IN THISday and age, ‘execution’ is a word that takes on a special meaning and emphasis. During the dotcom bubble, time was everything; shoot-aim-fire was the order of the day. Execution was replaced with immediacy and the need to get in the game. And no one remembered that someone had to execute and deliver the goods. Then came the corporate scandals; again, one of the root causes was the absence of any real execution. Instead, someone was cooking the books to make it look like they were delivering the goods. Enron, WorldCom, Madoff, Satyam and many others collapsed on inflated numbers. Instead of hard-working, poor execution is being covered up by illegal practices that make the companies appear to be executing flawlessly. Dotcom bubble and accounting frauds are classical examples of ‘extinction by instinct’ but the current financial crisis did not happen because of instinct, it happened because of the analysis-paralysis.
Now times are tough again and we are back to basics. What exactly is analysis-paralysis? It is actually paralysis by analysis — where CEOs are obsessed with excel sheets while completely out of touch with ground realities. It is a slippery slope — unfortunately, for most management graduates — it is a way of life, systemically ingrained in their DNA. We all use it to legitimise our plans and actions.
I had the good fortune of being taught by Henry Mintzberg at the McGill University. He often used to quote the example of Robert S McNamara, Harvard Business School’s most famous graduate of his day. McNamara received his MBA from Harvard in 1939, he then joined the faculty for three years before serving in World War II as a statistical control officer. From there, he teamed up with a group of veterans, who came to be known as ‘Whiz Kids,’ looking for a company to run.
Henry Ford II, who had just succeeded his grandfather in a difficult situation, took them on, and two of them, including McNamara, eventually became president. “The Whiz Kids accomplished what he hired us to do,” McNamara wrote. “The value of the stock increased dramatically”. But it was subsequent to this, as American secretary of defence during the Vietnam War (1961-1968), that Mc-Namara became famous — and infamous. To that job, he brought, in his own words, “a limited grasp of military affairs, and even less grasp of covert operations”.
What McNamara did bring to the table was PPBS (planning, programming and budgeting into a single system). He applied PPBS to the Vietnam War and the goose got cooked. David Halberstam wrote in his book The Best and the Brightest, about McNamara and the group that surrounded him in those years when civilian advisers said the Diem government of South Vietnam was losing popularity with the peasants. McNamara asked, “Well, what percentage was dropping off, what percentage did the government have and what percentage was it losing?”
He asked for facts, some statistics, something he could run through the data bank, not just the poetry they were spouting. This is what he did in Vietnam, except that successful conduct of the strategy translated into failed conduct of the war. McNamara, the formulator sat in his Washington office while the enemy was gathering in the paddy fields. According to a later article in the New York Times: “During the war, McNamara was so impressed by the logic of statistics that he tried to calculate how many deaths it would take to bring North Vietnam to the bargaining table.”
Coming back to our real world, all the bad habits of recent years — excessive borrowings by consumers and money managers, careless and reckless lending, cooking books with complete impunity — grew in a climate when gain seemed sure and it was always backed by impeccable analysis. Where do we go from here? I will turn back to Henry Mintzberg and here are some lessons so avidly described in his book Managers not MBAs:
Hard analysis is often limited in scope: The expression on a customer’s face, the mood in the factory, the tone of voice of a government official, all of this can be information for the manager but not for the formal system.
Much hard information is too aggregated resulting in the loss of real decision-making cues.
How much does the net profit tell you about the condition of the business; what do registered patents reveal about what is going on in a research laboratory.
Much of the hard information arrives too late. For example, the aftermath of the spiral effect of the current credit crisis — we still don’t know the real impact.
Finally, a surprising amount of hard information is unreliable: We all know how much distortion is possible in quantification of events and factors, intentional as well as unintentional. Of course, soft information can be problematic, too — speculative, distorted, and so forth. But that only highlights the key point here: that all information must be scrutinised carefully not just on the laptop screen but by being there on the ground — paddy fields of Vietnam and not the Washington HQ.
(The author is MD at Future Capital-Private
Equity. Views are personal.)
Now times are tough again and we are back to basics. What exactly is analysis-paralysis? It is actually paralysis by analysis — where CEOs are obsessed with excel sheets while completely out of touch with ground realities. It is a slippery slope — unfortunately, for most management graduates — it is a way of life, systemically ingrained in their DNA. We all use it to legitimise our plans and actions.
I had the good fortune of being taught by Henry Mintzberg at the McGill University. He often used to quote the example of Robert S McNamara, Harvard Business School’s most famous graduate of his day. McNamara received his MBA from Harvard in 1939, he then joined the faculty for three years before serving in World War II as a statistical control officer. From there, he teamed up with a group of veterans, who came to be known as ‘Whiz Kids,’ looking for a company to run.
Henry Ford II, who had just succeeded his grandfather in a difficult situation, took them on, and two of them, including McNamara, eventually became president. “The Whiz Kids accomplished what he hired us to do,” McNamara wrote. “The value of the stock increased dramatically”. But it was subsequent to this, as American secretary of defence during the Vietnam War (1961-1968), that Mc-Namara became famous — and infamous. To that job, he brought, in his own words, “a limited grasp of military affairs, and even less grasp of covert operations”.
What McNamara did bring to the table was PPBS (planning, programming and budgeting into a single system). He applied PPBS to the Vietnam War and the goose got cooked. David Halberstam wrote in his book The Best and the Brightest, about McNamara and the group that surrounded him in those years when civilian advisers said the Diem government of South Vietnam was losing popularity with the peasants. McNamara asked, “Well, what percentage was dropping off, what percentage did the government have and what percentage was it losing?”
He asked for facts, some statistics, something he could run through the data bank, not just the poetry they were spouting. This is what he did in Vietnam, except that successful conduct of the strategy translated into failed conduct of the war. McNamara, the formulator sat in his Washington office while the enemy was gathering in the paddy fields. According to a later article in the New York Times: “During the war, McNamara was so impressed by the logic of statistics that he tried to calculate how many deaths it would take to bring North Vietnam to the bargaining table.”
Coming back to our real world, all the bad habits of recent years — excessive borrowings by consumers and money managers, careless and reckless lending, cooking books with complete impunity — grew in a climate when gain seemed sure and it was always backed by impeccable analysis. Where do we go from here? I will turn back to Henry Mintzberg and here are some lessons so avidly described in his book Managers not MBAs:
Hard analysis is often limited in scope: The expression on a customer’s face, the mood in the factory, the tone of voice of a government official, all of this can be information for the manager but not for the formal system.
Much hard information is too aggregated resulting in the loss of real decision-making cues.
How much does the net profit tell you about the condition of the business; what do registered patents reveal about what is going on in a research laboratory.
Much of the hard information arrives too late. For example, the aftermath of the spiral effect of the current credit crisis — we still don’t know the real impact.
Finally, a surprising amount of hard information is unreliable: We all know how much distortion is possible in quantification of events and factors, intentional as well as unintentional. Of course, soft information can be problematic, too — speculative, distorted, and so forth. But that only highlights the key point here: that all information must be scrutinised carefully not just on the laptop screen but by being there on the ground — paddy fields of Vietnam and not the Washington HQ.
(The author is MD at Future Capital-Private
Equity. Views are personal.)
• Robert McNamara applied programming, planning and budgeting as a single system to the Vietnam War
• But the conduct of strategy translated into failed conduct of the war
• The key point is all data must be scrutinised carefully not just on the laptop screen, but by being there on the ground
No comments:
Post a Comment