How do You set Priorities, Part II
In coaching sessions I use the above Priority Assignment Scheme to stimulate thinking about priorities in a general way. When I ask, “What would be your top priority?” the most common answer is, “An immediate big gain of course.” On thinking more deeply about the nature of material-based businesses, however, it becomes apparent that big gains rarely can be achieved immediately because of the technological, environmental, regulatory and market development challenges that must be met. Even the sale of a business, or the licensing of intellectual property may require considerable negotiation and hence may not be achieved immediately.
On the other hand, the prospect of an immediate a big loss can be real—for example a key business contract can be lost, a long neglected production facility can fail catastrophically, a governmental agency can revoke operating permits or product approvals. Avoiding these types of losses can take considerable development time and resources—an improved product, a more cost efficient process, a revamped production facility or an enhanced quality program. Hence, the number one priority under most circumstances is likely to be that of preventing a big loss, area A in the diagram.
Having deployed programs and resources that will avert immediate big losses, and assuming a limited resource scenario, a decision must be made whether to pursue gains or to prevent the next most pressing potential losses, the mid-term losses. Even in the mid-term time frame of many businesses, say half the time to develop a new product or commission a new facility, a looming loss will require significant lead time and effort to prevent. Consequently in many situations an argument can be made that the potential for mid-term, moderate losses (and of course big losses) deserves the number two priority designated by the letter C in the diagram.
With immediate and mid-term potential losses having been addressed, immediate big gains can be pursued as a number three priority, area B in the diagram. Logic then suggests that mid-term moderate gains can be addressed as a number four priority, area D in the diagram.
Priority number five is likely to be the prevention of long term big losses given the normally long lead times required to address significant developmental improvements, area E. Priority number 6 then would be pursuit of long-term big gains, area F.
The above priority order would of course change in businesses in which innovations can be made rapidly (software development, perhaps) or in which financial resources are great and the installed capital or business base is minimal (a cash-rich operating company or a well-funded start-up, respectively for example).
Finally the region of urgency without business impact should be addressed. As illogical as it seems, leaders do have to deal with directives, inquiries or “suggestions” originating from within or from outside the company, that have no real impact, but are perceived to have great urgency. These situations are priority number 7 and should be taken seriously, but should be resolved by “upward delegation”, “thought experiments”, or expedient demonstrations that are designed to conclusively make the provocation go away.
The following figure summarizes the priority assignments as described above.
