By James McCusker Business 101
The biggest advantage of being a business adviser is that it gives you a perspective on many different kinds of businesses and management styles and a close-up look at what works and what doesn’t.
In smaller businesses, an observant business adviser begins to get a sense of what success looks like, its rhythm and sounds, even what it smells like. You will begin to recognize the same elements in a failing business, sometimes before the existing managers and owners do.
Together, these characteristic elements of a business present a different, complementary dimension to the perspective the financial reports provide. They are very important to a business adviser precisely because of this difference in perspective. Sometimes, in fact, it’s all you’ve got to show you the way to turn things around.
Financial reports, when analyzed properly, tell the story of the business and how it got where it is — whether that it is a good place or a difficult one. In the case of a business having some difficulties, the reports also indicate clearly what has to be fixed.
What the financial reports do not do not usually do is answer the question of how to fix things. What will actually work in this company, given the resources available? And since that is the question that business advisers are expected to answer, it is important to have the additional perspective on how the company really functions.
This additional perspective is often called insight. The term has been around for a long time and, in business, and is something that we especially attribute to those who succeed at turning around a tough situation.
Insight doesn’t sound very scientific, of course, and neither does any of that stuff about rhythm, scents and sensibility. In an effort to organize this insight — to capture and bottle it, really — there are a variety of efforts under way to bring more order and science to the process.
One of those efforts involves investigating the role of human habits on behavior and decision-making in business, in sports and in life. Unlike insight, habits lend themselves to statistical analysis. This would be a major advantage by itself, but when dealing with large numbers of people, consumers, for example, it also allows analysts to use computers to do the heavy lifting.
An excellent book on the subject is “The Power of Habit” by Charles Duhigg. It is not a scientific tome filled with diagrams and exciting photos of rodents accepting or rejecting cheese or breakfast cereal morsels under various controlled conditions. Mr. Duhigg is an award-winning journalist, and brings an admirable level of common sense to the subject and in so doing keeps it alive and exciting.
The book uses a wide-ranging perspective on habits and discusses everything from individuals trying to quit smoking to a history lesson on how Pepsodent tooth paste changed America. There is also an interesting discussion of the role of habit in Starbucks’ success, and how it continues to affect recruiting as well as strategy.
One of the particularly interesting chapters relates the experience of football coach Tony Dungy, who had experienced great difficulty explaining his coaching theory when he was interviewing for head coaching jobs.
Like so many successful methods, his idea was simple enough. Dungy said that it was hopeless to try to get players to abandon their old habits. Instead of getting rid of those habits he was just going to change them.
The psychological theory behind how he planned to change players’ habits is explained in terms that even a business consultant can understand, and is worthwhile knowledge for any of us who are responsible for the performance and well-being of others.
Dungy’s method was remarkably successful and his years as head coach of the Indianapolis Colts were marked by a record-setting number of wins that included a Super Bowl victory in 2007.
There is no doubt that habits, personal and organizational, are a key part of why and how a business succeeds, stumbles or even fails. They are also an important reason why business management itself doesn’t understand the problem in a way that leads to a solution. We often don’t see our own habitual forms of behavior for what they are and without that perspective it is very easy to lose traction.
There are different ways to get that perspective. A stumbling business can bring in a new CEO just as a faltering team brings in a new coach. And some businesses turn to business advisers.
However a business chooses to obtain that perspective and turn things around, though, it is important to do so quickly. As legendary NFL coach Vince Lombardi put it, “Winning is a habit. Unfortunately, so is losing.”
James McCusker is a Bothell economist, educator and small-business consultant. He can be reached at firstname.lastname@example.org.