Tuesday, August 30, 2005


Several folks have asked about books on negotiating and corporate development. There’s not a lot out there directly for corporate development, but McKinsey & Cos. Valuation is the bible for the analytical aspect of the work you do in corporate development. With my background, I also found it useful to read a book on financial statements for non-accountants. I can’t remember the exact title, but there’s probably something in the “Dummies” line by now.

There’s a lot of stuff out there on negotiating – books, seminars, even flash cards. It’s a mixed bag. I still like Getting to Yes, which is a classic (and has several sequels), but it still contains a lot of very useful general negotiating advice: Always know your BATNA (best alternative to a negotiated solution) and that of the other side. Focus on interests, not positions. Create solutions. I hope to follow up on these in future posts on negotiations, but Getting to Yes is a great overview on negotiating.

I also greatly enjoyed James Surowiecki’s The Wisdom of Crowds. It’s more about decision making, and arriving at the right or optimal outcome, even when faced with incomplete facts (Surowiecki also writes an excellent semi-monthly economics column in The New Yorker). The book is fascinating, offering all sorts of counter-intuitive examples of how crowds or markets can reach far better decisions than an individual is likely to do (one example: the average of all entries at a country fair “guess-how-much-the-ox-weighs” contest coming within one pound of the correct answer).

Of course, anyone who has sat through a board meeting, strategy session or attempt to make a decision via group consensus will scoff loudly at that assertion as applied to the corporate world. After all, it’s simply too familiar to see decisions made in advance of analysis (which is thereafter prepared to show that the decision is the right one), or decisions made by the senior person and then agreed to by the rest of the group without meaningful discussion or consideration of alternatives. Surowiecki points out that in order to get the benefit of “crowd” decision making in these contexts, the group must be diverse and independent. Not necessarily diverse in the EEOC sense, nor independent in the James Dean sense – just that the group possesses enough diversity of experience and enough independence that its members are willing to speak their minds.

Making the right decision and ensuring it happens can be two different things. Surowiecki also notes that when a decision is made the members must be able to put their passionate arguments aside and fully support the implementation of the decision. Sadly, we’ve all seen the passive-aggressive type who outwardly supports the decision and then does everything possible to subvert it.

1 comment:

Parkite said...

I'll have to read that book about decision making by crowds....a very wise investor from Omaha once said, "my idea of a group decision is looking in the mirror".

Seriously though, there is a bias that exists among groups with respect to decision making. In layman's terms, the senior person in the room is almost always supported in the direction they are leaning. This is quite predictable as this person's subordinates want to be seen as supportive team players and also want to further their own careers and gather favor with the person in charge. I forget what this biar is called but it is well documented. This is the primary reason why so many BODs are ineffective. If people on the BOD don't have any other source of income or the Board service is their primary source of income, they are very likely to fall in line and agree with whatever the CEO/Chairman is asking for....they are protecting their own self-interests....their paycheck. And they aren't doing their job representing outside shareholders very well. This gets back to my comment on an earlier post about how I believe that most public companies are run for the benefit of senior mgmt, not o/s shareholders.