Choosing between investments
Regulated business are limited by their ability to charge customers, a requirement to delivery to a minimum standard and or provide a social contribution. Often all three. Choosing between investments means , limited capital and a fixed period for returns to flow between one investment cycle and regulator review. Two levels of pressure here means cultural avoidance of making a mistake.
In this respect decision making feels and is , more about minimising risk in favour of PERCEIVED certainty. When you think you will be penalised for underperformance , and publicly so in regulatory review terms, behaviour shifts toward safety.
This business had a choice of several investments. The competition between department heads and capital funds led to reduced rational decision making and increased use of analogy, loss aversion and culturally challenging behaviour.
How to sort this :
- Take the name from the paper , discuss as ” investment 1/2/3 etc”
- Reduce and or stop the use of generic , out of date and inaccurate analogies.
- Help the business spot new lines of business which had gone unnoticed because there was no history
- Be outside the conversation to help you see what the business isn’t as well as what it is….
Three simple but highly impactful outcomes :
- A cohesive approach by the team
- Two new lines of business being explored
- Better future proofing
- Increased co operation and support for those approved
Being aware of unhelpful decision making approaches which weren’t aligning effort to value is where most cultures breakdown, we spend 5 times longer avoiding change than driving toward it- this is a lot of push back to navigate. Individuals believe they have seen “this” before and cast the old, out of date and often inaccurate analogy across all the new decisions they are asked to make. If it went badly previously, they will give it the swerve-withheld their support.If it went well they will falsely attribute all the success to the original decision and take no measure of changes in the market, competitors economic trends … etc etc etc