How To Break Free Of Analysis Paralysis

Analysis paralysis is something that I think impacts every single organization of every size. It can happen in an organization of five people. I've also seen it happen with 500 people. So even though there's this notion that it happens more often in bigger companies, I believe it's a deeper and more complex issue. It is embedded in organizations independent of size, originating from the behaviors of individuals within the organization.

Why Does This Keep Happening Here?

By now, you’re probably all too familiar with this pattern: Your organization starts with a number of exciting ideas. Several of them could take you in fascinating directions toward your goals. Then, over time, they get analyzed and analyzed and analyzed again. The energy that was once in the room is nowhere to be found. More time passes. Months go by to the point of where someone stops a manager in the hallway and says, “Hey, remember that great idea we talked about a few months ago? Whatever happened with that?”

The reply is a familiar one: “We’re still talking about it.”

This is code for: It’s not technically dead but it’s mostly dead. We need to show our people that we’re listening, however, so we need to provide the appearance that it’s still alive.

How did this happen and why is it that we're not ready to make a decision yet – or ever? The truth is, there are typically a number of reasons why people aren't ready to make decisions at any point in time. Let's walk through a couple of things that happen and then we can begin talking about what some of the ways are to avoid a re-occurrence of them.

What Kind Of Answers Do You Really Need?

If you can’t make a decision until you've answered all of the questions in front of you, that’s understandable, but do you always need an optimal answer to move forward? Sure, in a perfect world, we’d all love to have the most ideal answer possible, giving us the utmost clarity and security in the answers back to us so that we may move forward with great certainty. But let’s get real. Even if not all of the questions have been answered, with most of the data in front of us, do we have enough of the answers that we need at this point in time – without addressing all of the issues raised?

So the real question is: Do the answers we have give us enough of what we need to make the decision? If so, we can make this step forward and then another and so on. Waiting for the perfect time to obtain the perfect amount of information so that we can take the perfect next step is asking for too many stars to align, especially when it’s not the only answer we need to obtain.

I can remember a point in graduate school where the professor had laid out precisely what we needed to get the grade of a D, C, B or A. I reached a point when the professor called me into his office and said, "Look, you've stopped turning in homework. Why have you done that?" I said, "Well, I did that because you said that if we turned in this amount of homework, we would get a B in the course. Do I remember you correctly?" He told me I was correct. So I said, "Well, I've turned in that amount of homework and therefore I've got a B, right?" Again, he told me I was correct, but he was also confused: “But…why are you settling for that? Don’t you want an A?"

I said, "Look. An A would be wonderful and if you want to give me an A you can. But I'm not going to do any more homework because I've got a B. Frankly, I know right now where I'm going in terms of what job I'm going to have. If I have to do this homework, it takes time away from the other things that I want and need to do. Therefore, I've got my B. Why do I need anything else?"

The point is, I was happy enough with the outcome because I knew enough of what I needed to move forward with a decision I was comfortable with. Waiting for the perfect answer to a long list of questions wasn’t practical. I knew what it took to get a B in the class and I knew what kind of job I would likely have. Based on that, I could make a decision rather than wonder about my future or next steps.

Is It A “Nice To Know” Or A “Need To Know”?

Many years ago, someone put this concept of decision-making in front of me, which essentially says to do two things:

1) Sit down with everybody involved with an issue and come up with a list of questions.

2) Then, separate the answers to those questions between “nice to knows” and “need to knows.”

Just as it sounds, the “nice to knows” consist of ones that if you can get the answers, great. However, if you don't get the answers, it's not that big of a deal. You keep going with your analysis.

“Need to knows” are the ones that you absolutely have to have the answers to before you can go forward. The reality is that if you have 20 questions that you've come up with, in all likelihood, there's five or six at most that are “need to knows” while the rest of them are “nice to knows.”

Think about that for a moment: Only 25% of your questions may truly require a full answer before proceeding. Could it be that, at the heart of the problem of analysis paralysis, we’re treating 100% of our questions that way?

If we re-classify and define our answers to questions by “need to know” and “nice to know” (without getting paralyzed by that alone), we can take some small steps continually forward, even if it’s a “need to know.” OK, so it’s a “need to know” – what needs to happen next for this “need to know” to be answered? You can focus your energy and attention on the “need to know” ones because these are often the most difficult ones to answer. State upfront that if the answer to this “need to know” is A, it’s a go. If the answer to the same “need to know” is B, it’s a no-go. Keep in mind that no-go doesn’t mean “never go.” It means that if you want to change from no-go to go with this answer in hand, you have to specifically make that decision. Furthermore, as an organization, you need the discipline to go forward and get the “need to know” questions answered.  

