Key point from this chapterActing too quickly probably causes more bad choices than anything else. There are three rules to follow, if you want to avoid this trap:
1. Beware of solving problems too quickly because of time pressure.
2. Don’t make choices quickly if you’re under stress.
3. Slow down when you’re overly enthusiastic about something.
Beware of solving problems too quickly because of time pressure
To see how this can create horrendous problems for us, let’s examine a hypothetical business situation, and see what can go wrong when decisions are made under time pressure:
CASE STUDY
You’re the president of a 140-store chain of sporting good stores, most of them west of the Mississippi and in the Northeast. Although it’s a competitive business, it’s going well. You’re in the middle of a large expansion program, business is good, the sun is shining, the birds are singing, and you’re feeling great—until your vice president of finance comes to you and says, “We’ve got a real cash flow problem. It’s February the 15th and we’ve just had the worst ski season in the last 25 years. Hardly any resort in the country opened up before Christmas, and with so little snow, it’s been a disaster all across the nation. We’ve got a 10-million-dollar excess inventory in ski equipment. We can’t make the interest payment on the 50-million-dollar expansion loan that’s due tomorrow, and the bank won’t extend it. What are you going to do?”
If the last words a pilot always says before his plane crashes are “Oh, no!” then the last words a company president speaks before his company crashes must be “Why wasn’t I told?”
This turns out to be a little problem that just kept on growing, until it became a monstrous problem. Your ski buyer is one of the best in the industry. He cleverly inserted a weasel clause into all his contracts, so he could cancel or renegotiate in the event of poor snow. That’s fine, and because of the bad snow conditions, he planned to take advantage of it.
However, the night before he planned to cancel the orders, he got arrested for drunk driving, and called in with the flu. Preoccupied with his problems, he missed the deadline to cancel. Because he was covering up his arrest, he didn’t tell anybody. He lit candles in every church he passed, though he wasn’t Catholic, and wore his knees out, praying for late snow to bail him out. It never came. Now it’s so late in the season that a clearance sale wouldn’t generate enough cash to pay for the advertising.
The president tells the CFO, “I need time to think about it.”
He says, “You don’t have time! You’ve got to do something now! If we don’t make the three-million-dollar loan payment tomorrow, the bank will call the loan into default. The financial papers will pick it up on the first-quarter projections and our stock is going to drop in half. Let me remind you, that would mean a personal loss in net worth to you of more than $15 million.”
That’s the kind of real-world situation for which they don’t prepare you in business college: the major decision that has to be made under time pressure, when you’ve pushed all the chips into the middle of the table.
Under time pressure we make several mistakes:
1. We attempt to speed decisions by getting less input. We rush to accounts receivable to see what cash we can bring in fast. However, we’re in such a hurry that we don’t check the accounts payable.
There, we’d find we hadn’t yet paid for three million dollars worth of the ski equipment. They cut the check and charged it against the books, but didn’t mail it yet.
That information might be all we need to solve the problem. I’ll tell you why in a minute.
2. We analyze information less thoroughly. We might assume the ski inventory is scattered around the country, in our stores. That’s where it’s supposed to be, on February 15th. Given more time, we’d have found most of it sitting in a warehouse in Oakland.
That information would expand our options. We could ship it to New Zealand in time for their ski season, or have a clearance sale at the warehouse. In one location, the advertising costs would be much less.
3. We overlook important information. We may forget the drawing for a ski trip to Argentina that we held last spring. That gave us an e-mail database of 5,000 Bay Area ski customers. Within 48 hours we could e-mail out a sale notice to them.
4. We tend to slim down the list of possible alternatives. One option may be renegotiating the lease payments of the stores to improve cash flow. If the bank saw we were doing that, they might renegotiate the loan.
However, under time pressure, we dismiss it. “We’ve got 140 different landlords,” you say. “We don’t have time to go to them all.”
5. We tend to consult with fewer experts. We may know that Charlie over at Universal Sports had this happen to him once. If we could get him on the phone, he may be a big help to us. However, Charlie is scuba diving in Belize and can’t be reached, so we dismiss that possibility. If we had more time, we’d track Charlie down, or find somebody else at his company who knew how the problem was resolved.
