Food for Thought is our way of sharing interesting concepts on corporate leadership and management with others who might find it useful. The thoughts offered are intended to be controversial and thought-provoking. They are intended to help our readers intentionally realize their potential, what we call Potentionality.
This month’s Food for Thought is motivated by a piece written by our friend and colleague, Glenn Mangurian, of FrontierWorks. In his monthly mailing called Pushing the Edge he asks “Do you tend toward ‘doing the right thing’ or ‘doing things right’?” This prompted us to pose a dilemma that a lot of corporations face in this age of fast moving markets where speed and agility are considered to be a prized corporate culture. As a corporate leader, do you wish to create a culture where people make decisions fast, recognizing that some of those decisions might be wrong, or would you rather have a culture where people deliberate to make the right decision, recognizing that sometimes those decisions might cause the organization to move slow?
Such dichotomies abound in the corporate world and there is never a universally correct answer – neither a single correct answer for all situations nor a single correct answer for all people. Such dichotomies are modeled mathematically using the concepts of Type I and Type II errors in statistical process control (SPC). In our situation, Type 1 error might be the error of being wrong in a decision and Type II error might be the error of being slow to make a decision. SPC suggests that there is a heavy overhead cost to minimizing both Type I and Type II errors, beyond the costs of the errors themselves. More surprisingly, SPC indicates that balancing Type I and Type II errors also has a high overhead. Hence, our natural instinct to balance the two types of errors has a high cost associated with it. On the other hand, if you have a preference for one of the two errors, SPC suggests that it is much more economical to operate with a bias. To illustrate this point, consider the extreme case: it is easy to operate in a manner that ensures that one of the two types or errors does not occur. For example, you can always wait till the right decision becomes obvious ensuring that you will be never be wrong, or make instantaneous, though questionable, decisions ensuring that you will never be slow. More pragmatically, you need to understand the needs of your business and institute a culture that has a strong bias towards one type of error that is more acceptable.
In our particular question, which error should you favor – the error of being wrong or the error of being slow?
In most corporate environments when somebody makes a wrong decision the error is pinned on the individual; but when somebody makes a late decision the error is attributed to the culture and environment. In that backdrop, which error do you think is the bias of most corporations? Most corporate executives would rather be slow than be wrong. That does not make that bias inappropriate for your particular corporation. But, we question if it is the right bias for all corporations. As your markets move faster, you might want to overtly think through the culture of speed and agility you are creating in your company. Towards which error would you like your company to be biased?
We welcome your comments on our Food for Thought mailings and encourage you to explore the Food for Thought archive. We hope your business is doing well. We’re happy to chat about the content of this article or anything else which you’d like assistance.