Let’s say out of 20 questions, you have the answer to 15 “nice to knows” – which is all of them – but you only have the answer to three “need to knows” and still have two more that haven’t been answered yet. Here’s where temptation and a lack of discipline can be problematic: With three positive answers to your “need to knows,” you may assume that you have enough to go forward. After all, the overwhelming amount of answers are yielding a positive result, right?

That may be true, but remember – the answers you still need come from the “need to know” category. These are critical components and if you don't have these critical components, you can’t move forward. 

I can guess your next question: “Well, isn't waiting to get these “need to knows” a form of analysis paralysis?”

No. You said that these are critical components in making the decision and you have to know these answers to these questions before you go forward. Regardless of the size of your company, you must have the discipline to stay true to your “need to knows” and “nice to knows” and what the next steps of each require. You’re not waiting. You’re moving on both – only in different actions.

What Are The Financial Implications?

As you're going through this analysis, you're building a full model in which you’re working toward the answers to these “nice to know” and “need to know” questions. Very often, these questions then have a financial implication, so you need to spend the time thinking about them, especially the “need to knows” that can have the biggest impact on your business.

In fact, they can have bigger implications even for smaller deals as you sit down and say, “OK, for each one of the variables in front of us, let’s look at that variable and say, for all other things being equal, what happens if this variable changes by $10,000 positively or negatively?”  

In some rare cases, spending $10,000 more or less will have a one to one effect on valuation. However, you may be amazed to find that one variable swinging $10,000 in a positive direction could lead to a $100,000 increase in the value. A $10,000 negative may lead to a $200,000 reduction in value.

Now what if we stack these five most important variables up, again with a $10,000 change positive and a $10,000 change negative. Look at the financial impact and its positive or negative influence on overall valuation of the deal. You’ll find that, usually, no two patterns are alike and which of the variables you are going to need to devote the most attention to after the deal is done.

Assembling A Tornado Chart

As you chart and stack these variables, you’ll end up with what’s referred to as a tornado chart because some variables may ultimately yield a $100,000 increase or $200,000 reduction in value while others may result in bigger impacts.

If you’re a small company, you may wonder if this is more of a “big company” initiative and it’s actually just the opposite. I would submit that, for smaller companies, charting your variables is even more critical. For a large, $1 billion company, if you're off in your estimates by a million dollars, it’s a big deal but it may not be catastrophic because in the big picture, it’s a small percentage of the company. On the other hand, if yours is a $500,000 company and you're off by $50,000, you’re now talking about 10% of the total value of the company.

Analysis Is Not The Enemy – Lack Of Progress Is

Analysis paralysis happens when a team loses its focus whereas focused analysis does not. Within focused analysis, you’re still working on getting the answers to your “need to knows,” even as you know you can't go forward until you've answered those five questions.

The trap that people fall into is in simply doing analysis and thinking that it represents progress when, in fact, it doesn’t. Nor does it alleviate risk because all analysis is doing in itself is avoiding change.

That said, when analysis is combined with the consciousness to answer your necessary questions, you are moving forward. If you don’t answer those most vital questions, it could have a significant impact on the business. Consequently, it’s so critical to analyze whether something is a “need to know” or “nice to know” and then take the appropriate and corresponding action as a result. That kind of analysis is anything but paralysis because progress is being made.

Remember, you may get full answers to 100% of the questions you have before you, but that's quite unrealistic. Keep your analysis focused, think about the amount of time it takes to ask and answer your most pertinent questions and then execute in a timely manner on actions based on the classification of question.

By following these steps, you’ll be giving your team a deeper understanding of where you want to be as an organization in terms of what you value and what true progress represents in terms of tracking your priorities, goals and financial momentum. Analysis doesn’t have to be feared or be looked upon as a bad word as long as it is accompanied by these other elements that move your organization forward in unison.

It can be extremely helpful to gain an outside perspective to know exactly what your “need to knows” versus “nice to knows” are, how to decipher financial variables and what the next steps in your progress might look like.

So keep analysis paralysis at bay and ensure you’re supplied with more answers than questions by turning to Spitulnik Advisors. We’ll help you interpret the meaning behind the numbers so that you can make smarter and more timely decisions that align with getting your business to its next great destination instead of analyzing the journey endlessly. Start by calling us today at 312.593.3181 or email us at [email protected].