Leaders Get Paid for Judgment

0:00:03.2 Producer: Welcome back, Culture by Design listeners, it's Freddy and welcome to a new podcast format from Tim and Junior, Leader Factor single point lessons. 10 minutes of practical learning on a single topic. These episodes will be published in addition to our regular full-length episodes every Monday. Listen to these extra segments and let us know what you think by leaving a review or reaching out on LinkedIn. Let's dive in.

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0:00:34.4 Junior: Welcome back everyone, to Culture by Design. My name is Junior. I'm here with Dr. Tim Clark, for a single point lesson, the most valuable 10 minutes you'll spend in professional development all week. Tim, what's the lesson today? 

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0:00:43.7 Tim: The lesson today is Leaders get paid for judgment.

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0:00:48.4 Junior: Roger Martin said, "What do these office tower people do? They don't manufacture products or deliver services to customers. Instead, they manufacture decisions. Decisions are their outputs. What to research, how to sell, how much to spend on marketing, who to partner with, where to expand. The managerial infrastructure can be best thought of as a big and expensive decision factory." It's a fascinating quote. So if we're saying the leaders get paid for judgment, that means that they don't get paid for other things. We're not paying them for their time per se, we're not paying them for their expertise. Judgment, as we see it, is the correct application of your expertise. And just because you're an expert doesn't mean that you have good judgment. So let's go back to the factory. What do the factory idea imply? What do you think when you think factory, Tim? 

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0:01:39.0 Tim: Well, it's an idea factory, but more than that, it's a judgment to decision factory, that's the best measure of value, and that's what leaders really actually do get paid for, if you think about it. So ideas are the raw material, but the ideas have to be analyzed, they have to be converted into decisions. And that's a function of judgment, and that ultimately, is what leaders are paid to do.

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0:02:11.9 Junior: I love the factory imagery because I think about production lines, I think about the fact that everyone has a job, everyone gives a unique contribution to a piece of the outcome. So I think about the inputs for a product, it could be a bunch of raw materials, aluminium, could be plastic. There's this machinery with tight tolerances, good reliability, there's paint. And as you said, we can think about the decision-making process the same way, what are the inputs for a decision: Information, collaboration, ideation. And if the inputs of the decision are poor, the decision will be poor. If there's bad collaboration, there will be bad judgment. So what makes good decisions, good judgement? 

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0:02:54.1 Tim: That's right, Junior. So judgment is the outcome of the raw material going in. And then you have semi-finished goods somewhere in the middle, as we're analyzing and we're looking at options and we're thinking about what course of action to take. But ultimately, the finished product in this whole assembly line, this whole production line, is a decision. And that is a function of judgment.

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0:03:21.3 Junior: Part of what I like about that imagery is that in a factory, there are a lot of people that touch it, and so there are a lot of people that touch the idea and there are a lot of people that touch the outcome. And I think that it's the same in decisions. So what's the bad news then? What complicates this? Maybe it's just the reality, quality judgment is a skill that has to be developed. Not everyone's born with it, right.

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0:03:45.3 Tim: Very true. So you need repetition, you need experience, you need an opportunity to analyze information, synthesize information, consider different courses of action, actually make decisions, and then look at the consequences of those decisions. So you need some repetitions to go through that process. And as you go through that process, that builds experience and knowledge, and then ultimately, judgment.

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0:04:15.7 Junior: That's right. An organization's success depends on the judgment of its people. If it's people's judgment is poor, the organization won't do well because organizations, as we're talking about, are just bundles of decisions, that's really what they are. The quality of the decision making, in aggregate, will determine the quality of the organization. Peter Drucker said, "A decision, is at best, a choice between almost right and probably wrong." React to that quote, Tim.

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0:04:43.9 Tim: It just shows us that every decision is made somewhere short of certainty. It shows us that we don't have complete information, we don't have perfect information, and there's still a lot of risk associated with the decisions that we make. And when you think about that, a choice between almost right and possibly wrong makes you nervous. It helps you understand the weight that the leader has to take on to render a judgment, to make a decision, to choose a course of action. And that is the reality.

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0:05:25.2 Junior: One of the things that I think about when you say that is that, that uncertainty can discourage even making a choice. And I think that it would follow that if you're not making choices, you can't develop good judgment because you don't have the repetitions. Judgment means that you have a track record. And if you're not making decisions, and you're not making some good ones, some poor ones, and iterating over time and it's necessary, you're not going to develop judgment. So how do you develop better judgment? I think you approach building judgment as you would any other skill. So how do you develop any other skill? Deliberate practice. What's deliberate practice, Tim? 

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0:06:06.4 Tim: Well, it's a process where you're thinking very systematically about what you're trying to do. You set a goal, you try to complete that goal, but you're doing a lot of evaluation after the fact. As you do a post-mortem, you're evaluating what you did, what the consequences were, what worked, what didn't work, and how it all went. And then you repeat that process. And as you get repetitions in doing that, you develop a set of instincts. You learn how to synthesize and interpret data better... All kinds of data, not just quantitative data, but qualitative data, and impressionistic data, and ad hoc data, and anecdotal data. So you learn how to synthesize all of that and make a decision out of it.

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0:07:02.8 Junior: So that's the process: Set a goal, attempt to complete it, evaluate and adapt your attempt, and repeat. So how do you do this to develop judgment? There are two ways that I'm looking at this. Inputs, which are pre-decision, it's before the thing comes out of the factory. What do you wanna do for your inputs? You wanna seek diverse perspectives, you wanna gather relevant data, you wanna write down your intended outcomes and make some sort of prediction.

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0:07:30.2 Junior: I think that this is an important thing. What's difficult about making a prediction is that it's probably going to be wrong, and we don't like being wrong, which motivates us to not make a real, pointed prediction. So you do those things as your inputs and then outputs, post-decision. As you said, you analyze your decisions after the fact. You look at what you intended to happen, your documented prediction, and then you look at what happened and you adjust the inputs the next time around. Any other thoughts about deliberate practice? 

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0:08:06.8 Tim: Yeah, just... Let's come back to the definition, the basic definition of an operation, Junior. An operation has three components: We have inputs, as you said; we have conversion; and we have outputs. And so we have all the information that comes in, but some of that information, perhaps a lot of that information, you've gotta go get. And so you have to go get the information and you have to get to a place where you feel comfortable you've got enough information to evaluate. So all of that comes in, and then what's conversion? Conversion is synthesizing all of that information and interpreting that information, that's the second phase of the process. So we're converting, now, everything. And then we go to the third phase, which is what? The output of a decision, which is based on judgement. So we have inputs, we have conversion, we have outputs. And that is the primary output by which a leader is evaluated, by which we determine the overall performance of the leader. This is what you get paid for.

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0:09:20.6 Junior: So here's our call to action, what's the single thing we would invite you to do to help put this into practice? Here it is: Identify a decision you're trying to make and ask twice as many people to help you think through it than you normally would. That's it.

‍0:09:37.1 Junior: Thank you everyone for your time and attention during today's single-point lesson. We hope that this was 10 minutes well spent. See you next time.