The last few days have been quite chaotic politically here in the United States.
While chaos can come from many places, there’s one source in particular that I’d like to discuss today, as it applies to business.
It’s chaos that comes from…
Chaos from confusion is simple to prevent.
The antidote involves two things: 1) clarity; and 2) practical thoroughness.
When you communicate a new policy change, you want to communicate it clearly and concisely. The test of clarity is when 10 different people read about your change and interpret what you wrote in only one way.
When 10 people read it and have 15 different interpretations, this leads to confusion… and confusion can lead to chaos.
This is especially the case on hot topics, controversial issues, or issues with high stakes involved.
The other way to prevent chaos is practical thoroughness.
Every strategic decision made by a CEO or an organization’s leader at some point must be implemented. There is an ENORMOUS gap between strategic concept and practical reality.
It is important to recognize that this gap exists and should be closed (or at least minimized) before you disseminate your decision widely.
Ideally, you take a strategic intention that you want to roll out and run it by every major department in your organization.
You ask people from those groups to ask questions regarding your decision, to identify aspects of your decision that are ambiguous, and to point out practical problems with the decision (and propose solutions to those problems).
For example, let’s say you’re in a company that historically never offers pricing discounts on your products.
As CEO, you make a policy decision that you want to engage in selective discounts for the new year.
Let’s assume that strategically, this decision makes sense.
However, there are many practical problems and issues that must be considered or managed.
Here’s a list of a few that come to mind:
- If you offer a discount starting Wednesday, how do we handle the customers who bought on Tuesday at the higher price?
- How do we handle long-term purchasing agreements where we guarantee certain clients that they will never pay a price higher than any other client?
- Do any of these contracts have a clause that says we can not raise prices once we lower them?
- If so what percent of our client base does this apply to? What percent of revenues do these clients represent?
- What is the effective date of the price change?
- How much time will we have to train the sales force on the new pricing changes?
- How much time do we have to train the customer service department on these changes and on how to answer the most frequently asked questions about the policy change?
- What are the most frequently asked questions we anticipate from the change?
- Do we have an official answer that all executives can use when answering the most frequently asked questions?
- If we expect refunds due to customers who paid the higher price, do we need to create a financial reserve for these refunds?
- Does such a reserve need to be on our balance sheet?
- If reserves need to be accounted for on our balance sheet, does this change our debt equity ratio such that it violates our loan covenants from our lenders?
Decisions that seem strategically and conceptually simple have messy practical, real world implications.
Most of these implications can be worked out, but department heads need to be aware of the issues and have time to prepare for them.
One of my first jobs in industry was to be my CEO’s “feedback getter.”
The CEO would dream up new ideas on a Monday morning. By lunch, I would run around asking people around the company for feedback.
In each department, I would (at a minimum) ask both the senior executive and a front line employee for feedback.
After a handful of meetings, the key practical issues would become clearer. The feedback would then be used to make small adjustments that often preserve the original intent of the strategic decision, but eliminate ambiguity from the policy change.
Other times, major concerns would arise from the feedback. In those cases, the decision would need to be reconsidered, in light of the new information.
If you’re a senior executive, aspire to be one, or work for one, one way to avoid chaos is to consistently ask others for their input. Sometimes you get better decisions. Other times, you get better execution of the same decision.
Either way, you reduce confusion and the likelihood of chaos (at least the kind of chaos that comes from confusion).
To the extent you’re the person reducing this confusion, the people around you will associate you with projects that run smoothly.
This is an advantageous perception for senior executives to have of you. It’s also an advantageous perception for peers and colleagues across the company to have of you.
Reduce chaos through clarity and practical thoroughness. Both can be done by simply getting feedback from others.
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