Just a little bit of paraphrasing Dirty Harry to bring up an unusual topic of business management: Luck.
This is an almost taboo to discuss in business circles where everyone prefers to talk about plans of all sorts, about talents and skills, and about management, like luck would not exist. Well that is except for bad luck, which is still valuable as an excuse.
Unlike you might think by reading the first lines of this article, I am not a proponent of luck in business management. Actually, I am quite the type that will consider all sorts of scenarios and contingencies beforehand, but I also have to admit that luck, good or bad, does exist. So instead of arguing if luck is real or not, I have chosen to find ways of having some handle on it.
I would define luck by the occurrence of something that was not expected (or in many cases not anymore) to happen and which has positive impact on the performance of the business.
Every manager has experienced it. Sometimes the business environment is tough, you have tried everything you could to get the results you need and for a long time, nothing seems to work, most of the time as a result of adverse external reasons. You are not alone to experience it, your competitors struggle with the same challenges, and then when you are starting to wonder how to turn around the situation, it happens! You get what you wanted and business looks bright again. It has happened to all of us and yes then we all think the same: we have been lucky!
Luck is not a management tool
Although we all experience luck once in a while, this is not something that a manager can count on, just because of the unexpected character of luck.
Luck is not something that you can factor in, and yet it still is a factor in too many businesses. This is especially true in businesses that have been very successful or that have thrived in a very positive environment.
Just to give some examples, I would mention some hedge funds companies that instead of hedging were more interested in speculating. As long as the environment was positive, the speculation worked superbly, making some traders make personal fortunes and looking like finance wizards, until that day when things were just not as usual and the hedge fund goes bust. Actually, such traders were always doing the same, it mostly the environment that changed and they did not anticipate.
Another recent example I see of a business running too much on luck is the mortgage industry: just by making the assumption that a home is an investment that can only grow in value, some terrible mistakes have been made. Everything was going quite well until that day, when the interest rates had increased again and the mortgages had to be reset, getting home owners in trouble and also the lenders with all the ramifications that we still currently see.
A business runs on luck when people do not analyze what the company is doing so well. It is very human to be less concerned about when a business is doing well than when it struggles. At the first sign of a bad result, you see management starting to ask lots of questions to know why the results are under forecast. When the business does well, then management tends to think that they really had it all figured out and tend to minimize the impact of external factor in the good performance. They are lucky, they take it for granted and become complacent, thus setting the stage for future bad luck!
Running on luck and being complacent is just bad management. But what good managers can do and will do is to create conditions to attract luck. This can be done very easily.
The best way to attract luck is to assume that you will not be lucky and that you as a manager must make it happen. Assume that nothing will go as you wish, plan a worst case scenario!
Too often, I have seen companies heading to a disaster, just because they took action too late. They reacted instead of anticipating.
Anticipation is indeed the key, and it starts with a critical attitude towards planning and forecasting. A simple rule of thumb is to consider that you will achieve only half of what you aim at, that it will cost twice as much and that it will twice as long to achieve. Once you have your operations and departments working on that worse case scenario, you are creating more opportunities because you are planning to achieve a lot more than what is in the actual business plan. Of course, it costs more energy and time, but in the end you create more conditions for “luck”.
And should be really lucky and achieve more than you can handle, like generating more sales than you can fill in, just realize that you only have a luxury problem. It might not easy to solve but it is luxury!
The conclusion of this story can be sum up by the saying “Fortune favors the audacious”.
Copyright 2009 The Happy Future Group Consulting Ltd.