“I, the Lord your God, will hold your right hand saying to you, Fear not I will help you.” – Isaiah 41:13

Remember to register for the few remaining places of the Business of Management interactive dialogue workshop on Thu Jan 26 2012, contact Helen at 250 9781 or sprinsib@sunbeach.net,  where we will creatively explore the constraints in the 25 cells of The Management of Business Matrix™ and learn how Shepherding mitigates the risk of business failure.

I came across a White Paper on “Forecasting and Risks” by Professor Dr. Aaron J. Gellman, Northwestern University, Chicago, an extract from the abstract of which follows: “A key question to keep in mind when addressing any issue related to forecasting is whether the activity is primarily art or science. If the latter, it means that forecasts are largely produced relying on backcasts or upon mathematical models – not exactly a turn-the-crank operation, but almost. At the other extreme, holding that forecasting is fundamentally art, then it must primarily be based upon intuition and expectations, probably conditioned by past experience.”

“The issue is not simply which sort of forecasts carries the greatest risk. This is the case in large measure because most forecasts are a blend of science and art. Models of various sorts grounded largely in the past are modified (or their output is “adjusted”) through the application of the artistic, which looks to the future…”

“…Risk managers may well (and ought to) point out the risks being courted if a given forecast is acted upon and make a case for adopting a view of the future which is less risky without unduly sacrificing market and profit performance. They must make their case convincingly in order to prevail.”

I can think of examples, not necessarily in business, where forecasts are confidently (a hypothesis of a low risk of failure) made but, contrary to good management practice, we never monitor the actual outcome against the forecast to test the hypothesis.  If the outcome is consistent with the forecast, then the hypothesis is upheld and the confidence in the forecasting mechanism is justified; if the outcome is not consistent with the forecast then the forecaster may be ridiculed and should go back to the drawing board using the body of experience garnered to improve the forecasting technique.

Here are some examples.

Trade Unions, when facing difficulty concluding collective bargaining agreements, seldom ever give in.  They forecast, sometimes time and time again, that this is not the last time that the employers concerned will be hearing from them.  The outcome is that with the passage of time, as the public focus is distracted to other issues, one never hears from the Trade Union again and the matter fades into oblivion.

There are cricket commentators who, quite confidently, forecast the outcome of a day’s play but they never publicly review the outcome at the end of the day in the context of the earlier forecast.  Such a review could provide a data base of information which would improve their forecasts in the future.

There are pollsters who confidently forecast the outcome of an election stating, perhaps, that there is no significant difference between the parties and they are running neck to neck and then one party wins by a landslide.

Economists confidently forecast the expected performance of the economy three quarters ahead, but they never come back to compare the outcome with the forecast.

The head teacher who discourages a student to apply for a scholarship because of his perceived assessment of the potential of that student but, when the student goes on his own and applies and is awarded the scholarship and then successfully benefits from the tuition, the head teacher is never seen or heard of again in the context of his misjudgement.

In a business setting, the functions of business are corporate governance, which speaks to the structure and vision for the company; marketing, which drives revenue; operations, which produces goods and services for sale; people, who perform the tasks delineated in the organisational structure; and investment money, which fuels the infrastructural requirements and the day-to-day operations of the business.

Good management is highly correlated with the sustained success of the business and includes the elements of planning, organising, staffing, leading and monitoring/controlling.  The monitoring/controlling element of management facilitates the exercise of testing the outcome against the objective (forecast) and if the outcome is not consistent with the forecast then corrective action must be taken to bring future outcomes back on track with the forecasts.

The Management of Business Matrix™ consists of the 25 cells which are defined by the combination of the five elements of management and the five functions of business.

If in any business those cells are at a level of excellence, then there is minimum risk of failure which may be caused by acts of God or unexpected behaviour of man. In practice, there will be a gap between the outcome of the activities in these various cells, and the levels of excellence and, therefore, we have the classical gap analysis problem. The Webster Dictionary definition of a shepherd is to guide or direct, in a particular direction, to prevent someone or something valued from being exposed to danger, harm or loss. The Shepherding process, which is an integral part of the CBET Shepherding Model™, facilitates the closing of the gaps and mitigates the risk of business failure.