Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today by Jack Welch, Suzy Welch Page B
Authors: Jack Welch, Suzy Welch
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employees had a tendency to rely more on gut instinct than on facts and rational thinking? Mine do, making me wonder how I can possibly explain their decisions to company executives.
— JAKARTA, INDONESIA
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Y ou really have two choices. Either tell your bosses, “Charlie made that terrific decision based on his tried-and-true gut instinct,” or, if Charlie’s gut is fifty-fifty at best, ask him to stop making decisions that way.
Look, as a general rule, gut instinct is nothing to be ashamed of. Quite the opposite. It’s really just pattern recognition, isn’t it? You’ve seen something so many times over your life or career, you just get what’s going on this time. Gut instinct, in other words, is a deep, perhaps even subconscious, familiarity—the kind of knowing that tells you anything from, “Go for it now ,” to “No way— not ever .” Although we would wager the most common gut call falls in between the two—the “uh-oh” response, in which your stomach informs you that something is not right and you should figure out what it is.
The trick with gut, of course, is to know when to trust it. That’s an easy call when you discover, over time, that your gut is usually right. But such confidence can take years of trial and error.
Until that point, we suggest this rule of thumb: gut calls are usually pretty helpful when it comes to looking at deals and less so when it comes to picking people.
No, we’re not mixing them up. Even though deals come to you with all sorts of data analysis and detailed quantitative predictions, and people decisions seem so much more qualitative, the numbers in deal books are really just projections. Sometimes those projections are reasonable, but in other cases, they’re little more than wishful thinking. When have you ever been presented with a deal with a projected discounted rate of return less than 20 percent? You haven’t! Again, sometimes that’s because a deal is great. But other times that’s because the people proposing the deal have adjusted the investment’s residual value to make the returns reflect their hopes and prayers.
So, when it comes to looking at deals, consider the numbers—of course. But make sure your gut plays a big role in the final call as well. Say you’ve been asked to invest in a new office building, but visiting the city, you see cranes in every direction. The deal’s numbers are perfect, you’re told; you simply can’t lose. But your gut tells you otherwise—that overcapacity is about a year away and the “perfect” investment is about to be worth sixty cents on the dollar. You’ve got few facts, but you have the uh-oh response.
More often than not, that means you should kill the deal, even if it infuriates the so-called rational thinkers on the case. Odds are, they’ll give you credit for prophetic thinking down the road (although probably with less public gusto than you’d like).
By contrast, relying on your gut during hiring isn’t always a great idea. The reason: our gut often makes us fall in love with a candidate too quickly. We see a perfect résumé with prestigious schools and great experience. We see a likable individual who says all the right things in the interview. And even though we don’t admit it, too often we also see a person who can quickly make a problem go away, namely, a big, open, gaping position. So, with our gut hurrying us along, we rush to seal the deal.
We see this dynamic in action all the time when people call us for references. They start off by firmly stating that they only want an unvarnished view of the candidate in question, but as we start to give it to them, we can feel them begin to wither. Their voices tighten; it’s almost as if they’re saying, “Oh, please don’t tell me that! All I really wanted from you was a stamp of approval!” They can’t get off the phone fast enough.
So, when it comes to hiring decisions, you may want to ask your people to muster up the
— JAKARTA, INDONESIA
----
Y ou really have two choices. Either tell your bosses, “Charlie made that terrific decision based on his tried-and-true gut instinct,” or, if Charlie’s gut is fifty-fifty at best, ask him to stop making decisions that way.
Look, as a general rule, gut instinct is nothing to be ashamed of. Quite the opposite. It’s really just pattern recognition, isn’t it? You’ve seen something so many times over your life or career, you just get what’s going on this time. Gut instinct, in other words, is a deep, perhaps even subconscious, familiarity—the kind of knowing that tells you anything from, “Go for it now ,” to “No way— not ever .” Although we would wager the most common gut call falls in between the two—the “uh-oh” response, in which your stomach informs you that something is not right and you should figure out what it is.
The trick with gut, of course, is to know when to trust it. That’s an easy call when you discover, over time, that your gut is usually right. But such confidence can take years of trial and error.
Until that point, we suggest this rule of thumb: gut calls are usually pretty helpful when it comes to looking at deals and less so when it comes to picking people.
No, we’re not mixing them up. Even though deals come to you with all sorts of data analysis and detailed quantitative predictions, and people decisions seem so much more qualitative, the numbers in deal books are really just projections. Sometimes those projections are reasonable, but in other cases, they’re little more than wishful thinking. When have you ever been presented with a deal with a projected discounted rate of return less than 20 percent? You haven’t! Again, sometimes that’s because a deal is great. But other times that’s because the people proposing the deal have adjusted the investment’s residual value to make the returns reflect their hopes and prayers.
So, when it comes to looking at deals, consider the numbers—of course. But make sure your gut plays a big role in the final call as well. Say you’ve been asked to invest in a new office building, but visiting the city, you see cranes in every direction. The deal’s numbers are perfect, you’re told; you simply can’t lose. But your gut tells you otherwise—that overcapacity is about a year away and the “perfect” investment is about to be worth sixty cents on the dollar. You’ve got few facts, but you have the uh-oh response.
More often than not, that means you should kill the deal, even if it infuriates the so-called rational thinkers on the case. Odds are, they’ll give you credit for prophetic thinking down the road (although probably with less public gusto than you’d like).
By contrast, relying on your gut during hiring isn’t always a great idea. The reason: our gut often makes us fall in love with a candidate too quickly. We see a perfect résumé with prestigious schools and great experience. We see a likable individual who says all the right things in the interview. And even though we don’t admit it, too often we also see a person who can quickly make a problem go away, namely, a big, open, gaping position. So, with our gut hurrying us along, we rush to seal the deal.
We see this dynamic in action all the time when people call us for references. They start off by firmly stating that they only want an unvarnished view of the candidate in question, but as we start to give it to them, we can feel them begin to wither. Their voices tighten; it’s almost as if they’re saying, “Oh, please don’t tell me that! All I really wanted from you was a stamp of approval!” They can’t get off the phone fast enough.
So, when it comes to hiring decisions, you may want to ask your people to muster up the
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