Naming the trade-off

Bring three options when you need a decision, not one

You have done the work, and you know what should happen. You write it up, take it to the executive committee, and recommend the thing you believe in.

Then one of three things happens. It gets picked apart for an assumption you did not think to mention. Someone asks for more analysis and it slides a month. Or it is approved.

In 2005, three finance academics, John Graham, Campbell Harvey and Shiva Rajgopal, surveyed more than four hundred chief financial officers and finance directors. A majority admitted they would sacrifice long-term value to hit a short-term earnings target.

The people you are presenting to are already managing a trade-off between this quarter and the next three years, and most of them will privately admit the quarter usually wins.

Why the single option is the natural mistake

A manager who brings a problem solved gets the next difficult thing. So you learned to present only the resolution.

In 2007 the organisational psychologists Michael Mumford, Michael Campion and Frederick Morgeson mapped what leadership roles actually require at each level. Strategic and business skill requirements rise more steeply with seniority than interpersonal ones do. The further up you go, the more of the work is choosing between things that are all defensible.

So when you bring one option, you not helping. You have removed the part of the job they are there to do, and left them looking for what you missed.

That is why the questions can feel hostile. They are reconstructing the options you already discarded.

The method: three options, four lines each

Write the recommendation as three options, and for each, cover.

1. What it is, specific enough to be understood.

2. The trade-off you accept by choosing it, if any.

3. Who else is impacted, how, and by when.

4. What would have to be true for this to be the right decision.

Then your recommendation, with the rationale clearly stated.

Say you run distribution for a business with eleven depots, and you want to close two.

Option A. Close both this financial year. Saves £4.2m a year. Costs next-day coverage in the south west for around seven months. Lands on the sales director, who has two customer contracts with delivery terms written into them. Right if the £4.2m has to arrive this year.

Option B. Close one now, hold the second for eighteen months. Saves £1.9m. Keeps coverage while the two contracts are renegotiated. Impacts nobody outside your own function. Right if the coverage risk is real and the cash is not urgent.

Option C. Keep both, take the cost out of routing and shift patterns. Saves perhaps £1.1m, and slowly. Impacts your operations managers, who have been asked to do this twice already. Right if those contracts turn out to be impossible to reopen.

Underneath the three, you write this.

I recommend option B. The trade-off I am accepting is £2.3m of savings this year in exchange for keeping next-day coverage while we renegotiate two contracts. I think it is worth it because those two customers are fourteen per cent of revenue. If I am wrong, we will know by the end of the second quarter, when the renegotiation either lands or does not.

It tells them what you conceded, why you accepted it, and when you will find out whether you were right.

The two-column test

Before you write any of it, take a sheet of paper and rule two columns: this quarter, and next year. Put each option through both. What does it do to the first, and what does it do to the second?

The left column is the easy one. The second is what the finance chiefs in the 2005 survey were skipping when they hit their earnings targets.

In the depot example, the left column for option A says £4.2m saved. The right column says two contracts renegotiated under pressure, a sales director who found out late, and a coverage gap that customers will remember when they come to renew.

It takes about five minutes. Start with a decision you have already made, because the second column is far easier to see on something finished.

You might be thinking this makes you look indecisive

Of course not every decision needs three options. A ten-minute decision needs one, and dressing it up as a ten-week decision wastes time. I am talking about the recommendations that require senior approval.

The reason you get handed difficult things is that you decide, and this can look like you are being disempowered.

You still decide. The three options are how you show your working, and they let people senior to you see how you got there.

Do this

Take the last recommendation you sent to anyone senior. Do not rewrite it.

Write the sentence you would have put underneath it: the trade-off you accepted, why you judged it worth accepting, and when you would know if you were wrong.

If you cannot write that sentence about a decision you have already made, that is the finding.