If It Ain't Broke, Don't Fix It!

If It's Not Broke, Don't Fix It!

True or not?

This can be a very useful piece of advice. It seems to accord with common sense. And yet, there is research that suggests that it may not always be in a person’s best interests to stick with the status quo and that taking this approach may lead us to neglect to make changes that would ultimately benefit us greatly.

Factoring this into our communication

As we approach the end of the year, some businesses may be at their busiest and others may be winding down towards the summer break. Both categories may benefit from taking a few minutes to reflect on this tendency of people to stick with the devil they know and reflect on how this might be taken into account in their business dealings in the coming year.

Some research findings

In the December 2004 issue of Negotiation, Max Bazerman presents several examples of situations where this tendency to go with the status quo explains why people have failed to make highly lucrative financial changes.

In the first example a group of individuals with a working knowledge of economics and finance were asked to imagine that they had inherited a substantial sum and to choose one of four possible investments with variable levels of risk in which to place the money. The participants usually made what seemed like a rational choice – they preferred moderate to high risks.

Then they were asked to imagine that they had inherited a similar sum that was already invested in one of the previous categories. They were asked whether they would keep it in the investment category in which they had inherited it or trade it for one of the other investment categories. Surprisingly, the participants ‘overwhelmingly chose to keep the type of investment they had received rather than exchange it for the type they had identified as their preference for the first sum of money’.

In a second example, it was found that college professors – whom one might imagine to take a fairly active and informed interest in their finances – when faced with a choice of two retirement investment funds, allocated their money 50/50 between the two and then ‘stuck with the status quo for the rest of their careers, squandering thousands of dollars in the process’.

In a third example, it was found that enrolment in a retirement plan worth thousands of dollars to the enrolees, jumped from 49% to 86% when the company switched to automatic enrolment as the default (instead of employees being given the choice of opting in, they were given the choice of opting out).

Do your own cost-benefit analysis

These findings illustrate the necessity of making the time to do regular cost-benefit analysis on the decisions we take — or fail to take – and to seek appropriate professional advice. We may be missing opportunities.

Help your customers and clients with cost-benefit analysis

From a small business owners’ point of view, these examples suggest two things: it pays to help customers and clients do a cost-benefit analysis to appreciate the value of the product or service offered; it also pays to make it as easy as possible for customers and clients to take action to obtain the benefits.

How are you helping your clients to understand the benefits your business offers?

And what are you doing to make it easy for them to take up these benefits?

Whether it is financial planning for our retirement, taking legal advice on our business rights and responsibilities, buying or selling property, changing jobs, adopting a new marketing strategy, or any other business or personal decision, it will pay us to sit down for an hour or so – if possible with a personal or business coach – and consider the long term view. How will our life or our business be affected by this decision – or lack of decision – further down the track? In two months? In two years? In twenty years? Are we focusing too much on the drawbacks and too little on the potential benefits of change? There is no right answer to this question, but we owe it to ourselves to ask it in the first place.

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Transformasia Pty Ltd
ACN 097 139 725
Tel: +61 3 9525 3409
E-mail:
www.transformasia.com.au