I don’t recall ever meeting a successful businessperson that kept a list of dreams. However, they all have a list of goals, supported by clear, measurable plans.
Although many business managers have told me that they are not risk averse, I learned that many need almost 100 percent certainty of success before they execute on an initiative. CEO’s with this belief system have endless lists of questions that stall decision making to the extent that the opportunity has moved on while the grueling evaluation process continues to grind on.
At Philpott, we create a strategic plan each year that is condensed into a one-page Objectives vs. Strategies matrix which guides every employee’s activities. This plan provides the roadmap that I use to steer our team through each opportunity that has an acceptable likelihood to fulfill our objectives through execution of our strategies.
Opportunities can be identified by anyone in the company and are usually communicated to a corporate officer.
That officer generally takes the lead on the project and forms a multidiscipline review team to create a due diligence list. Each listed item is weighted and then graded by each member of the team as information is assembled.
The team leader establishes what may seem to be an unreasonably short timeframe for team members to gather the needed information. However, since our team members are all highly competitive, with few exceptions, this work is completed on time.
Once the information is gathered and assembled, the data is evaluated and a determination is made as to whether or not to move forward with the initiative. When I joined Philpott and introduced this process, many asked, “How will we know when we have sufficient data so that we do not make a mistake?”
First, I explained that our weighting/grading process turns the data into information. Then the rollup of information from all team members creates intelligence on the initiative. Experience has regularly proven that mistakes occur when less than 30 percent of readily available data becomes intelligence through our process, but waiting for much more than 70 percent will ensure that the opportunity has passed.
So, having somewhere between 30 percent and 70 percent of intelligence on an initiative must suffice if a prudent, yet timely decision is to be made.
The 70/30 Intelligence Rule must always account for the most critical variable: likelihood of success. Surely, no one would embark on an initiative where the team composite likelihood of success is less than 50 percent.
Although we are not risk averse, our composite opportunity ranking is usually on the upper side of the 70/30 Intelligence Rule to move forward. In addition, each team member’s rating allows us to separate the skeptics from the supporters of the initiative. If the initiative moves forward, we have identified those on the team who will take the highest ownership and thus exert the most success-assuring energy in the project. ●
Mike Baach is president and CEO at The Philpott Rubber Co.