Thursday, July 26, 2007

The Role of Decision in the Enterprise, Part 2

Decision-making is like any other great process: Part science, part art. The science that goes into a decision, however, is quite the feat: Including probability theory, risk assessment, and information theory, just to name a few disciplines that go into something that each of us practice each and every day.

Whereas just a generation ago information was usually consumed in discrete pockets: Morning newspapers, evening newscasts, and perhaps hourly news on the radio, for instance. Today, though, the amount of information in our everyday lives is only limited by our willingness to ingest it—or block it from our lives. The Internet, for instance, has democratized the access to information: Everyone with news facts to present or an opinion to offer has an outlet to readily remove barriers to getting this information to the widest audience possible.

Information is essential to making decisions, right? Yes. The more information, the better, right? Not necessarily.

A man that understood the science of a decision was a humble British Presbyterian Minister that also dabbled in mathematics. Thomas Bayes, known best by his theorem—aptly titled Bayes’ Theorem—is a result in probability theory whereas an event that is conditional on another happening is generally different from the second event being conditional on the first. Bayes’ Theory explores the relationship between the two: Essentially, it informs us how to update or revise beliefs in light of new evidence dependent on experience.

Can we have too little information with which to make a good decision? Yes. Is more information better when making a decision? Not necessarily. Perfect decisions are made with the perfect amount of information—that is, not too much, not too little. One of the ramifications of Bayes’ Theorem is that too much information can exist and befuddle the decision-making process native to the decision maker. My current studies into decision making are towards the end to develop a practical and reproducible process with which a decision maker can come to make the perfect decision.

Practically speaking, the perfect amount of information may not be easily achievable, for the attainment of information is something that can change from moment to moment. Take my Battlemaster experience, for example. Battlemaster is a lightweight, text-based online game which is set in the period of the middle ages; the game is part roleplaying, part strategy. I began playing mostly for the strategy elements, but have participated quite a bit in the roleplaying elements as well. Each group consists of characters, created by players, in realms. Each realm has knights, lords, dukes, and four members that are commonly called the realm council: The ruler, general, judge, and banker. Each performs duties that are commensurate with what you might think they might be—the banker is in charge of the economics of the realm, for example. When my first character became the general of the realm of the realm of Eston, he co-developed a battle doctrine with his aide de camp. The Kane-McKay Battle Doctrine was the culmination of experience in combat, producing a construct for waging wars and winning battles that created more undefeated military commanders than any other doctrine that I have ever come across in the entire game, in all my years there. The first thing that the Doctrine emphasized was:

Combat is a fluid situation.

Strategy dictates tactics only loosely: Tactics are how strategy is adapted to the battlefield under the circumstances of the moment. As such, strong tactics drive good strategy, and vice versa.

In other words: While staying true to your principles—don’t budge on your ethics or morals—be certain you can adapt your tactics to suit the environment of the moment. Every element of warfare may be able to be predicted down to the minutest detail; however, the entrance of the human component into any military plan renders it fluid, possibly chaotic, and definitely entropic.

So, when making decisions: Be sure to make them with the understanding that they are rarely made in a vacuum. Decisions are most often made as part of a larger context that changes with each passing moment.

The Role of Decision in the Enterprise, Part 1

Be willing to make decisions. That's the most important quality in a good leader.
—General George S. Patton

What separates a rank-and-file member of an organization from a leader in the same? While most of the production and support staff have duties that fall within the category of drills—sequences of discrete actions which comprise a larger task. While these are typically things that can be learned and easily repeated instinctually, they differ from the decisions that leaders make by their very nature of not being what drills are: Something that can be repeated on a mechanical basis.

Not surprisingly, the power of the decision has historically been important in combat, just as it is in the enterprise. Think about the great decisions throughout the history of business:

· The decision of John D. Rockefeller to combine the multitude of Standard Oil companies into one “trust.” Not only did this revolutionize the oil industry in that day and age, it produced the world’s first billionaire, one of the world’s first multi-national corporations, caused the United States government to form “anti-trust” laws, and re-define the ways of philanthropy by a single man and his family. According to Wikipedia: Standard paid out in dividends during 1882 to 1906 in the amount of $548,436,000, at 65.4% payout ratio. A large part of the profits was not distributed to stockholders, but was put back into the business. The total net earnings from 1882-1906 amounted to $838,783,800, exceeding the dividends by $290,347,800. The latter amount was used for plant expansion.

