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|In: Business Ethics|Last Updated:

I first discovered the business significance of AND logic while participating in the redesign of my then-employer’s capital approval process. Among our findings: A $25,000 proposal required at least five approvals — the immediate manager, followed by the department head, division head, CFO and CEO. All had to agree — AND logic at its finest.

The average $2.5 million proposal, in contrast, required only three — the division head, CFO and CEO. The practical consequence? My employer had 67% more opportunities to reject simple, low-risk, high-return investments than large, risky endeavors.

All in the name of control.

Organizations grow and thrive on YES decisions. YES is how they increase revenue, decrease costs, increase speed and agility, improve quality and add excellence.

YES decisions also create risk, because every one proposes a change of some kind. Change isn’t safe. It always includes the possibility that no matter how good it looked in the PowerPoint, and how carefully everyone involved with it planned, designed, engineered and built, it might not work out.

The typical mechanism organizations use to mitigate risk is the veto. It’s requiring some number of individuals to independently decide whether the risk is worthwhile, and if any one of them doesn’t think so then the proposed change never sees the light of day.

In practice, it comes down to getting signatures. And in practice, this usually means that the process designed to mitigate risk instead becomes the process through which the organization plays favorites. You know how it works: If the proposer is, or works for, someone who is in the inner circle or is one of their proteges, then signatures become rubber stamps.

If, instead, the proposer is unknown or works for an unknown then it receives scrutiny usually reserved for the scene of a murder on CSI. And if the proposer works for someone who has annoyed anyone whose signature is required, rejection is automatic.

What’s the solution? That depends on how you define the problem.

If your company’s goal is to make its investment decisions as fairly as possible, then its governance process should look a lot like how radio stations make hiring decisions for their announcers: Applicants speak behind a screen, so that if you have a “face for radio” it won’t bias the interviewer. Similarly, a fair governance process operates on paper, and all proposals are anonymous so that nobody has a chance to play favorites.

Fairness is, however, an overrated virtue. Among its defects are its speed, which can be glacial, and its expense. In business, you’re more likely to set a different goal — to invest in the most promising proposals. Fairness might be a means to this end, but often it isn’t.

If you don’t accept this, imagine you’re evaluating two competing proposals. One comes from an associate with whom you’ve worked for more than ten years — someone you know well, like, and trust. The other comes from an outside vendor — a company that’s unknown to you.

If you ran a fair process you’d perform the exact same due diligence on both proposals. But you’ve already performed ten years of due diligence on your trusted associate, so your first step is deciding whether considering the unknown company’s proposal is worth any time and effort at all.

That, rather than the apostrophe, is the crux of the biscuit: The only difference between trust and favoritism is whether you’re among the trusted few or the anonymous many.

Here’s a nit to pick: In business, trying to invest in the most promising proposals … the best ideas … is pointless, for two reasons: Uncertainty and multidimensionality.

Uncertainty is an issue because the business justification included in every proposal is, at best, an estimate with a sizable error bar. “Best” implies a level of precision that isn’t available to you.

Multidimensionality means that every proposal has more than one justification — more than one reason for pursuing it. These different reasons have different levels of importance for different decision-makers, so “best” depends on which chair you’re sitting in.

When it comes to corporate governance, it’s best to set the bar a bit lower. Just trying to make sure every funded and scheduled proposal is worth pursuing is tough enough.

To achieve even that requires an executive team that operates as a team — whose members like and trust each other and who have a common purpose — rather than a roomful of rivals.

As CIO, you can’t make this happen. That’s the CEO’s job.

If your company doesn’t have one of these you’ll have to work toward the next best thing: Making sure as many of the decision-makers as possible like and trust you.

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|In: Industry Commentary|Last Updated:

Ongoing issues, discussions, and brick-a-brak:

Some facts: Earth’s radius = 3,950 miles. One mile = 63,360 inches. Surface area of a sphere = 4*pi*radius^2. Atmospheric pressure at ground level = ~14.5 pounds per square inch.

