Understanding the Rationale

When you’re CEO, you’re in this paradoxical situation in which your direct reports often know a lot more than you do in their functional areas.

This causes many first-time CEOs to stumble.

After all, how do you manage someone who knows more than you do?

While this is a subject worthy of an entire class, I’ll share with you one technique for handling this.

I call this technique... “Understanding the Rationale.”

If your VP of sales wants to change the sales compensation plan, you want to ask... why?

If your VP of engineering wants to do a complete technical redesign of your flagship product, you want to ask... why?

If your VP of finance wants to refinance your line of credit with a different bank, you want to ask... why?

(Notice a theme?) :)

The first red flag is if you ask “why?” and you don’t get an answer.

The second red flag is if you ask “why?” and the answer you get back doesn’t pass the common sense test.

Quite often, if something doesn’t seem to make sense, it actually does not make sense.

[As an example, a CEO of a $900-million-revenue military defense contractor came to me flustered over a decade ago. Some social media consultants were telling him he needed a Facebook page. He was completely unfamiliar with and intimidated by social media. He asked me for help. 

I asked, "Who are your customers?" Answer: "Military generals and politicians." Then I asked, "Do they go to Facebook to learn more about your products?" Answer: "No."

My response, “Then you don’t need a Facebook page to sell missile systems. If the answers to those questions change in the future, you might reconsider it." No matter how technical the field, the decision still needs to make common sense. 

He was relieved.]

Assuming your direct report has a response to the “Why do you want to do that?” question, the next step is for them to explain their rationale to you. 

You want to do this in a step-by-step fashion.

Step 1:
What is the problem you’re trying to solve?

Explain it to me.

Let me explain it back to you. 

Did I get it right?

Step 2:
What happens if we do nothing and just let the status quo continue?

(This tests the hypothesis that something needs to be done and done now.)

Step 3:
Okay, what are you proposing? Why?

Step 4:
What are the alternatives to your proposal?

What are the pros and cons of those alternatives?

Why did you like your proposal more than these alternatives?

IF the answers to the questions in each of the four steps make sense, then there’s a good chance the decision is a sound one.

Over the years, I’ve used this with countless executives who have greater technical competence than I do.

I’ve also used it with surgeons and oncologists to understand medical treatment options for people I care about.

I’ve also used it with my kids when they want to do something that I don’t quite understand intuitively.

Understand the Rationale. 

It’s a very useful tool.

This is an example of the type of upper management tools that I teach members of my Inner Circle Mentorship Program.

Membership for Inner Circle only opens up twice per year, and the next opportunity to enroll is coming up later this quarter. If you'd like to be notified of your opportunity to enroll, submit the form below. 

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