Why Your Perfect Plan Will Fail...
...And What to Do About It
An algorithm that can transform your leadership and life (hint: you should always plan backward from your end goal).
In business and life, nothing ever happens according to plan. We underestimate the randomness, delays, and frictions. It's human nature.
Let’s say you want to lose weight. You set your goal to lose 15 pounds in 15 weeks. You have a plan. You’re ready to begin. The first day starts off well. You have a healthy breakfast. You get a nice walk in. It’s going great. You’re on track. But then, at lunch, someone brings in a pizza. Everyone on your team indulges and, not wanting to be left out, you tell yourself: Just one slice. Then later that week, you find yourself bored at a cocktail reception and you fall victim to the fancy appetizers. You check your progress on Friday, and...you’re off track.
No matter your goal, you’ll need to course-correct along the way. Reality won’t simply match the plans you write down on paper (or formulate in your mind). The question then is: What’s the best way to handle the inevitable deviations?
Control theory gives us an answer to this question, and leaders can use this as a model when guiding their organization or team in pursuit of a goal.
What’s control theory?
Maybe you thought psychology was all "soft" science, but here, the science of the human mind borrowed control theory from science and engineering.
A simple definition (that should be more than enough for our purposes) is that control theory is a framework to handle dynamic feedback loops.
You can think of it as a system or an algorithm. Using our 15 lbs. weight loss example, here are the building blocks of the model:
· A target state (your goal). You want to lose 15 lbs. at a rate of 1 lbs. per week.
· A measurement device; Your scale.
· Discrepancies. Deviations from losing 1 lb. per week.
Control theory tells you how to handle the discrepancies, and it anticipates the effect of your corrective measures (“self-regulation”) on progress toward your goal. It’s a dynamic system because the decisions you make now will have an impact on future observations, and future decisions.
If your weight falls below the -1 lbs. per week line, you may start eating more. If your weight trends above the line, you’ll want to reduce calories.
Simple enough.
But let’s say you need to cut back. The question is, by how much?
Should you cut 1,000 calories today? Or try to cut 200 calories per day for the next five days? How will fluctuations in your weight over the next few days influence this course of action?
The scale gives you a feedback loop. And your actions influence the outcome. There’s also, however, noise in the system—variables you can’t control. It’s impossible, for example, to keep your hydration level the same every day when you step on the scale. (And you’d be surprised how much hydration impacts your body weight.)
Using Control Theory to Achieve Your goals
When using control theory to achieve your goals, the three most important rules are:
Start from the endpoint. Work backward from your big goal to develop plans, milestones, and performance indicators.
Optimize the path. Set targets to be difficult yet achievable. Manage expectations and build a plan that will allow you or your organization to make progress at a rate that maximizes engagement.
Don’t anchor decisions on past information. When results deviate from your plan, adjust execution based on forward-looking analysis (again, working backward from your endpoint) rather than what has happened so far.
Applied to the context of product development this might look like:
When do we want to launch the product? By asking this question, you frame the discussion with the end goal in mind instead of the current issue that needs to be fixed.
What needs to happen between now and the launch date? Work backward from the launch date through each milestone, step by step. Recognize that there’s uncertainty at each step.
What should be our response to today’s setback? Most discussions start here, but control theory says you must start with questions 1 and 2 to optimize today’s decision.
The first two of the three questions force you to look at the project from the top down. Hedge fund manager Ray Dalio would call this process “practicing higher-level thinking and looking down at the machine.” What’s wrong with the machine? Why is it producing disappointing outcomes?
When reality deviates from your plans, consider whether the machine is broken. Don’t let the process becomes something that traps you; sometimes it has to change.
And remember: when things get tough, people look to you as a leader to remind the organization of a brighter long-term outlook. And they want you to tell them how the organization will get there. You may have to revise the plan, but that’s okay. It’s much better to re-baseline than to hold on to a plan that has become unrealistic.
Takeaways:
Plans never work perfectly—embrace the chaos.
Reality > Your Spreadsheet—learn to deal with uncertainty.
Focus on the future, not the past.
Always keep the end goal in mind. Work backwards from there.
I hope you found this helpful,
Seb
Bonus content: My Podcast with Dave Asprey
When he decided to write a book on leadership and self-improvement, Sébastien Page was rejected by over 200 literary agents.
He was asked, “Why would a finance expert write about leadership?” He was told to stay in his lane.
Sébastien has more than two decades of leadership experience. As an author, he believes breakthroughs often happen when experts venture outside their field. That is why, in "The Psychology of Leadership," he went beyond finance and economics to study research in psychology.
He is currently Head of Global Multi-Asset and Chief Investment Officer at T. Rowe Price. He oversees a team of investment professionals actively managing over $500 billion in assets under management.
Sébastien won research paper awards from The Journal of Portfolio Management in 2003, 2010, 2011, and 2022 and the Financial Analysts Journal in 2010 and 2014. In addition to The Psychology of Leadership, he is the author of Beyond Diversification: What Every Investor Needs to Know About Asset Allocation (McGraw Hill, 2020) and the coauthor of Factor Investing and Asset Allocation (CFA Institute Research Foundation, 2016).
Sébastien is also a member of the editorial boards of the Journal of Portfolio Management and the Financial Analysts Journal, and the Board of Directors of the Institute for Quantitative Research in Finance (Q Group). He regularly appears in the media, including Bloomberg TV and CNBC, and was recently named amongst the 15 Top Voices in Finance by LinkedIn.
Great piece! Control theory’s focus on managing dynamic feedback loops reminds me of a key insight I am working on from Peter Bernstein’s Against the Gods and how the illusion of control can sometimes lead us astray.
In my world (talent development), it’s tempting to react to every deviation, but real progress comes from keeping the end goal in mind and making thoughtful adjustments.
Loved the practical takeaways, especially the idea of working backward from the goal (in golf start with the green in mind). Thanks for sharing!