It’s one thing to have a sharp vision about where you want to go. It’s another thing to maintain visual acuity when conducting oversight over where others want you to go. How Group Decisions End Up Wrong-Footed, Jason Zweig’s column in the Wall Street Journal of April 25 examines myopia exhibited by some corporate fiduciaries during the financial crisis as they considered the selection and recommendations of “expert advisors.”
Healthcare leadership teams, often using clinical and technical experts, determine strategic organizational direction. Financial advisors, architects, strategic consultants, and executive recruiters among others can contribute substantially to this process. But the checks and balances between leadership teams and their advisors must remain intact. We can learn something from Zweig’s insights into what went wrong for these teams in the recent economic turmoil.
Oversight Team Oversights
Jason Zweig’s WSJ column takes a sober look at the less than stellar performance of investment committees, boards, compensation committees, and regulatory commissions – some of who relied upon outside advisors to guide them – in making or approving decisions to invest in risky, illiquid, and poorly diversified instruments or to inordinately compensate executives who took these risks, all in pursuit of above market performance. Unfortunately, achieving good investment returns only represents one component of fiduciary responsibility – the other being safeguarding the financial and managerial foundation of the organization. Same holds for us of course.
So the important lesson here is about the failure of otherwise high functioning fiduciary groups to use reasonable oversight to avert catastrophic investment decisions even when recommended by their advisors. If that can happen in financial circles, healthcare organizations – which are also heavily reliant on expert advice rendered to high functioning teams – are not immune to similar failures. Zweig suggests that (health care) leaders can use disciplined managerial principles to decrease the risk that teams with important delegated decision-making responsibility won’t be led down the wrong road.
Zweig’s principles are simple, intuitive, and easy to follow (or to ignore) in selecting advisors and using them effectively to provide meaningful decision-making oversight:
Measure what makes a success: In this context, Zweig refers to relying on fundamental metrics of experience and past performance when making selections of suitable outside advisors (in our industry these could be financial advisors, architects, technical experts, strategic consultants, executive recruiters) who can potentially exert substantial influence on organizational decisions. If the fundamentals aren’t there, don’t be dazzled by wild testimonials or unsubstantiated reputational claims. If other members of your oversight team are so charmed, be the gadfly on behalf of the team and press for better answers.
Neuter the numbers: Zweig advises that oversight teams develop impartial or objective rating scales for evaluating candidates who wish to be your strategic advisors. Set the criteria, use quantitative as well as qualitative metrics, require each member of the oversight team to rank accordingly, and apply them impartially to more than one prospect. The right choice will emerge and some of the wrong candidates may fold under such scrutiny. Any leadership team member is justified in demanding a dispassionate rating approach to advisors who will be entrusted with making critical recommendations.
Reframe the question: When considering sensitive and far-reaching decisions, a well functioning team should not rely only on the framing of its advisors. With expert input in hand, Zweig recommends the team identify the key issues and prepare and discuss “pros” and “cons” using internal subgroups charged with developing the most compelling arguments on both sides. So whether it’s a decision on a new service, market, device, leadership recruitment, or investment, leaders who are responsible for implementation and results should make and decide the final arguments from the organization’s strategic perspective.
Use “the five whys”: In other words, don’t take advice on face value. Through your questions seek detailed, logical, and consistent responses that will build your confidence in a good decision. And, by the way, will enable you to explain the rationale for the decision in great detail to others who will be impacted by, but were not involved in making the decision. Advisors who cannot join you in that pursuit are suspect.
Define the default position: Know the “default” path to be taken in the absence of compelling reasons to alter the organization’s chosen strategy or operating plan. With that in mind, it’s possible to examine alternate recommendations from the perspective of what is to be gained, and risked, by deviating. This sets the bar for any advisor’s recommendations. In the absence of a default, your leadership team will be adrift and any recommendation from the outside will be a relief and appear to represent progress. As we have seen, it’s not always so. Primary direction and strategy must come from within. If you’re not ready to declare a default, perhaps some visual acuity exercises need to be prescribed to get you closer to 20-20.