· The decision of AT&T on January 8, 1982 to settle a lawsuit and agree to divest its local exchange service operating companies in return for an opportunity to enter the burgeoning Internet services business: “Effective January 1, 1984, AT&T's local operations were split into seven independent Regional Bell Operating Companies known as "Baby Bells." RBOCs were originally known as Regional Holding Companies, or RHCs. The ramifications? The telecommunications giant additionally became an Internet Service Provider and most of the companies that were divested eventually merged back into a couple companies—in fact, one of the divested companies acquired the parent company AT&T to become, once again, AT&T. The current AT&T has a market capitalization of $1.18 Billion USD.

· The decision of a small Seattle company to start selling cappuccino and espresso drinks instead of just purchasing coffee beans from growers and selling them as a premium product revolutionized the coffee house industry. The name “Starbucks” is synonymous with the word “coffee” and its variations (i.e. very high Top of Mind Awareness, what marketers like to call TOMA). In addition, the cash flows of Starbucks are so high that they can open a store in Great Britain once every two weeks!

· The decision of Jay Van Andel and Richard DeVos to expand from such business ventures as a hamburger stand, air charter service, and a sailing business into a company simply called “Ja-Ri” in 1959 that would later change its name to a concoction of the two words “American Way.” Millions of people would become “downline” distributors, and thus their own bosses, and work towards being part of the “American dream.” The company was Amway and has thoroughly become seated in the American culture as something with a good and bad image.

· The decision of individuals working for energy trading giant Enron towards impropriety, especially of the financial variety would revolutionize the United States business environment by wiping out one of the five major accounting firms of the country and influencing Congress to enact laws on corporate governance.

And, lastly:

· In September of 1995 a computer programmer with a personal website put his broken laser pointer up for sale. When he astonishingly sold it for $14.83, Pierre Omidyar contacted the winning bidder and reminded him of the state of disrepair of the laser pointer. To his amazement, the buyer stated that he collected the unique item. eBay is now the holding company for, online banking company and Voip service Skype and had 2006 revenues of $5.969 Billion USD.

The importance of the decision is truly an astounding one; one that we will certainly pursue further. To close, a quote from Napoleon on the nature of decisions in warfare:

There are times when a battle decides everything, and there are times when the most insignificant thing can decide the outcome of a battle.
—Napoleon Bonaparte

Wednesday, July 25, 2007


The following is adapted from materials that I previously wrote to train new military leaders. Enjoy!--Matthew

Every person serving in any position, any rank, throughout an organization must understand, display, and demonstrate the values inherent in that organization. Part of the task of senior leadership is to make these values well-known to the entire membership.

Some duties and responsibilities of all members of a larger organization include, but are not limited to:

· Exercise command. Be sure to exercise it within accordance with the proper rules and regulations set forth by your particular realm or organization.

· Are accountable for mission accomplishment, business unit readiness of their respective team, and performance of their "piece of the greater picture."

· Establish or interpret policy, set standards for personal and group performance as appropriate, and establish procedures and guidelines to meet goals set by leadership. This could mean simply ensuring your business unit is ready and as agile as need be.

· Manage and allocate resources appropriately. One resource often overlooked is time. Leadership in any organization often requires resources at certain places at certain times. Not having all "pieces of the puzzle" come together at the right place at the right time can be devastating to any mission.

· Plan, provide resources, and conduct and evaluate training. Are you at the right place at the right time? Are you skilled enough as a team member or leader to be effective in your mission?
If you are leading a business unit, is their training satisfactory to meet or exceed missions set out by your leaders? How will you get there, what resources you need, and what can you do to be more efficient and effective in this process.

· Maintain professional standards established by your leaders.

· Support your leadership effectively.

· Maintaining job proficiency. As a leader, you must be expert in keeping and maintaining a business unit in working order.

· Initiative. Take the initiative. Be an active participant in, and your capabilities will often be noticed. Your leaders do not possess any sort of extra-sensory perception, so unless you let them know what you desire or are capable of doing, they likely do not know.

· Total competence. While the head of your organization decides the vision of the realm, your vision guides your operating unit towards that larger goal. Your competence in the areas set forth in the vision of the leader of your organization will go to add to the synergies in the entirety of the organization.

· Maintain established standards.

· Information! Information! Information! Intelligence is often a driving factor in any operation. Without the right people knowing the right information, operations unnecessarily lose their effective qualities that make them successful.

· Seek guidance when necessary: Uncertain about what to do, where to go? Go to a trusted peer or superior that would be able to clarify things for you.

