2006-04-29

Respect Facts

A very important attribute usually associated with an MBA and more so with a consultant is that he is fact based. While developing an intuition on one’s own business is an important way of managing business, doing so at the cost of facts is a dangerous path.

Facts reveal a lot of things, including the biases and prejudices that people operate out of. There was a presentation being made by a consulting firm to us when we were at ISB. The firm was mandated by a board of directors of a company to give a plan to reorganize the company. The consulting firm gathered all facts only to realize that there was no way to bring back the company to be competitive. If at all the shareholders had money, they are better off investing the money in starting a new company rather than investing in the current one. The facts gave out such story. The consulting firm made a presentation to the board suggesting that the company be closed down. If the company itself were to do a similar exercise there was no way the board would have come to such conclusion because its biases and incentives would have come in the way of reaching the optimal and fact based decision. The fact based decision, in this case the closure of the company, will only mean one thing – not wasting any more of the shareholder money.

Respecting facts is an important way of adding shareholder value.

PS:

=I am not saying that the implications of a decision such as closure of a company would be as easy as making a recommendation / presentation. The repercussions could mean laying off a number of people, maybe violating industrial laws of the country, losing the company’s brand equity (if any) in the market, et al. But the issues of continuing with running the firm will bring its own set of problems.

=Gathering facts also is not easy. We can never get all the facts. We usually sample. What samples and from whom we collect them are again not necessarily fair; the process can be driven by our biases.

= I am also not saying that intuition needs to be ignored. I have made many personal and professional decisions on intuition, but over emphasising on intuition can be a wrong game. i have learnt this during my MBA program. Also, accepting whatever is given to you as facts is pretty naive. Questioning is one of the most important of skills.

5 comments:

Kapil said...

having all the facts before makin a decision is a luxury people odn't have..ppl have to wrk with half baked info,misleading figures and wht not...so the role of experience and intution cannot b downplayed either...funny u shud post abt it..i was just discussin somethin on this topic wid a senior colleague of mine.

Vinay (a.k.a Resolute) said...

Agree with your point Vijay but facts themselves keep changing and evolving. If one were to base decisions solely on existing facts, new ideas would not necessarily emerge. Had Copernicus taken the then existing fact that Earth was the center of the Universe at face value , he possibly could not have thought about the heliocentric theory (though he would have probably saved himself the Clerics' wrath ;)
Respect facts - sure, but not without challenging them!

itheabsolute said...

hi kapil

i have myself taken a lot of important decisions (personal and professional) based on intuition. it is important to corroborate intuition with facts. if u do optimization course you will realize that a lot of times intuition will also let us down.

hi resolute

i am not saying that u should not challenge facts. if you dont, then there is no progress. but taking whatever is given to u as fact is smacks of naivete. being discrete is important too.

cheers

Vineeth Kumar said...

Sir,

Hope all is well...when do you join DiamondCluster? I would start the Journey day after; my vacation formally ends today.

-Vineeth.

itheabsolute said...

hi vineeth

doing fine dear. hope u r doing fine too. all the best for your assignment. i am joining on june 1. guess our paths will cross some time....

thank u.

cheers

2006-04-29

Respect Facts

A very important attribute usually associated with an MBA and more so with a consultant is that he is fact based. While developing an intuition on one’s own business is an important way of managing business, doing so at the cost of facts is a dangerous path.

Facts reveal a lot of things, including the biases and prejudices that people operate out of. There was a presentation being made by a consulting firm to us when we were at ISB. The firm was mandated by a board of directors of a company to give a plan to reorganize the company. The consulting firm gathered all facts only to realize that there was no way to bring back the company to be competitive. If at all the shareholders had money, they are better off investing the money in starting a new company rather than investing in the current one. The facts gave out such story. The consulting firm made a presentation to the board suggesting that the company be closed down. If the company itself were to do a similar exercise there was no way the board would have come to such conclusion because its biases and incentives would have come in the way of reaching the optimal and fact based decision. The fact based decision, in this case the closure of the company, will only mean one thing – not wasting any more of the shareholder money.

Respecting facts is an important way of adding shareholder value.

PS:

=I am not saying that the implications of a decision such as closure of a company would be as easy as making a recommendation / presentation. The repercussions could mean laying off a number of people, maybe violating industrial laws of the country, losing the company’s brand equity (if any) in the market, et al. But the issues of continuing with running the firm will bring its own set of problems.

=Gathering facts also is not easy. We can never get all the facts. We usually sample. What samples and from whom we collect them are again not necessarily fair; the process can be driven by our biases.

= I am also not saying that intuition needs to be ignored. I have made many personal and professional decisions on intuition, but over emphasising on intuition can be a wrong game. i have learnt this during my MBA program. Also, accepting whatever is given to you as facts is pretty naive. Questioning is one of the most important of skills.

5 comments:

Kapil said...

having all the facts before makin a decision is a luxury people odn't have..ppl have to wrk with half baked info,misleading figures and wht not...so the role of experience and intution cannot b downplayed either...funny u shud post abt it..i was just discussin somethin on this topic wid a senior colleague of mine.

Vinay (a.k.a Resolute) said...

Agree with your point Vijay but facts themselves keep changing and evolving. If one were to base decisions solely on existing facts, new ideas would not necessarily emerge. Had Copernicus taken the then existing fact that Earth was the center of the Universe at face value , he possibly could not have thought about the heliocentric theory (though he would have probably saved himself the Clerics' wrath ;)
Respect facts - sure, but not without challenging them!

itheabsolute said...

hi kapil

i have myself taken a lot of important decisions (personal and professional) based on intuition. it is important to corroborate intuition with facts. if u do optimization course you will realize that a lot of times intuition will also let us down.

hi resolute

i am not saying that u should not challenge facts. if you dont, then there is no progress. but taking whatever is given to u as fact is smacks of naivete. being discrete is important too.

cheers

Vineeth Kumar said...

Sir,

Hope all is well...when do you join DiamondCluster? I would start the Journey day after; my vacation formally ends today.

-Vineeth.

itheabsolute said...

hi vineeth

doing fine dear. hope u r doing fine too. all the best for your assignment. i am joining on june 1. guess our paths will cross some time....

thank u.

cheers