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Horse Sense and Analysis:
The Art and Science of Decision Making

By Mark W. Sheffert
August 2003

I was recently visiting with my elderly mother, and as we watched a politician speak on TV, she commented that he seemed to have a lot of book sense, but no horse sense.

My mother grew up in the South, so she’s entitled to say things like that. I had no idea what she was talking about when I was a youngster. “Horse sense” conjured up images of Trigger, Silver, or Mr. Ed saying, “Well, Wilbur.” But eventually, I came to understand that when she described people this way, it meant she viewed them as intellectual ineffectuals.

It took me a long time, but now that the brown hair of my youth has turned gray – okay, white – I’ve finally figured out the fuller meaning of “horse sense.” Actually, it has a variety of meanings. For instance, it can mean that
someone has street smarts, a sixth sense, deep perception, or sharp insight; that they are somewhat clairvoyant; or that they have common sense and good judgement. But if pressed to describe horse sense in one word, I’d have to say“intuition.”

I’ve also discovered as I‘ve gotten older that there’s a strong correlation between having horse sense and being a strong business leader. Good leaders have an intuition about business that leads them to make good decisions, even when they don’t have all of the facts. Because to lead is to choose, almost always on the basis of very imperfect information.

Consider the environment in which businesses compete today. Global competition is moving at Internet speed. New products and services are produced and sold in the quagmire of the new knowledge economy. Sophisticated consumers are loyal only to whoever gives it to them faster, cheaper, and better. And strategic alliances, acquisitions and partnerships are making it more difficult to know who your competition is and isn’t.

Then consider the internal operations of most business organizations today. Intricate information systems are
able to track progress indicators on an up-to-the-minute basis. Global communication by e-mail and voice mail happens 24/7. Businesses have to get more accomplished than ever before, but with fewer resources – especially time.

Who are the business leaders that succeed in this environment? Are they the ones with the most information?
Many business professors and best-selling authors say that investing tons of money in market research is good, because it means businesses will know more about their competitive environment and therefore have better performance. And many businesspeople must believe them, because according to a report published by the American Marketing Association, U.S. businesses spent $5.5 billion on market research in 2001. That’s a lot of research.

But does more information mean more accuracy? The business academics envision business leaders who know
everything at all times about their competitive environment, and believe that they will use that knowledge to quickly change strategy or organizational structure to fit new competitive situations. The assumption is that the business will just keep rolling along, never skipping a beat.

My mother would say that’s book sense, not horse sense.

Those with horse sense know that it is not a perfect world. It is impossible to make decisions based on all encompassing, flawless information. There are limits to market analysis. And facts aren’t much use standing by
themselves; we have to interpret and make some sense out of them before they can be useful.

Besides, most of the information that floats up through the corporate hierarchy is filtered. Information is never
served straight up in a corporate environment – it is shaken and stirred along the way. Precise research doesn’t mean much when the data are later corrupted.

What’s more, most business leaders suffer from information overload. They have so many reports, e-mails, voice
mails, and databases that it would take several lifetimes to analyze it all.

So, again, who are the successful business leaders? It’s not those with the most information. Rather, it’s those who can interpret it the best.

After all the research and data are compiled, it takes an intelligent human being with intuition to sort through it
and interpret what it means for the future of the organization. Good business leaders have the uncanny ability to look at their environment and interpret the financial, political, economic, and technological factors impacting their business, and then decide what changes they should make to their products, pricing, promotion, distribution, and organizational structure. Not suffering from analysis paralysis, they rely on intuition to make their way through the clutter of information and reach a decision.

After all, a business leader’s job is to create a vision of some future state of the organization, and then manage
the resources of the organization to achieve that vision. And that vision doesn’t appear in a market research report – it is given birth to by intuition.

The reality is that the world in which most business leaders operate is complex. Information about their environment, though plentiful, is never obvious in its implications. So the way that business leaders decipher their
environment is more meaningful than how accurately they know the environment.

Now, don’t go turning to tarot cards, Ouija boards, and horoscopes at your management meetings. Intuitive insight
plays an important part in decision making. But making decisions is both an art and a science, and good business leaders take a balanced approach. At the end of the day, it takes horse sense – the art of following gut-level feelings – grounded in the science of sufficient data analysis to make good decisions.

It’s not always easy to find that balance. Academics and technology geeks push companies to train executives on information management, so executives can better research their business environment. I say we should leave that to the junior executives and middle managers. Executives leading an organization need more training and experience in relying on their intuition.

Former Johnson & Johnson CEO Ralph Larsen has written that most people will perform brilliantly up through
middle management levels, where decision making is heavily quantitative. But when they reach senior management, where problems are more complex and information is ambiguous, their judgement, or intuition, is not what it should be.In fact, a survey conducted in 2002 by an executive search firm found that 45 percent of executives said they relied more on instinct than on facts and figures in managing their businesses.

Let me share a story to illustrate good business intuition. My best friend started his own business more than 20
years ago and has grown it into a multimillion-dollar company. Three years ago, someone made an offer to buy his business. It was a nice sum of money, but after several sleepless nights my friend walked away from the deal. Based on what he knew about his market and his business experience, he felt that his business was probably worth more. There was no research report telling him so, but his gut just didn’t feel right about the deal. And guess what: Now he is considering a new offer from a different buyer for three times the amount of the first offer. I’d call that being a master of the art and science of decision making, wouldn’t you?


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