· Support priorities established by the commander: One of the duties of a commander at any level is having the right resources at the right place at the right time. You and your unit or skills is a resource. Are you where you need to be, when you need to be?

· Support and be able to explain the reasons for current policies: Sometimes policy is derived simply as an extension of personal preference of the leader, but oftentimes it is linked into a larger, more complex system of industrial politics, market forces, and goals.

· Loyalty: Above all, any that you belong to organization should have your loyalty. As a leader, it is part of your responsibility to cultivate this loyalty in those in your charge; but you also need to develop this quality yourself—and be able to demonstrate it.

· Respect. If you want to receive respect, offer it. This goes equally for your subordinates and your superiors.

Tuesday, July 24, 2007

The Force Multiplier Effect

We look around our worlds, as we each meander through our daily lives, and we see any number of people just trying to “get by.” They wake up in the mornings and perform a routine series of activities until such time that they can go home; washing, rinsing, and repeating the next day. So many things in our lives, and their effectiveness, are measured by a stick of limited means: An easily quantifiable action producing an easily quantifiable result in the manner that an equal force begets an equal reaction.

There are things in this life, however, that aren’t so discrete. Some things add to the equal force-equal result equation allows the result to become worth more than the sum of the parts put into it.

There are many things in nature that exhibit the same sort of phenomenon: Take the particles that you find inside the nucleus of an atom: Protons and neutrons. In and of themselves, they have limited value. When they are held together with their opposing charges, they can lump themselves into a (known number) of 118 different combinations. These combinations are the elements which we find in the universe—from the common sorts of hydrogen, oxygen, nitrogen to the less-common such as gold and uranium. In various combinations they make life possible and each of those things that we take for granted on a daily basis. By themselves, the universe’s smallest particles mean little to nothing in the greater scheme of things, for instance; but the sum of their parts is greater than science can fathom yet.

I first realized this when I was working at Windy’s Pizza (we were also a bar). In fact, this was my first “real job” working for someone else: Where I learned that, while sometimes work is just a monotonous process that you go through. Other times, however, there are things that increase your morale so much that the process which you’re going through becomes something that you’re more effective, efficient, and, ultimately, better at. At Windy’s, this was music. Clint Revelette and I would play music while we were cleaning up on a Friday evening after busy dinner rushes.

I would go through other jobs and see many, many other examples of this morale-building principle. I quickly learned that music in itself wasn’t a fundamental force multiplying principle; instead, it was morale that I determined to be a fundamental force multiplier.

Expect this to be merely the tip of the iceberg for this topic, for it’s a very important addition to the toolbox of a leader.

Monday, July 23, 2007

Monkey Mondays: Monkey and the Kitty!

Monkey saves the kitty!

Jack of All Trades

Ever hear the saying “Jack of all trades, master of none?” How do you feel about this phrase? The person it represents is the one whom probably comes from a background where mastery of a scholastic or trade skill was paramount to earning a good living and being successful in life. Instead, have you ever heard of the story of the young M.B.A. recruited into the large corporation; instead of being placed in a single department or discipline for his or her career there, they were shuffled around between departments as if they were being groomed for something bigger?

Throughout history the work environment in which most people reside has changed at points of major technological changes. In the United States, hours worked in the nineteenth century—around the time the Industrial Revolution made its way here—were easily “first light to dark” until legislation was enacted. The trend in the 1900s would move the average hours worked by an American from 55 hours per week to 37 hours by the beginning of the 21ST century. The shift in the hours resulted in technological revolutions: The Industrial Revolution shifting to the Information Revolution via the assembly line. What’s more, one hundred years ago no less than 85 percent of the population were entrepreneurs of some sort—shopkeepers or independent farmers. The shift in technology has brought about the ability to have more leisure time and develop a specialized skill set in a modern economy.

So, the “jack of all trades, master of none” comment finds its origins here: As the generations that came home from two world wars went to work in specialized professions—doctors, lawyers, engineers, artisans, or in some other trade skill. When you were young, chances are that your parents and teachers wanted you to “get good grades, get into a good college, and get a well-paying job.” Doctors, lawyers, engineers, accountants and the like: We’re conditioned to fit into a mold that is supposed to result in living the “American Dream” with the white picket fence, 1.54 children, pets, and a green lawn.

