Acknowledging survivor bias

Recently, I have been asked to assess a number of clients’ inconsistency regarding their ability to achieve financial year objectives in the eyes of the Board.

Why is it that some years I achieve, even exceed, my organisational objectives; and others, despite not changing the formula, I fail?

Following the last six months of research I have noticed an alarming trend among these executives – every single one of them failed to identify SMART (Specific, Measurable, Achievable, Realistic, Time-bound) objectives linked back to Board goals, instead using platitudes and jargon in lieu of an a priori (in advance) strategy. Without clear objectives, outcomes are open to the interpretation of those responsible for judging performance, thereby susceptible to misleading rhetoric. Similarly, the managers they charge with delivering outcomes are ill-prepared to seize opportunity or anticipate issues, instead investing resources blindly.

This leaves senior managers in a position whereby they are inclined to justify actions, a posteriori (after the event) on the outcomes rather than on the strategy. When outcomes align with expectations, credit is given to decision making; when they do not, blame is assigned where convenient. When executives fail to critically examine this phenomenon, survivor bias emerges, rewarding managers who can best justify the activities of execution, rather than promoting planning behaviours. This accounts for the growing trend in management of action first and planning “when we get to it” creating a cycle of ‘temporary’ solutions and, inevitably, perpetual effort spent maintaining them.

The debate on strategy versus execution has raged on in MBA programs for years, with concepts such as first-mover advantage, second-mover advantage, disruption, and agility being thrown around with a multitude of conclusions available to support whichever position you would like to take. Whilst it is fair to say that the perfect plan does not exist, it is a fallacy to believe that action without planning is a sustainable business practice.

Without labouring the point, it is essential that executives provide a clear, upfront strategic intent to their managers, to ensure cogent action driving toward outcomes anticipated by the Board. Without this, execution suffers from a lack of coherence, foresight, and accountability; which ultimately propagates across the organisation through survivor bias, further reducing visibility for executives.

The takeaway? Promote planning, if not plans, through active discussion (even argument) with management and subject matter experts. Provide clear outcomes-based measures, with guidelines on acceptable variations to strategy. Through this, staff are enabled to make sound decisions grounded in strategic purpose to deliver favourable outcomes, which are easily reported to the Board.