The Hindu Business Line : Costs, benefits and trade-offs

Dr Kamla Chaudhry was a superb teacher of organisational behaviour in the early days at IIMA, whose classes were models of how to lead a case discussion, which required one not only to have read and analysed the situation but also speak up defending a reasoned course of action. Kamlaben used to despair of the Indian student's indecisiveness, sitting on the face on the pretext of lack of complete data, unwilling to stand up and be counted. She had some sharp and perceptive things to say when she saw this display of lack of urgency.

One of her managerial mantras was that every managerial act was a choice; to do nothing was also a choice; every choice meant there was an alternative; and every alternative had a price tag attached to it. Our job was to trade off the price tags. This salutary lesson has been proven to be true later in life even in personal affairs, such as deciding to going abroad, changing jobs or getting married - or not.

Yet this difficulty with Indian students continues to this day, modified in a peculiar way. Today's manager and student tends to be drawn predominantly (even more than before) from the more quantitative undergraduate disciplines; so the tendency to look for one clear right answer remains unchanged. An engineer or accountant thus rejects a choice made under uncertainty with incomplete information, as if life were making an unfair demand on him, while the truth is that a decision has to be made, and made within a certain time, otherwise one might as well not collect any data! Yet that is how most managerial decisions are indeed made in everyday life, for example, how to respond to a change in the market demand or a competitor's new product launched at a lower price and better value than one's own.

If one delayed the response, to quote my professor, it implicitly meant a decision to accept the consequences, although often one wasn't conscious of this. The clock does not stop nor does the river.

A response a month later will definitely mean some loss of potential sales and profit and the best computer simulation can give you only a probabilistic estimate of it. One has to take the data as it comes and make a trade off implicitly against the greater impact that might happen if one did not act.

This is not to suggest that all decisions have to be made in a great hurry. On the contrary, the point is to realise that time means money; delay is never cost-free; and information can always be refined further; and finally that in some situations no one knows for sure. Ask a good doctor how sure he is of the treatment he is giving a really ill patient and he will tell you that the medicine only treats the patient and only Nature or God (whatever you chose to call it) cures. What is more, no one knows when and how this happens.

There is no shame in accepting the inevitability of some decisions turning out wrong. The only issue is whether, at the time of making the decision or choice, one was conscious of the likely impacts of the various options and their costs as well as benefits - to the best of one's knowledge and ability. After that, there is a certain element of luck, chance, or as Einstein called it `randomness of the universe' that takes over.

To wait eternally for clarity or better information and think that one is reducing one's risks in doing so is foolish. Take a painful and contemporary example. A stock broker said pithily last week on TV that there is no use telling the small investor not to panic, because they most certainly will in a falling market, and one should only advise them if anything to panic early and get out, rather than watch the graph go down and suffer further after growing more desperate.

There is of course an alternative of sitting tight, but if one did so, one ought to be conscious that it is a trade off — between cutting one's losses, taking shelter somewhere else on the one hand, and facing the prospect of an eventual market revival at an uncertain future date, on the other. Both options carry a chance element - and inaction is not cost-free.

(The writer, a former Director of IFMR, is a management consultant)

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