The person that popularized the aforementioned phrase was in the working class: Either middle class or poor; my money is on the middle class person. While many may be perfectly happy in the role of the middle class family, I think that many people are selling themselves short, so to speak. If I’ve said it once, I’ll say it a hundred times more: Money is like oxygen—the more you have, the easier it is to breathe. Success, while it means many things to many people, is often fueled by a person’s financial picture: Financial success allows you more freedom in your life to determine which path you want to take, and not necessarily the one you need to take to keep the lights on, a roof over your head, and food on your table. Money buys you options.

Financial success is achieved not necessarily by one skill, but by myriad skills that fit together and work together towards an end of leading and executing. Just like the CEO that needs to be sufficiently familiar with the functional areas of the enterprise, or the general that needs to understand the concepts of combined arms in order to be able to employ resources effectively towards the cause that works towards his or her vision.

Each person has at least one gift that accentuates and somewhat defines their being. One of my backgrounds being in human resources, I have become somewhat adept at categorizing people into occupational fields & disciplines due to what I perceive is their particular skill set. Good with numbers and like to reconcile things? You’ll likely get categorized as an “accountant” in my head; different skill sets to different occupational specialties. Business would classify these skills that we could do second nature and employ best in any given situation “core competencies.” Just as core competencies are critical to our ability to earn an income, I recall hearing a saying once that went “people are often just one skill away from success.” Think about it. A profound statement, isn’t it? A medical doctor, for instance, usually attends 4 years of undergraduate school, 4 more years of graduate school, 3-7 years of a residency program, and (under some circumstances) a fellowship program that could last 1-3 years in a particular sub-specialty. A recent study found that physicians across multiple specialties in 2002 earned a median annual salary of $228,615.50. Despite this high level of income, what is the price paid to get into this time-honored professional occupation?

Despite the fact that doctors are among the best-paid professionals in the country, some worry debt and other financial considerations could affect career decisions made at the end of residency…A 2000 Contemporary Issues in Medical Education (CIME) report raised a red flag, stating that "at a $150,000 level of borrowing, a borrower's career decisions such as whether or not to pursue a fellowship program, to subspecialize, to practice in an underserved area, and other practice location decisions may be adversely impacted by their level of educational debt...’It used to be horrible for us to see a student whose debt surpassed $100,000,’[Pamela Nyiri, director of financial aid at Yale University School of Medicine for the past 20 years] said.’"Now it is horrible to see a student whose debt surpasses $200,000.’"

And none of this even touches the spending habits of individuals who have typically needed to put off any degree of luxury spending for at least a decade.

The same can be found for other specialty and professional occupations as well. Take attorneys, for example:

About 80 percent of law school students obtain loans to pay for law school, and the average loan debt is $76,763 for private law school graduates and $48,910 for public school graduates.

What is the way to get ahead? In his book “Rich Dad’s Guide to Investing,” Robert T. Kiyosaki explains the concept of learning to be a business owner and investor over the path of becoming someone who works in a “job” or starts working for themselves as a “solo professional.” In the latter two options, your destiny is tied directly to a routine of “go to work every day” or your income will suffer. They are both based on earned income—that is, income that you must tend to on a regular basis in order to maintain. It is the type of “work” that a person must be tied to in order for it to succeed. As a worker, you are tied to the whims of an employer; and often as someone working as a solo professional, your destiny is tied to the professional skill which you bring to your business concern. In a business entity you allow others to manage the day-to-day affairs of the business (if you choose) and work to gain you wealth; you are investing in people and materials and reaping a return on your investment equal to the productivity of each individual within this business organization. The investor, then, is one who transcends normal paradigms and is able to move money and other assets around into various investments and reap the passive income-generating benefits that are offered by them. In the first alternatives: Worker and professional, you must play a very active role in order to reap the rewards—you trade your labor for financial benefit. In the business owner and investor you instead work your mind, using your intelligence, experience, and other resources to make time work harder for you, instead of you working harder with your time.

This sort of paradigm is not necessarily achieved by means of sitting in a single occupation or industry for several decades and comfortably accumulating wealth; instead it arises from a broad skill set manifest of experience and education—both self-education and formal education. Instead of sticking with one skill set, you don’t take jobs or offer your expertise for things that will necessarily make you money; instead, you find job opportunities to expand your amount of skill sets—increasing your core competencies—and thus offer you a broad level of experience that is deep in several fields. This offers you a background that allows you to look at life’s multitude of opportunities in a creative manner: One that allows you to spot opportunity more readily than others and apply the resource pool, the mental box of tools which you’ve constantly been expanding, which you have to exploit the opportunity at hand.

So, instead of becoming a “master of one trade,” become a “jack of many,” and be able to hire “masters” for those trades which you want work done in.