Case 1: Here, the investment figures are clear-cut: The capital value is positive; the pay-off time is short. Nonetheless, there remains a gut feeling that something isn’t right. This could be fueled by various sources: Perhaps there is a lack of trust in the person applying for the investment, who may be suspected of making personal gains from the investment, or the estimated figures are considered to be overly optimistic. This situation is not new to controllers, as it occurs quite often when plans come out into the open. Experienced controllers instinctively know when they need to take a more critical look and intervene. If the figures withstand critical examination, the decision from the reflective judgment stands, otherwise they must be corrected accordingly.
In case 2, the controller’s gut feeling confirms the findings of the analytical method. Here, it is important to avoid being overconfident.
Case 3 is the same as case 1 but in reverse: Here we have the situation where the manager is convinced about a new scheme – a new product or technology, for instance – but is unable to make the necessary calculations. It is the controller’s job to find arguments that support the manager’s 6th sense and which weren‘t part of the previous plans. For example, a new product in a new market may not be feasible in itself, but it could open the door for future products. This could involve changing the calculation method (from a present net value analysis to a real options analysis). An assessment of the manager plays an important role when reviewing the case. Have there been similar situations in the past? How often has he tried to box through other schemes under the guise of “strategic premiums“? What is his track record? How much can be put down to luck? Whenever reflection and intuition produce different results, it is important to exercise caution.
Finally, case 4 is similar to case 2 and, therefore, uncomplicated. If both reflection and intuition provide negative results, then the decision is clear – at least as long as the judgment wasn’t made too hastily.
Let’s sum up: Analytics, or reflection, is an essential skill for both managers and controllers. Managers who rely solely on their intuition are taking a considerable risk. On the other hand, controllers can’t limit themselves to analytics alone: They aren’t able to carry out their complementary and constraining tasks (Unburdening, Complementary, and Constraining Tasks) successfully, if they don’t have a 6th sense for recognizing rationality deficits. It is essential that both approaches to problem solving are used in tandem in order to make good decisions.
Professor Utz Schäffer & Professor Jürgen Weber