Bernardo Lustosa, Ph.D. has a degree in statistics from Unicamp and a Master’s in Business Economics with a Focus in Finance from UCB/DF. He has a Ph.D. in Business from FGV/SP. His thesis was about pricing and stability in innovation networks. He is a Data Mining Professor in the FIA Fraud MBA program, and a Partner and COO of ClearSale S.A. Bernardo is an Endeavor Entrepreneur. He has worked in Data Mining for 14 years, and in fraud prevention for 10.
Your risk as a leader, when decisions are made based on rhetoric rather than reason.
No doubt you have been at meetings where, in a debate, the person that best dominates the rhetoric wins, even if his or her arguments are not the most rational. As a leader, your role is to identify these nuances and look into all possible scenarios before making a decision. This is the message I want to leave with you today.
This article is the result of my observations over almost two decades of meetings with consultants, government and private banks, larger corporations and my own business, where my partner and I head ClearSale, an organization that went from a dozen to eight-hundred employees. I have observed the decision-making process of companies in different stages or growth and employing different organizational structure.
For years, I was in meetings all day, and I can assure you that a key leadership role is to continuously seek reason. The larger the company the harder this is, and the more valuable the leader able to find reasons in the midst of all the multidisciplinary arguments normally present at a meeting.
I always say, and reiterate here, that for all intents and purposes, a company may be understood as a rational being. Economically speaking, a rational being has well behaved expectations - it seeks growth and would rather have more than less. In practical terms, this means companies may be understood as a sequence of decisions, and there is always a decision (or a small set of decisions) that will maximize the organization's value. These are the rational decisions, and companies must not deviate from making the right ones.
A KEY ROLE OF LEADERS IS TO IDENTIFY THE RATIONAL DECISION TO MAKE, EVEN IF HE OR SHE DOES NOT HAVE ALL THE INFORMATION AVAILABLE
The less concrete information available, the more a leader must use his/her intuition, which is also very important. However, a second element adds to the complexity of the matter - rhetoric.
SOME SAY A GOOD LEADER IS A GOOD COMMUNICATOR. I DISAGREE.
A good leader has more to do with making the right decisions to complete a mission and positively influence a group of people to do the same.
In my view, communication is an important leadership skill, one that makes a leader's job easier, but to lead is not merely to communicate. Here are some examples. Brazil's largest entrepreneur (in financial terms) is not a great communicator. On the contrary, he is shy and reclusive, but has an expanded vision and makes the very best decision at each step. At the other extreme, a globally recognized failure of Brazilian entrepreneurship is a great example of communication without substance, and convinced millions of investors to spend their money with little or no rational foundation. If leadership and execution were synonymous with communication, we would be far better administered in this country that what we see round us today, as we all know that politicians communicate rather well.
TOGETHER, REASON AND RHETORIC ARE OUTSTANDING AS THE LATTER HELPS EXPLAIN AND UNDERSTAND THE FORMER. THIS MAKES IT FAR EASIER TO MAKE SAFELY MAKE DECISIONS
However, when rhetoric and reason are seated at different positions of the desk, your role is to uncover the rational argument, no matter how difficult this task may prove.
The reason is a clear causal relationship. It has to do with looking at all possible scenarios and the potential outcomes of each one. Rhetoric may come with cute phrases and long contexts, inducing others to thoughts, and feelings. It often uses metaphors, we all buy into metaphors, but beware.
Let me give you an example. We have all heard that "costs are like nails, you have to keep them trimmed".
This metaphor would induce us to believe that costs grow constantly, with no control. But is that correct? In any minimally organized business, costs only increase with budget approval, therefore each additional cost is the result of a decision you made or failed to make. If costs went up where they shouldn't have, we already have a failure in the rational decision making process. High costs must be cut of course, but an unjustified cost reduction could place the very sustainability of your business at risk, as someone will certainly feel the effects of this cut, perhaps your client, either directly or indirectly. I have watched the benefits my credit card offered being cut, one by one, about every half-year or so. It took me two years to switch to another card, but I did. I keep wondering about the meetings and the decision-making processes that resulted in cutting these benefits. Did they use metaphors? What I am trying to say is that costs may be cut or they may go up, but not because "they are like nails". Each scenario has its own set of consequences.
Think back and you have likely seen something like the following hypothetical meeting: two opposing arguments on different sides of the desk. At first, nobody knows who has the rational argument, however as the creator, I know it is John, who is shy, does not explain himself well, uses short sentences, does not place things into context and is constantly interrupted. Joe has the rhetoric but not the reason, he also is a good articulator and has more power. Often, I have seen the one with the rhetoric carrying the meeting and, as a result, the decision made was the worst decision. This is a tragedy. John was unable to question non-rational arguments. He simply blushed, said it was not going to work, looked around for support then shut up and gave up. I once heard a saying in Argentina that many people use in practice: "Never discuss with an idiot, it's not clear who's who from the outside". This is how Joe operates. Some of the technicians who are more familiar with the problem may look at each other, shake their heads and laugh at the discussion. Meanwhile, Joe is going on and on. It's your job to avoid this. Encourage John to speak up like the rest. At least make sure they have equal time. Ask for the opinion of those closer to the problems, explore the consequences and tirelessly look for the rational decision.
You must also be careful of something i will define as the "willingness to listen". It is natural and healthy to develop a number of trust-based relationships in the company, actually it's one of the best things that can happen. However, if you have too much trust in a person's decisions, you will tend to agree even when that person is not the one being reasonable. You must be careful to always use filters. People will understand.
Rhetoric is dangerous, it uses feelings, it motivates, excites and inspires. When used incorrectly, i.e. with no basis on reason, it can make it impossible to meet any target, or can make it seem possible to meet any target. Rhetoric can make us lose focus and embark on tortuous paths, betray our culture, act unfairly, make incorrect assessments, value the wrong people, discourage our own talents, and signal mismanagement and contradiction to the organization.
AS A LEADER, IT IS YOUR JOB TO FIND REASON, BORING, LINEAR, CONSISTENT AND CRUEL REASON. HOWEVER, SUSTAINABLE AS WELL!
I am in no way talking about people who have poor intentions. This applies to well-intentioned people who truly want what's good for the company. Your job is to find the right cause and effect relationship. Never forget your vision or strategy in light of the decisions being made. This will make it easy to find the rational position.
Explore arguments, question impactful statements, the undemonstrated truths, extend the meeting for a bit if the topic is important. Remote emotion from the decision process.
There are moments when emotion is essential for the business, but not when it comes to making sustainable decisions. Do not deny your beliefs so easily. Question. Question the underlying arguments. What is fact? What is opinion? Question what you are reading now, after all my arguments have no scientific basis. This means it is, in essence, pure rhetoric.