6. We tend to get fewer people involved in the problem-solving process. “We don’t have time for an executive committee meeting,” you’re thinking. “I’ve got to earn my pay and make a bold decision now.” With more time, we might get some very valuable insights by getting the regional managers involved in a conference call.
7. We tend to jump at the first solution that looks right. Now it’s 11:00 at night and everybody’s thrashed. Your office is a sea of computer printouts and empty pizza boxes. Your executive vice president is saying, “I hate to do this, but it looks as though we’re going to have to close a bunch of stores. Here’s what we should do. Call a press conference in the morning and announce that we’re closing the 40 least-productive stores. With that, the bank will renegotiate the loan. The stock analysts will love it, and our stock probably will go up $10 dollars a share overnight.”
You say, “But that would be a debacle, half our top store managers would jump ship in the panic. You know they’ve been approached by headhunters as it is. Besides, we’d ruin the relationships we worked so hard to build with our suppliers!”
“Would you rather file a Chapter Thirteen? That would hold off the creditors and give us some breathing room.”
“I’ll never do that,” you sigh. “Let’s call the press conference. Which stores are we going to close?”
Because you solved the problem under time pressure, it was a bad decision. If you had spent more time, you’d have done better. You’d have learned about the negotiating leverage that existed, because you hadn’t yet paid the ski suppliers. You could have gone to the supplier and negotiated a deal where they’d cancel the three-million-dollar invoice, rebilling you on September 1st. Then you arrange a massive pre-season ski sale at the San Francisco Convention Center, for Labor Day weekend. You move the merchandise into a separate corporation that you set up, which gives you collateral against which to borrow, and frees up the pressure on your existing inventory.
And because this is a fantasy, we might as well make it a good one. The Labor Day sale is such a huge success, the following year you hold pre-season clearance sales in convention centers across the nation. You promote the event on cable TV, with the show hosted by the nation’s top ski racers. It becomes the most successful event in sporting goods history.
That’s the way it should have gone, but instead it all went down the tubes—because you tried to solve the problem under time pressure.
Beware of being overzealous. Have the patience to understand that making the right choice may take time.
Examine the possibility of going with a temporary solution, rather than committing to a long-term answer. What would give you breathing room?
If you are forced to make a rash decision, be sure that when the pressure’s off, you take another look at the problem. See if there aren’t additional solutions.
When you’re forced to make a decision under time pressure, you’re usually better off to defer the decision, until you feel comfortable making it—in spite of the pressure you’re under. It isn’t always the right thing to do, but it’s the right thing to do enough of the time, to make it a good rule.
Don’t make choices quickly when you’re under stress
I learned the second rule the hard way: I don’t make decisions if I’m angry, if I’m depressed, or if I’m not feeling well. That rule has so often served me well. For instance, I’ll be driving down to my office just boiling over with anger at a secretary. I can’t believe she’s made this mistake for the 10th time, and I feel like storming in there and reading her the riot act until she quits. Then I remember I’m not feeling good that day. Perhaps I’m coming down with something, or I’m tired because I’ve just come off a long speaking tour. I back off, and say to myself, “I’ll take another look at this tomorrow, and see if I still feel the same way.” I’ve never regretted being cautious like that.
If you’re angry, depressed, or not feeling well, just learn to cool it. Just calm down, let some time go by, and see how you feel about it the next day. When you look back at it, you usually say to yourself, “Wow, I’m glad I didn’t make any choices when I was feeling the way I did yesterday.”
Slow down when you’re overly enthusiastic about something
Rule number three shows that feeling too good can also be a detriment. At my company we have a standard line when we find we’ve made a bad choice: “Wow, you must have been feeling good when you made that decision.” If you feel really good about something, slow down—because enthusiasm can blind you. If it feels too good to be true, it probably is too good to be true.
The time for enthusiasm is after you’ve made the decision, not before. Once you’ve made the decision, then your enthusiasm can sometimes make even a poor choice work. But enthusiasm before you make a decision is inviting disaster.
Key point from this chapter
Beware of solving problems too quickly because of time pressure.
Don’t make choices quickly if you’re under stress.
Slow down when you’re overly enthusiastic about something.