In this world of data explosion, we have more information than we ever need. But the most effective managers make quick decisions effectively. They do it using a concept called thin slicing. It refers to using a small amount of information that tells them everything they need to know about a situation.
I discussed the concept in my podcast this week wherein I explored the idea of dominant logic. Dominant logic is a cognitive map shared across top managers. This joint map has a significant amount of information and the critical logic that makes the firm successful. As a part of our mental processes, we rely on schemas and mental models to deal with a complex world in a fast yet efficient manner. We do it without processing all the information related to a situation. Here is an example of thin slicing from a person experience.
The P&G Context
A long time back, I was the program manager for SAP implementation for P&G Asia. That was a huge organizational transformation process that transformed P&G from a country-based organization to a globally run company. It involved standardization of thousands of operations across all the countries in Asia.
Once my team standardized a process, embedded it into the SAP system, it would train the operations team who would then run the activities with those processes.
The Payables Problem
One of the critical processes of the organization was Accounts payables. It involved paying money to suppliers on time as per a prior agreement. After 100-120 days of our pilot implementation, the Asia leader of operations told me that there is something wrong with the payables process. As a result, many suppliers were not paid and some of them were threatening to stop supplying.
He had talked to various people in operations and my project team to find out what was the problem, but he wasn’t able to get to the bottom of the situation. Since I was busy with the next set of countries, he called me in as a last resort.
What We Knew
He told me that the payable operations manager said that they were processing thousands of invoices within the service level agreement. Their service level agreement was something like 97% of invoices paid on time. Since they were meeting their goals, something must not be ok with what the project team did. The project team members were saying that the process works pretty well and the operations must be not doing their job.
A Small Step
All I did next is to ask the operations folks where are the people who were doing accounts payables work. Then I walked to the payables process room. I walked around for 2-3 minutes and asked one of the processors two questions. And then I walked out.
Verifying the Issue
When I walked out, I knew exactly why the problem existed.
But telling the problem to people would not have helped me at all; I needed empirical evidence. So I asked someone in my team to pull a report from the system. That report showed the exact problem.
The issue was that when an invoice had a problem, there was no exception handling process. So the exceptions were being generated, and no one was looking at those invoices.
Thin Slicing At Work
The amazing thing here is not that I solved a problem that no one else was able to figure out including the folks who designed the process. The amazing thing is that it took me a couple of minutes to figure this out using only a little information.
And I didn’t run many reports to identify the causes that may be leading to this issue. I knew the answer and then ran a report that confirmed the problem. In fact, the report didn’t even exist in the system; someone had to generate the data.
The Secret Behind Thin Slicing
How did I do that? The reason is thin slicing of information. When I entered the scene, I brought with me a set of mental models. In my mind, every process is a pre-determine closed system, and there are a few places where the bottleneck can exist.
When I walked into the payables room I had two questions – are all invoices reaching the processors and are the processors processing 100% of them.
My first question to the processor told met that 100% of invoices were indeed reaching them. And the second answer told me that no one is looking at the problem invoices. The invoices that were somewhat not right were being thrown out of the process. They lay there day after day without anyone taking care of them.
I didn’t have to go through a million thing that would go wrong in that incredibly complex process. There was no need to know which people were doing the right job and who were not. I didn’t need to know what different kinds of invoices exist or how a purchase order is entered into the system.
This story tells you how thin slicing of information allows you to make sense of a complex situation in a short time.