Quantcast
Subscribe!

 

Enter your email address:

Delivered by FeedBurner

 

E-mail Steve
This form does not yet contain any fields.
    Listen to internet radio with Steve Boese on Blog Talk Radio

    free counters

    Twitter Feed

    Entries in decisions (4)

    Tuesday
    Jul112017

    Learn a new word: The General Theory of Second Best

    There's nothing I care more about that NBA basketball, (I promise this isn't another basketball post, but I may have to dig out a basketball analogy to make the point), with the possible exception of learning new things.

    Which is why, I think, I run the 'Learn a new word' series on the blog. I am also falling into the trap of thinking 'if this is interesting to me, then it should be interesting to people who read this blog'. After 10 years of this, I am not really sure if that is even true. But I persist.

    So here's today's 'Learn a new word' entry - The General Theory of Second Best.

    What in the heck is that?

    A decent description can be found in the Economist: (emphasis mine)

    The theory of the second-best was first laid out in a 1956 paper titled, sensibly enough, "The General Theory of the Second Best", [paid access] by Richard Lipsey and Kelvin Lancaster. Roughly put, Lipsey and Lancaster pointed out that when it comes to the theoretical conditions for an optimal allocation of resources, the absence of any of the jointly necessary conditions does not imply that the next-best allocation is secured by the presence of all the other conditions. Rather, the second-best scenario may require that other of the necessary conditions for optimality also be absent—maybe even all of them. The second-best may look starkly different than the first best.

    Let's think on that for a moment and take it back (sorry) to the basketball analogy I hinted at in the open.

    The optimal allocation of resources for say a basketball team has traditionally consisted of five different kinds of players, with different body types, playing styles, and characteristics that when assembled, would provide the team with the right balance of scoring, passing, rebounding, and defensive play that would result in winning.

    But let's say that the team can't acquire or develop one of the positions, let's say the point guard - the player who usually is charged with handling the ball, setting up his/her teammates for easy scores, and functioning as the on-court leader of the team. If this example team can't find a good enough point guard, the Theory of Second Best suggests that 'answer' to the problem isn't making sure the other four positions/roles are filled as designed and slotting in any old player as the point guard.

    The theory suggests that the 'optimal' solution, when one resource (the point guard), is missing, may be to take a completely different approach to building the team. Maybe the team looks for more 'point guard' like skills in the other positions, or maybe the team implements a different style of offense entirely to mitigate the problem.

    The real point is that once conditions appear that make the 'first best' strategy impossible to execute, that you may need to think really, really differently about what will constitute the 'second best' strategy. 

    The second best may look starkly different than the first best.

    I really dig that and hope you think about it too, once your plans in business or in life run into some challenges.

    Tuesday
    Feb162016

    There are only 5 possible reasons for any business problem - Bar Rescue edition

    Some folks who know me know that about a thousand years ago I spent a fair bit of time working in the Middle East - in Saudi Arabia to be precise. And these same folks also know that every one of my probably hundreds of stories I have told about my time in Saudi fall into only five major categories - it was really hot, we had to find gray market beer, I played rugby with a wild group of expats, we socialized with the (mostly Irish and Canadian) nurses from the local hospital, and sometimes you had to deal with some scary police/security people.

    Every story, no matter how it starts, ends up in one of those five classifications. In fact, over the years I got tired of telling, (and people got tired of listening to) the old tales, and now I just list the five categories. The details of any one event or experience don't really matter all that much anyway. But the categories are still valid.

    What made me think about this again was that over the long weekend I caught a few episodes of a marathon one of my favorite reality TV shows - Bar Rescue. If you are not familiar with the show, the basic premise is this: Veteran bar and hospitality consultant and expert Jon Taffer gets summoned to 'rescue' or help fix a bar or bar/restaurant that is failing, and possibly about to go out of business. 

    Taffer will bring in a team of experts like a master mixologist, a chef, and designers and construction crews that together help to renovate the bar, motivate and train the owners and staffs, and redesign products and processes in hopes of giving the bar a new start and (hopefully), keeping it in business.

    But what's the connection to 'Steve's boring Middle East stories?' you might be asking. 

    Well it is this: Just like my dopey stories, every major problem facing the failing business owners in Bar Rescue falls into five categories as well. Sure there may be some subtle differences in specific situations, and most of these disaster bars suffer from multiple problems, but at their canter, they are mostly, remarkably, the same.

    Every failing bar's problems fall into one of these five categories, (with some specific manifestations where I can think of some).

    1. Lack of leadership from the bar owners - shows up in a few ways on the show, my favorite are the owners that simply get trashed drunk at the bar every night and have no idea what is really happening. Other times the owners are part-time or 'hobby' owners and have other businesses or jobs that keep them from paying enough attention to the failing bar.

    2. Terrible hiring decisions - often this is the 'professional' bar manager that has no idea what he/she is doing. Also, lots of 'friends and family' hiring of people that are totally wrong for the jobs they are in or are taking advantage of their relationship with the owner to get away with doing substandard work.

    3. Lack of attention to maintenance and upkeep - these are the bars with dead fruit-flies in the bottles, accumulated grease covering everything in the kitchen, and tubs of expired and/or rotting food in the walk-in. It is actually kind of shocking what some of these failing bars have allowed to let happen - at times it even threatens the health and safety of workers and customers.

    4. Little or no understanding of the market/customers - time and time again Taffer and his team have to advise and educate the bar owners about the local neighborhood, the main drivers of potential traffic to the bar, and how the bar stacks up against the local competition. Typically in these situations, the bar owners have failed to recognize and adapt to changes - trends, preferences, and expectations of customers that are not the same as they once were back when the bar was more successful.

