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Paralysis by Analysis - Don't let your Leader-ship be wrecked on the reefs of Indecision


Don't let your Leader-ship be wrecked on the reefs of Indecision

Late evening, September 15th 2008. Lehman Brothers had not been bailed out by its lender of last resort - an outcome that sent shocks through the global financial system. Posterity would judge that despite all their experience, Ben Bernanke and his team at the Federal Reserve had got their response dead wrong. But posterity, right then, was the farthest thing on my mind. Reality, years spent in the pressure cooker atmosphere of a trading floor had taught me, is rooted firmly in the here and now. It needed to be dealt with. 

Sitting in my room looking through the glass wall into our trading area that night, I could see the shocked uncomprehending expressions on the faces of my traders and salesmen. Over the days, months and years that would follow, as the true impact of Lehman played out across markets, we would all learn valuable lessons in managing a crisis. Indeed, this was to turn out like no other crisis in the history of financial markets. Over the next decade or so, careers would be ended, lives destroyed, and economies broken. 

But back in September 2008 I didn't know all this. What I was acutely aware of however, having already been through a few regional and global crises in my career, that neither our trading books nor client positions were equipped to handle the tsunami of extreme reaction that would invariably follow. As the market absorbed the news, I called in our head of sales, and we together got on the telephone with a few of our largest clients. Our advice to them was unequivocal - liquidate your positions to a level where your cash flow can absorb the loss, assuming a fifty-percent negative impact on the positions. I conferred with our traders and we agreed to similarly manage their own positions keeping our annual stop-loss limits in sight. 

That year, our total revenues from trading and sales dropped for the first time after half a decade of remarkable growth. But none of our customers defaulted on their dues to us that year, and our quick action on reducing trading positions prevented serious damage. The entire team lived to see another day. 

It was more than could be said about many other organisations in our space. For some, the positions had just been too large to liquidate. But for most, the major villain of the piece had been inaction, what I call paralysis by analysis. By the time the leaders were done analysing possible scenarios, the rude shock of reality had far overtaken the worst outcomes predicted by their analysis. 

This is a scenario that played out throughout the world. The impact of an unprecedented financial crisis had been exacerbated several times by the failure of the leadership to act quickly and decisively, mainly because they were reluctant to act without the benefit of full information. 

And that for me would be the key leadership lesson that came out of the reactions to the Lehman crisis - as leaders, we never operate with complete information. So when we decide to wait until we have fully analysed the situation, the proverbial horse has inevitably bolted. 

Psychologist Barry Schwartz calls this general phenomenon the Paradox of Choice. He maintains that choice in the modern world has made us not freer but more paralysed, not happier, but more dissatisfied, and while increased choice allows us to achieve objectively better results, it also leads to greater anxiety, indecision, paralysis, and dissatisfaction. In business, as leaders we have allowed access to information to paralyse us by getting bogged down by analysis.

Australian Greg Norman is one of the greatest golfers of all time. He won 90 titles worldwide. And yet, what he is often remembered for is a spectacular failure. In 1996 at the Augusta Masters, Norman had a comfortable six stroke lead on rival Nick Faldo going into the last leg of the competition. Then Norman fell apart. At every stroke, indecision gripped him. He fidgeted uncomfortably, taking inordinate time before every single approach shot. Nick Faldo would later say: 'I could feel the nervousness emanating from Greg. He gripped and regripped the club, as though he could not steel himself to hit the ball.' By the time they were done, Nick Faldo had won his third Green Jacket by five, improving on Norman's score by eleven incredible strokes. A classic case of paralysis by analysis had cost Greg Norman a certain victory.

The military is not immune to the effects of leadership paralysis. In 2007, Ant Middleton was leading a British Royal Marines mission to track down a Taliban commander in Afghanistan. Bullets from an AK47 started flying out of the door. Middleton’s job was to run through the door the moment the bullets stopped. Standing there, waiting for the bullets to stop, he restarted the analysis of possible outcomes despite agreeing the plan of action with his team. Inevitably he froze, legs refusing to move. 

The team member behind Middleton put his hand on the leader's shoulder in assurance that he was not alone, and quitely reminded him they had a plan that would work. Middleton and his men stormed the house and captured the Taliban commander. Ant Middleton was lucky to have that team member to shake him out of his paralysis, and he thereafter found a way to move forward when fear and indecision threatened to paralyse him into inaction. 

So how do we as leaders avoid paralysis by analysis? There is no easy answer to that questions as all our journeys are uniquely individual. But as in all the learnings we speak about in this #OutsideInsights series, there is no teacher more reliable than experience. And that experience doesn't always have to be your own.

I have had almost three decades of opportunity to learn from my own failures and successes in decision making. When I put that in context with conversations over the years I have had with other business leaders, high achievers from elite sports, fighter pilots and commando leaders, there is a clear pattern of success that emerges. 

Isolate the Moment - When we are faced with a crisis or at a crucial 'make or break' moment, nothing around us, including other critical business decisions, matters. It is not different to an umpire or a batter in cricket focusing on the bowler's hand at delivery point. Everything else, in that moment ceases to exist, except your reaction to what faces you. In the batter's case, a hard red leather ball hurtling at you at up to a 100 miles per hour. In yours, a crisis that could make or break your business.

Think Positive - This is Your decision, and Your Team's future on the line. So avoid negative people around you, negative thoughts, negative talk, as you prepare to take that decision. Desist from seeking more opinions. This is not the time for consensus. Constantly think positive thoughts and tell yourself that you can do it. Go a step further and assure yourself that the decision you are taking is the ONLY correct one to ensure a positive outcome. A decision in a crisis, remind yourself, is far better than no decision in a crisis. 

Listen to your Instinct - If there is a time to 'trust your gut', it is this. There is a reason for this piece of advice. What we call 'instinct' or 'gut feel' is not a random gambler's 'feeling'. Instinct in a leader is a sum total of their career experiences that the brain processes better than any computational power on earth, and turns into a suggested reaction to the situation at hand. Three decades leading teams in environments with very high financial stakes taught me this above all else - your instinct is rarely wrong if you listen to it carefully and consistently. 

Step Back to Press Forward - While it's important to avoid paralysis by analysis, its also good to remember that you do need to give your brain time to process the situation, and allow it time to go through the steps outlined here. Quick decisions, are mindful decisions, not mindless ones. If you are overwhelmed by the situation, and need to allow your brain to take stock, don't ask for more information. Go into a room, take deep breaths and relax. If possible, take an unhurried walk around the block. Then come back and make the decision. 

Leadership is not easy, and decision making under extreme pressure is one of its most difficult challenges. But if paralysis ever threatens to overwhelm you at such moments, just remember this - there are no right or wrong decisions, only optimal ones. Chances are it might save your leader-ship from being wrecked on the reefs of indecision. 

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