ramblings on investment decision making

I've been doing a lot of things around investment decision making lately. Reviewing business cases, teaching people how to complete feasibility analysis and compile business cases, actually compiling business cases for clients and assisting project teams to compile business cases. I've gotten to the point where I need to ramble for a few blog entries to get out of my system some thoughts that have been running around my head.

Real asset investment decision making has been a fascination of mine since University days. The process of discovering if an investment has potential is fascinating. The range of topics you get across is huge.

Over the years I've also discovered the massive political and emotional aspects to decision making too. I've experienced the political and emotional responses through observation rather than participation. Most of my experience in observing the emotive and political response to a problem has been through the review of business cases or cabinet submissions that have been written to get a certain decision up rather than testing and proposing the best option for decision makers. Other observed phenomena is the retrospective business case. This is where a document called a business case is written to cover for the fact that a decision has already been made. What I find interesting in these cases is discovering what was the business case that caused the actual decision to be made. Was it a conversation, a presentation, a site visit or something else. There is always something that is the catalyst for a decision maker or person in power to decide to act. Sadly, it is often some small, quick comment or observation rather than as a result of a sound and well developed business case.

The most frustrating thing for me has been the difficulty in understanding the overall thread or long term goal to investment decisions. They are so often made in isolation with the dependancy and impact on other initiatives rarely considered. Yes, the investment aligns to strategy but does it contribute to an overall plan that leads to some end state that the organisation, community or society finds desirable.

Many new management theories are being explored around complexity theory and the uselessness of trying to predict the future (e.g. through forecasting and modelling). However, I find it impossible to be motivated and commit to investing money in a project that has no clear purpose and cannot be defined as part of some overall goal or end state.

I understand that it is extremely difficult to define an end state, but without one, all common principles of strategic planning and business management are useless and the complexity theorists become 100% correct in their description of organisations as self forming organisms that bumble along much the same way life always has since that first single cell split and became two.