Estimates (from various Googled sources): Human oil consumption per year = 30,660,000,000 barrels. One barrel = 252 pints. A pint’s a pound the world around. Human coal combustion per year: 6,500,000,000 tons. Oil and coal = mostly carbon. Carbon’s atomic weight = 12. Carbon dioxide’s atomic weight = 44. Atmospheric CO2 concentration = 380 parts per million.

With these facts, any middle school student should be able to compute the weight of the atmosphere and how much CO2 humans add to it annually (38 billion tons = 6.66 parts per million = 1.8%).

The connection to everyday business situations: As with global warming, every business decision (whether to replace an aging system, for example) depends in part on who has the burden of proof. Usually, those who recommend action bear it, as “do nothing” is the default decision, but that’s just habit. For global warming, I’d say the arithmetic places it squarely on the other side.

Choose carefully in your business decisions.

Holiday card follow-up: To disapprove or not to disapprove, that was the question I asked. Several readers suggested that disapproval is quite appropriate. Using my Tiger Woods/Britney Spears example to illustrate, they contended it makes sense to choose carefully who you emulate.

Personally, I don’t think you should ever choose who to emulate. Few people are entirely admirable in every aspect of their character and behavior, so we’re all better off figuring out what we admire about someone and emulating that. Figuring out who we admire and emulating everything about them is worse than a bad idea. It’s creepy.

Something not to emulate: my spelling. The correct version is “Britney.” Sorry, ma’am.

A really bad trend: Using compliance as an excuse. “The auditors require it.” “We might get sued.” “Sarbanes/Oxley won’t allow it.”

First of all, if it’s a good idea, Sarbanes/Oxley almost certainly does allow it. It simply requires that you document it to death. Likewise your auditors. As for getting sued, yes, you might. While you’re more likely to get sued if you do something you shouldn’t, American jurisprudence allows anyone to sue anyone else, for almost no reason at all.

If you allow the risk of being prosecuted for breaking the law to stop you, you might ask why you think breaking the law is a good idea in the first place. But if someone allows the risk of some bottom-feeder suing them to stop them from making prudent business decisions, shame on them. Businesses shouldn’t put anyone this timid in charge of anything important.

Our ongoing obsession with metrics: When setting goals, many consultants advocate the SMART formulation from Paul J. Meyer’s “Attitude Is Everything.” SMART stands for “Specific, Measurable, Attainable, Realistic, Tangible.”

So here’s a question: If you choose to be SMART, will you ever decide that customer satisfaction matters? After all, it isn’t specific, is exceptionally difficult to measure, and is largely intangible.

For most businesses, it’s also the single most important determinant of success.

From the Department of Contractual Stupidity and Sleaziness: Here’s some standard boilerplate you’ll find in huge numbers of privacy policies:

“[Company name] may modify this Agreement’s terms and conditions at any time without notice. Continued use of the Services and the Site after a change in this Agreement, a change in the Privacy Policy, or after implementation of any other new policy constitutes acceptance of such change or policy.”

Don’t they know how slimy this makes them look? Especially since many of these websites provide no way to contact a human being.

In the same category, my new digital camera, an otherwise fine piece of equipment, allows me to install the accompanying software on only a single computer. The question: Why on earth do they care? The software is only useful with the camera.

A final PowerPoint question: We’re all agreed the world has seen lots of bad PowerPoint. Three questions remain. The first is whether this is just another example of Sturgeon’s Law (90 percent of everything is crud). The second is whether the bad presentations that made use of PowerPoint would have been even worse without it.

I suspect the answers are yes and yes. Many who aren’t professional presenters still have to present from time to time. What matters isn’t whether PowerPoint makes their presentations good. It’s whether it makes them better than they’d have been otherwise. So the third question is what we should consider to be the default assumption.

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