Strategic Consistency

By strategic consistency we mean the organization’s commitment to implement its chosen plan of action.

Most strategies are long-term in nature, but their implementation generally involves sequences of short-term actions. Successful implementation of such plans often involves short-term sacrifices—just like dieting or hiring a consultant. (Although we like to think that our entertainment value alone justifies the modest fees.)

If short-term actions are chosen expediently, then there is a strong possibility that the stated goal will not be achieved. Na economía, this is known as myopic behavior. In real life, it is impulsiveness or impatience. (In politics, it seems to be standard operating procedure.) Any number of examples will illustrate this ineffectiveness, but we’ll choose two: one familial and one corporate.

Two Examples of Inconsistency

Spoiling Children – most parents do not consciously plan to spoil their children. Their goal is to raise independent, well-adjusted adults.

Claro, failure to do so may be due to dynamic environmental factors or bad luck, g, Robert Frost’s line “…the best laid plans of mice and men go oft awry…,” but we are not interested in this type of failure. We are interested in the internal failure to execute the stated plan to achieve the desired goal.

For many parents, it is just easier and less tiring to spoil their children, especially if one desires the children to be their friends. (Uh, they’re your responsibilities, not your acquaintances.)

Afortunadamente, we’ve never fallen for their childish manipulations, and that explains why we live in the graceful state known as the absence of text messaging.

Near the time of our oldest child’s birth, we saw research that found that on average infants looked more like their fathers during the first six months of life than subsequently. The theory was that this masking was an evolutionary device to keep the father nearby and increase the chance of the infant’s survival. We were struck by the fact that babies could change their skulls—their very bone structures—to manipulate their elders, and we were impressed. We have been vigilant ever since against their attempts at psychological and emotional control (and yet have been voted by those in the know as the coolest parents in the school; por suposto, maybe we were just being manipulated).

In terms of goal attainment, in the long-term, coddling and indulging won’t make them love you more—or even like you more. In other families we’ve seen it lead to that wonderful combination of dependence, resentment, and disrespect—almost the exact opposite of the initial, intended goal.

Relationship Banking – or why buy the cow when the milk is free? In the fifth score of the twentieth century—less grandly, during the 1980’s—many large corporate banks embraced “relationship banking.” The idea was that value could be extracted from customers over the long-term “if they only knew us.” In other words, customers would be more likely to overpay for services and loans if they could experience the pleasure of our company and our company. (Do we need to go any further?)

These beliefs and policies caused many banks to offer cheap loans as loss leaders. Sentímolo, loans and treasury management services are not very similar to crack cocaine; they are not physically addictive, and there are many alternative legal sources.

So what happened? Banks offered loans with below-market credit spreads so that customers could get a taste of their services. Sentímolo (and predictably), this did not induce customers to overpay for the next loan. In fact and instead, it led customers to expect low rates the next time because of their past experience and the fact that many competitors were attempting the same loss-leader strategy. The nerve of those customers acting in their own best interests and foiling our plans!

Somehow the “long-term” relationship was going to create value when nearly every sequential, short-term deal was priced at the marginal cost—at best. Yet, the explanation for not following the strategy (of commanding premiums) was that it was the best way to follow it. This was partly due to the fact that lending money isn’t that much different that selling airline tickets or other commodities. ¹

It was also partly due to the fact that almost all of the lenders were following the same strategy. Although this mimicry isn’t crucial in the outcome, it does make it ironic and humorous and inevitable! ²

Así, one could easily imagine borrowers chuckling as they recall the old relationship adage with the same connotations: why buy the cow when the milk is free? ³

Inferences: what are they good for?

Así, how can one infer an organization’s actual strategy and its consistency with its stated one? Observe the sequence of actions or patterns of behavior. Sometimes short sequences are sufficient; con todo, if the organization is behaving randomly, longer sequences—bigger sample sizes—may be necessary. ⁴ As they have the best information about operations, employees often make these inferences and notice strategic inconsistencies.

Strategic consistency is simply sticking to one’s plans, which is easier said than done.

Managerial Discipline

Managerial discipline is tactically necessary for strategic consistency. It involves the effective implementation of the organization’s plans.

In centralized organizations, it is relatively straightforward, and usually involves doing things and getting things done—perfect for the MoA (man of action) who enjoys meetings, long days, and giving orders. Así, from our perspective given that it straightforward, it is not very interesting.

In decentralized organizations, con todo, discipline often involves not doing things and not taking action—not very good for the MoA who wants to boss and “lead.” Yes, it usually involves that dreaded word—dare we write it—thinking, instead of doing.

En realidade, optimally controlling decentralized organizations often involves committing not to act as well as designing schemes to induce others to act and then monitoring and adjusting those schemes to indirectly influence subordinates rather than the “managing” subordinates directly. That is generally less enjoyable and that is why discipline is required.

Unlike most other types of discipline, managerial discipline is especially challenging because it requires both self-control and empathy (to understanding why subordinates behave as they currently do and project how they will respond to new or revised controls).

It is can excruciatingly painful when it involves letting someone “get away with” some type of dysfunctional behavior, but such discipline on the superior’s part is necessary to provide real autonomy to subordinates. Ademais, the dysfunctional behavior is a response to the implemented controls; así, it flows from the superior anyway.

In our former life as a business school professor we enjoyed discussing a case where the shirking sand-bagger was rewarded (for revealing his private information) and the hard-charging, over-achiever was not because the former behavior was, en realidade, cooperative and the latter’s was not.

Many of the MBAs in the class would howl with indignation over our conclusions. It just didn’t seem…fair, but in the case, coordinating efficient shared resource usage and knowing (and announcing) aggregate earnings estimates with certainty were more important than motivating extreme effort in an attempt to, dicir, increase the mere probability of higher earnings. Así, the firm had concluded that there was no cheaper way of eliciting the essential and valuable hidden information.

The case reminds us of one of our favorite quotes, which we had shared with the students before hand:

“Little is gained from becoming indignant about self-seeking behavior by managers. It is only human for managers to have their own goals and ambitions…. A more productive response is to take as given the manager’s aims, and ask how to design institutions that work as well as possible.”

—John McMillan
Xogos, Estratexias & Xestores

In decentralized organizations, managerial discipline requires the continual awareness and acceptance of this fact, which is simply the human condition. It reminds us very much of the differences between organizations that take then fallen nature of man as a given—though not dooming—and those that believe society could be perfected if only the imperfect ones could be eliminated. Take your choice of 20th century tyrannies with this working assumption, or for the pop-culturally-minded, recall the James Bond movie “Moonraker” from 1979, where only beautiful and smart people had a right to live (once everyone else was killed).

Copyright © 2008 Espero Consultoría

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