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Making the Most from Experience

Recently, Howard Schultz announced "sweeping changes" at Starbucks to help, he hopes, redirect the company whose stock has lost half its value in less than a year and half. Said the CEO, "We have somehow evolved from a culture of entrepreneurship, creativity and innovation to [one of] mediocrity and bureaucracy."1 How did experienced managers, including Schultz, allow this to happen?

Kishore Sengupta, designer of a computer simulation that assesses project management skills, has found that users with over 10 years of experience perform worse (generate higher costs, make more errors, and miss more deadlines) in the simulation than less-experienced users.2 This seems counter to the common belief that "experience is the best teacher."

Is experience overrated based on these results? Did experience work against managers at Starbucks who chose to focus on building stores and automating the coffee-making process at the expense of meeting customer needs?

There are different kinds of experience. Every day employees make operating decisions related to their work. Often these decisions rely on expertise in areas like accounting, engineering, sales and IT . Specific experience in these fields can prove invaluable, enabling people to draw quick conclusions that are accurate and efficient. Experience also allows people to smartly eliminate options that inexperienced workers will explore unnecessarily. When outside their expertise, however, people often try to map prior experience to new situations, leading to the results found in the project management simulation. When working in new situations, experience has the potential to get in the way.

For managers, relevant experience comes from making decisions that supersede operational ones. That is, experience for the general manager can be valuable if it includes deciding not just how to do various operational activities, but deciding the actual outcomes that determine those activities.

In the case of Starbucks, experienced employees effectively doubled the number of stores in two years. They also effectively automated production in the stores. Given the outcomes to grow stores and create operational efficiencies, these decisions were made consistent with experience related to real estate, construction, acquisition, operations and IT. The problem was with poor judgments among the senior managers determining the appropriateness of those outcomes, which were disconnected from the vital customer experience associated with product branding.

For general managers, judgment is at the heart of making good decisions. Tichy and Bennis3 assert that judgment is the basis for good decision-making and that leaders must develop judgment in 3 areas: people decisions, strategy decisions and crisis situations. In the Starbucks case, poor strategy judgment resulted in dehumanizing stores. Judgment usually involves not just making a call on the decision but pre-decision analysis and post-decision execution.

Good judgment can be learned. Managers can develop this judgment by making decisions related to people and strategy. And judgment should be developed down the chain the best led companies are ones that are able to diffuse good judgment to people at all levels. Among the things that will help your firm or unit improve its collective judgment:

  • Value critical thinking skills. It is easy to lock into old mindsets and accept false assumptions based on prior experience. Be skeptical of old solutions to new situations. A takeaway for one participant of Mr. Sengupta's simulation was to question his assumptions more. In fact, suspending judgment is often counter to successful businesspeople's preferred mode of taking immediate action.

  • Embrace learning. Here experience is essential; managers will learn from mistakes if there is a reflective mechanism in place and a culture that values using it. One way to do this is to provide consistent feedback on results, and to focus coaching discussions on how those results were obtained.

  • Push decisions involving people, strategy and crisis down to subordinates. The benefits of experience are enhanced when it involves judgments related to outcomes, not just technical expertise or operational tasks.
In fact, experience is not the critical factor for decision-making; judgment is. Good judgment, however, requires experience if it is the right experience. Mr. Shultz might wonder if he has enough managers with strong judgment experience, where they have made decisions about people, strategy, and crisis.

1Brad Stone, Starbucks Plans Return to its Roots, The New York Times, March 20, 2009
2Phred Dvorak, Dangers of Clinging to Solutions of the Past, The Wall Street Journal, March 2, 2009, p. B4
3Noel Tichy & Warren Bennis, Judgment, Portfolio, 2007.

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