Before you make that decision... - June 2011

Before you make that decision is an article in Harvard Business Review that talks about how bias can distort business decision and how we should avoid it. It also talks about the difficulty in avoiding such bias and thus has proposed the following 12 questions to help management detect and dismiss such bias. The questions are:


Questions that decision makers should ask themselves:
1) Is there any reason to suspect motivated errors, or errors driven by self-interest of the recommending team?
2) Have the people making the recommendation fallen in love with it?
3) Were there dissenting opinions within the recommending team?

Questions that decision makers should ask the team making recommendations:
4) Could the diagnosis of the situation be overly influenced by salient analogies?
5) Have credible alternatives been considered?
6) If you had to make this decision again in a year, what information would you want, and can you get more of it now?
7) Do you know where the numbers came from?
8) Can you see a halo effect?
9) Are the people making the recommendation overly attached to past decisions?

Questions focused on evaluating the proposal:
10) Is the base case overly optimistic?
11) Is the worst case bad enough?
12) Is the recommending team overly cautious?

These questions should be used at decisions where stakes are high rather than routine decisions.

These questions gives a framework on detecting as much bias as possible and also helps us to understand the recommending team's dynamic and its members too. Being humans, it is unavoidable that we would have biases in our decisions thus I would feel that the above questions is something that most management should take note of and go through it. The only constraint that I can see from these framework is whether managers would have the capacity to adequately answer these questions.

The Age of Customer Capitalism-January 2010

The Age of Customer Capitalism talks about the relationship between shareholder’s value and customer’s value. It goes through the history of capitalism where initially there is a need to separate the ownership and management of business, hiring professionals to manage the business.

Because of principal-agent problem, we see the rise of shareholders’ value capitalism where there is a strong focus for corporations to improve/increase shareholders’ value. But with such type of capitalism, and the only way to realize a higher shareholders’ value is through the stock prices, we see some corporations’ management start to ‘manipulate’ stock prices by trying to exceed expectations of Wall Street. Such moves create knee-jerk reactions to the stock prices and a lot of price volatility.

Moreover, because of shareholders’ value capitalism we see the rise of stock options featuring in the remuneration package of CEOs so as to align their interest with that of the shareholders. But this has made management short-sighted, and for those retired CEOs, their successors will most likely have their work cut out for them. In the last decade, we have seen what consequences such capitalism has brought about.

In this article, a new era of capitalism is coined and that is “Customer Capitalism” where the focus is on increasing customers’ value. Personally, I concur with this new capitalism. Customers are the main foundation of any businesses. Without customers, there cannot be any business at all. Given the booms and busts that are coming fast and furious, a re-focus back on customer’s value would create a sustainable business because customers are mostly value seeking. Customers will always patronize the companies that give them the most value, no matter in good or bad times. As such, companies that focus on customers are going to survive well in bad times.

I think the second group of people CEOs should focus on is employees. Especially front-line employees, they are the one that has the most direct impact on the customer’s value created besides the value that the product or services provided. So I strongly feel that if a company wants to refocus on customers’ value again, there must be a strong partnership formed with front-line staff. Listen to their feedback and needs, make changes/improvements to processes, and most importantly adjust their remuneration package accordingly to reinforce the idea of being customer-centric so that substantial customers’ value can be created.

Closing the Feedback Loop – Harvard Business Review Dec 2009

Closing the Feedback Loop is about the advantage of having a feedback loop that starts with frontline employee. Main points to take away from this article is having such feedback loop is a starting point in maintaining and enhancing customers’ loyalty.

In this article, it shares with us the NPS (Net Promoter Score) which is featured in HBR Dec 2003 “The One Number You Need to Grow.” Basically it is to raise the number of “promoters” among existing customers.

Because the feedback loop starts at the frontline staff and are mostly evaluation of how frontline staffs are handling customers, immediate evaluations would help frontline staff to immediately adjust their performance so as to better handle customers. Such real time information can also be fed back to the relevant parties to make adjustment as soon as possible.

One must take note of how the real-time feedback can affect frontline staff. If customers are affected emotionally by events outside the “moments of truth” he/she has a higher tendency to exaggerate certain events within “moments of truth”. If such events perceived and feedback as good, frontline staff’s morale might benefit from it, but if the events are perceived as bad by the customer and he/she gives a very bad rating, frontline staff can be affected by it. Reason being frontline staff gets the full force of each real time data that comes in as compared to getting all the data as a whole where frontline staff would get the average evaluation. Thus management has to take note of this when selecting people for frontline staff.

If one-on-one session are conducted with customers to gain feedback, management have to take note it should be the general opinion of customers that should be taken in and not react to each and every individual opinion that is received by the frontline staff.

Management also has to note that frontline staff’s opinion on customers’ feedback through this one-on-one session plays a part in what is related back to the management too. And its opinions are greatly influenced by what the last few customers it interacts with as compared to the first few.

In gathering feedback from customers, one must note that the questions asked should be open-ended for customers that have time, so as to probe for more information that company can use to improve its customer service. For customers that are rushing, questions that are close-ended such as questions asking for ratings would be great.

This article shows how companies have benefited from feedback loops that started with customers which I feel is a must read given the need to get back to being customer-centric. But one must take note that how it is implemented would play a crucial part in its success and as mention by the article, the support from management is essential too.