Is LIFO affecting your thinking?

Your decisiveness may be unintentionally derailing your strategy.

THINK ON IT: Is LIFO affecting your thinking?

LIFO: Last In. First Out. It may be a useful accounting method to defer taxes on inventory, but when it comes to strategic thinking, placing a premium on the latest information is something else entirely. Psychologists even have a name for it: recency bias.

Recency bias affects leadership decisions so often there's common slang to describe it. A leader "shoots from the hip" or the "squeaky wheel always gets the grease." We are so prone to making decisions quickly — and believe decisiveness to be a supreme leadership virtue — that we don't stop to ask if the information we just received warrants the attention we're tempted to give to it. 

Maybe you’ve recently lost a big customer. Or you’ve just learned that sales are below the forecast. Or a valued employee just announced their departure. Bad news like that can hit you hard, and instantly dominate your attention.

As leaders of our businesses, if we’re not intentionally evaluating the relative importance of news we just learned, we run the risk of adjusting our strategy to focus on the latest information — not necessarily the best information. 

The result? When crisis trumps strategy, the result is strategy-du-jour. Do it often enough and your team starts to ignore strategy altogether. And why not? Tomorrow it will be different anyway, when leadership latches on to some new stat or piece of info they deem more important than all else. 

Don't let LIFO affect your vital business strategy. When new information arises — or that squeaky wheel squeaks — ask yourself, "Is it compelling enough to warrant the change required to act on it?"

If your strategy changes with every piece of new info, your organization isn’t chasing after a clearly defined future; it’s hopping on opportunities as they arise instead.  

LIFO thinking is one of the biggest catalysts for letting fear drive our thinking, and if we let fear drive, we often do the wrong thing first. 

[Premium members] For premium subscribers, I dive more into how fear affects our thinking below and offer three questions to ask when facing a critical issue. Become a Premium Member.

“The world is full of smart executives who take decisive action. It’s woefully short of wise executives who take decisive inaction.” — Jim Collins

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