    5. Failure to understand the economics - this one is pretty common the show and manifests itself in a few ways. Sometimes the owners really don't know how much money they are really losing or owe. Sometimes they don't have a good grasp on the financial drivers of their business, like knowing what food or drink items are most profitable. Or they are getting fleeced by staff (or even themselves) by giving away too many free rounds of drinks and not realizing how much that is hurting the business.

    Just like my Saudi stories can be pretty easily classified, every failing bar's problems on Bar Rescue can fit into one of the above categories. And the the more interesting thing about Bar Rescue than my stories, is that these bar/business problems are pretty likely the same broad set of categories just about and business faces too.

    Issues with leadership at the top. Bad hires, poorly trained staff, people in the wrong roles. Failing to keep track of the basic elements needed for any kind of success. Not keeping up with market and business condition changes. And finally, not watching and understanding the finances. Every problem (pretty much anyway), fits into one of these buckets.

    Figure out in which one of these buckets that most of your business problems fit and you, like the Bar Rescue team, will know where to spend your time and energy making things right.

    Thursday
    Jun182015

    Learn a new word Thursday: Knightian Uncertainty

    Welcome back to the latest installment of 'Learn a new word Thursday' where I share with you some small, but hopefully interesting and relevant word or concept that since it is new to me, must be new to (many of) you as well.

    Submitted for your consideration today's word/concept: Knightian uncertainty.

    From your pals at Wikipedia:

    In economics, Knightian uncertainty is risk that is immeasurable, not possible to calculate.

    Knightian uncertainty is named after University of Chicago economist Frank Knight (1885–1972), who distinguished risk and uncertainty in his work Risk, Uncertainty, and Profit:

    "Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated.... The essential fact is that 'risk' means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating.... It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all."

    Did you catch the distinction laid out there, between 'risk', which can generally be measured and estimated (and therefore planned for); and 'uncertainty' of the kind that is not measurable at all, the so-called 'Knightian' uncertainty.

    For example, we might be able to assess the 'risk' of any given commercial flight arriving more than an hour late say, but we have no real ability to estimate the likelihood of any given route being profitable in say, 25 years time. 

    Let's read that again just so we are sure it sinks in, a measurable uncertainty...  is so far different from an unmeasurable one that it is not in effect an uncertainty at all.

    So the lesson here is to be a little more careful, and a little more precise when tossing about terms like 'risk' and 'uncertainty.' If you can measure it, can draw some reasonable conclusions about the likelihood of an occurrence (or failure for something to occur), and can get smarter over time from these practices, then whatever it is probably isn't 'uncertain' at all. 

    And the interesting thing from an HR and talent management perspective is that with the rise of more sophisticated technologies for assessment, competency, skill, and massive amounts of actual workforce data upon which to test our theories, more and more 'people' decisions are becoming much less uncertain and simply more risky.

    Which doesn't sound like much of an improvement until you realize that just a few years ago just about every people-related decision was an uncertainty. Perhaps even a Knightian uncertainty.

     

    Tuesday
    Oct232012

    Housecleaning as a perk? It's about reducing decisions

    Yesterday at Fistful of Talent in the latest '5 Things You Need to Know This Week' compilation, Holland Dombeck included a link to this piece from Business Insider - 'Evernote Pays For Each Of Its 250 Employees To Have Their Houses Cleaned Twice Per Month', which on the surface reads mostly like another one of those classic and almost cliche, 'Tech company perks that your business would never even consider', kinds of pieces.

    I mean, we've all read enough stories about free gourmet meals, onsite car detailing services, anything goes dress codes, and even more out of the ordinary types of perks and benefits that tech companies have been known to create and bestow upon their employees. And for most of us that do not work in one of these small or start-up tech companies, our reaction to these stories is pretty standard - variously choosing from the following:  they won't work in our culture, won't scale to our size, are somehow 'unfair', and since none of our industry or location benchmarks say we have to offer them to be competitive, then we don't have to worry about them. They make for a cute story, (and easy blog fodder), but that's it.

    It was with that kind of practiced cynicism I too read the Business Insider piece about Evernote, but digging into the story just a bit deeper, buried in the original New York Times piece that BI essentially summarized, we find this gem of a quote from an Evernote employee, when asked about the 'free housecleaning' perk:

    Given that his employer is paying to clean his apartment, (Evernote VP of Marketing), Mr. Sinkov and his girlfriend do not have to quibble about cleanup duties. The value of the perk is greater than the money saved, he said.

    “It eliminates a decision I have to make,” Mr. Sinkov said. “It’s just happening and it’s good, and I don’t have to think about it.”

    Hmm.

    The perk is valuable because it 'eliminates a decision I have to make'.

    That sounds familiar, no?  Well it should to regular readers of this blog, as very recently I posted about two separate stories about the importance of reducing (often unnecessary), decision making, as shared by President Obama and the President of the Internet, Mark Zuckerberg.

    It's not about the cash value of the perk - I suspect Mr. Sinkov can afford to pay to have his house cleaned - but rather about removing from his day-to-day the need to think about it at all. 

    And what we saw in the Obama and Zuckerberg stories continues to resonate - if you want to really, truly, and fully do great work, maybe even your best work, then anything that distracts you too much from that work presents just another little barrier that you need to get over.

    And anything, even a simple perk like housecleaning, (or dog walking, or yard work, or time off for voting), can give people on your team just a little bit of help in what for most of us seems like a Monday to Friday mad dash to get everything done.

    Think about it - what can you do today to let your teams make just one less decision?