6 charge simply wasn’t worth the effort to re-engage the executive team and me over. But the misplaced receipt was holding up the entire invoice payment. He would have paid it himself just to get financial approval. But he was dealing with a strict financial manager determined to follow policy and hold the line.

Devan had no choice but to call me. I then placed a call to the executive team and the issue was resolved within a few minutes. They apologized for the problem but the irony wasn’t lost on them. Here was a well intentioned manager determined to hold the line for a $6 charge not realizing that it was being compared to a $400 savings on a project worth hundreds of thousands to the executive team.

I’m sure the financial manager felt like she was doing a good job holding the line on expenses. But a quick consideration of the big picture could have saved her some embarrassment from her executive team.

Jeff Jolly is partner and second in command of a company called Riser Media. They are a very successful marketing firm and because they are “right brained” creative types, I expect them to see the world differently. They do work for the Hollywood film and TV studios designing websites for some of the industry’s biggest hit movies. Jeff has given me lots of good advice on how to build my own firm so I have a lot of respect for his work.

We exchanged emails this morning and I noticed that he has for his title, “Storm Chaser.” He considers his role a problem solver for clients and removing road blocks for the people in his organization. I loved the title. For me, it conjures up an image of someone looking for problems to solve, tornadoes to unwind, and ways to make life more “sunny” for those who work for him.

Everyone is getting a new “C” title it seems. “Chief Talent Officer.” “Chief Strategy Officer.” Chief You-fill-in-the-blank Officer.” I have even seen a “Chief Remove Obstacles Officer.” But somehow, naming a Storm Chaser of the organization seemed like a genuine attempt by Jeff to communicate to his people that he is there to solve problems and remove obstacles for them. I like the title and consider “storm chasing” the role of a good consultant. I plan on doing some storm chasing of my own! Thanks for the inspiration Jeff!

Between 1893 and 1898 Joseph Pulitzer and William Randolph Hearst were waged in a commercial battle of circulation for their newspapers. The competition is a classic and spawned the term “yellow journalism” as a pejorative reference to how the newspapers competed. Rather than compete on the quality of their journalism, they started competing using sensational headlines, and making crime stories into “morality plays.” Facts took a back seat to entertainment and journalists would turn to dubious sources for their stories. Some faked interviews. Stories were used to generate self-promotion and sell papers rather than inform the public. Each in an effort to out do the other.

At one point, Pulitzer had a very popular comic strip called The Yellow Kid. So, Hearst hired away the creator and started running the Yellow Kid in his paper. Pulitzer, not to be outdone, hired someone else and continued to run the same comic strip in his paper. The papers then became known as The Yellow Kid papers, and came to symbolize shoddy journalism.

A professional is someone who can tell the difference between good analysis and yellow journalism. You see it when accusations lack evidence, when people are vilified and when innuendo supersedes actual behavior. Sometimes you see it in financial projections that simply confirm biases or when experts offer “keys to success” with no evidence or experience to back up their claims.

Decision making is hard enough under conditions of uncertainty. But it is twice as hard if you have to rely on yellow journalism information that may be twisted, hyped or even false. Whenever you hear sensational claims, with dubious sources, villainous stories, pseudo-science and a clear bias for self-promotion with profit over substance, beware!

Deitrich Dorner is a scientist that studies human behavior and decision making under very complex situations. In the early 90’s he developed a computer simulation of a city in a developing country and then asked participants in his study to run the city. He could then create complex problems for city managers and the computer would react to their decisions and show realistic consequences for those decisions. It was a revolutionary way to study how people make decisions and think through problems.

What he found was fascinating and formed the basis of a book, The Logic of Failure, that my old boss Stephen Covey endorsed. One of his findings was that when people are faced with complex and often conflicting data, the purely rational thinker is quickly overwhelmed and succumbs to irrationality. Ironically, the best strategic thinkers were not the smartest people. they were the intuitive people.

Several years later another group of scientists (Roderick Gilkey, Ricardo Caceda, and Clinton Kilts)were conducting a different kind of study. They devised an experiment that involved a scanner to track the electrical behavior of the human brain. They too were looking for insight into human behavior and decision making under complex situations. But they were approaching it from a physiological perspective; what parts of the brain are used when we have difficult and complicated decisions to make? They found that the best strategic thinkers are the ones that use “Emotional Reasoning” rather than intellectual reasoning to solve problems and meet challenges.* They, “suspend rational thinking rather than emotional thinking, which is contrary to the most common advice to decision makers.”

Both studies, and a host of others, show a similar conclusion: the best decision makers and strategists are not the rational ones!

HBR September ’10, When Emotional Reasoning Trumps IQ, and HBR December ’10, When Emotional Reasoning Trumps IQ Follow-up. Roderick Gilkey, Ricardo Caceda, and Clinton Kilts

The Logic of Failure, Dietrich Dorner, Basic Books, 1996