Correct Analyses Require a Proper Framework and Methodology
An integral part of doing well as a business revolves around carrying out analyses, reaching correct conclusions, making right decisions, and taking the necessary and appropriate actions. Doing the analyses well is essential to the performance of practically every business enterprise. Do analyses better and the business will do better. Do analyses less well and the business will do less well. To do analyses well requires a proper framework and a methodology that yields correct results and accurate understanding. The professionals who can do it well not only help their companies, but also help differentiate themselves from others, and are greatly rewarded.
Unfortunately, it has been my observation that most analyses in the business world are somewhat deficient and leave much to be desired. Worse yet, neither those conducting the analyses nor their managements who use such analyses are aware of the deficiency. All believe that the analyses and conclusions are of the highest quality. This is so for two reasons. First, relatively few learn how to do it well, and even fewer know how to teach it well. Second, there is a huge gap between the theory and the practice. So, even if taught well, analyses could easily be poorly executed.
However, one can become much better at it. Therefore, and because of its importance, any incremental improvement would lead to better business results and concurrently advance one’s career. My goal in this section is to teach you the proper way to conduct analyses and also to bridge the gap for you between theory and practice. The first question that should come to mind is, How can it be possible that this activity is so essential in the business world, yet relatively few know how to do it well?
The most important aspect to understand is that the theory is not very complicated. It is the application of the theory, in its practice, where deficiencies creep in. Thus, as you read this section, focus your attention on the application and where the practice can falter. Understand this dimension and you’ll become much better at it.
There are two key reasons why, in practice, this activity and its methodology are not applied well. First, as stated already, few are taught and practice this methodology to the degree necessary to do it well. Second, but just as important, to do it well is often expensive and time-consuming—and money and time are two commodities not abundantly available to professionals working for corporations. In other words, oftentimes those conducting the analyses must resort to taking shortcuts. Those who may know how to do analyses well and are competent at it will likely be careful enough with the shortcuts to make sure that the overall quality of the analyses and results are not overly compromised. Those who are not as knowledgeable and as competent (which are many) will very likely end up with compromised and subpar results.
In my view, this is so because only the most critical issues a company faces would receive the resources required to apply the methodology well. Thus, most of the professionals working for a corporation rarely have an opportunity to learn how to do it properly. So, it is routinely applied poorly, but not recognized as such, because neither the one conducting the analyses nor their supervisors and management possess the necessary expertise to properly assess it, or if they do, they rarely check the competence behind the analyses. It is not their role to do so, and they mostly assume that such analyses were conducted competently. Such analyses are also generally presented to management in a summary form. In those presentations, the focus is on the conclusions and recommendations requiring management’s attention and actions, and not on the veracity of the analyses. In such a summary form, it is impossible to decipher how well and competently the analyses were conducted.
This phenomenon is amplified with time. Since it is difficult to decipher the quality from a summary presentation, the feedback from management regarding the presentation (which assumes that the underlying analyses supporting the observations and conclusions were done well) is often positive, and promotions still occur, leading all to believe that the quality was solid. Those same analysts then train the next generation of up-and-comers and the cycle continues, a kind of “the blind leading the blind” phenomenon.
Fortuitously, my experience was different, and I learned how to do it properly. There were three factors that facilitated my learning. First, I was taught by the best teachers. Second, I applied what I learned for many years with the best quality control supervision one could have. Third, I had ample opportunities to compare and contrast the difference between proper and deficient analyses early on and throughout my career.
I learned all I know as a consultant at Booz Allen. The premier consulting firms were hired by boards of directors or top management to work on the most critical issues facing a company. For this very reason, clients were willing to pay the hefty fees and expenses to ensure the utmost quality of the analyses, conclusions, and recommendations.
It is for these reasons that those consulting firms hired those they felt had the best analytical skills and who adhered to the highest standards of performance. The outcome was of significant importance to the clients, and there was little room for substandard quality. At the same time, there was an even more compelling reason for the consulting firms’ high standards—the survival of the consulting firms themselves depended on it.
Because of the nature of the projects and because they worked directly for a board of directors, these firms wielded a tremendous amount of power and influence. Their analyses and conclusions exposed poor past performance, mistakes, incompetence, poorly considered decisions, and so on. Their recommendations in many cases affected individual careers, some for the better and some for the worse. The executives whose careers were likely to be negatively impacted didn’t just passively accept the inevitable. They had their subordinates go over every bit of the data, analyses, and conclusions with a fine-tooth comb in an attempt to find something that would discredit the conclusions. Thus, these consulting firms would have never survived had they made mistakes.
It is in this environment that I was schooled, where I practiced for many years, and where I became reasonably competent at it.