Past Performance and all that stuff!

There is a heavily over-used phrase in business, at least in the UK. It is one that is intended as a truth and a warning, but one that most businessmen hope their clients will take as a untruth (possibly a bit string to call it a lie?). In large part that is because commercially it suits them best if clients disbelieve and disregard it.

Their belief that it is untrue is also evident in much that of their behaviour, particularly in recruitment.

So what is it?

"Past performance is no guarantee of future performance"

This gained public use from the regulatory requirement to give it as a caveat on many, many documents relating to financial products. Of course it is often placed in the least obvious position in the least eye-catching way, but it is there; indeed it is in the national psyche and is often quoted.

When a business is selling a product, an idea or a service, they clearly want the client to believe that they can deliver to their promise and will never fail to cite previous experience and deliveries by way of supporting their claim that they can do it again. They really want the client to believe that past performance is a guarantee, or at least a near guarantee, of future performance.

This is also true when the same business people are selling themselvesto a new employer or investor. They will cite their track record of how they have achieved something before, in a different place at a different time. In the past, when the world was simpler (with fewer dependencies and connections) and evolved more slowly, this was probably more relevant. The environment in which were looking to work could well have been very similar to the one in which they previously succeeded. But now it is hard to argue that the situation in an one organisation is the same as another. The opportunity for difference are manifold, culture, infrastructure, personal factors, clients, markets, ethics ...... and so on

By way of further illustration change has been described as the journey from one steady state to another. That is one knows exactly where one starts and can describe where one wants to end up, this being able to divinve the difference and plan work to change matters. On a simpler world those steady states were simpler and in a slower world those states tended to persist.

But as the world has become more complex and moves faster those "steady states" are at best transitory. The outcome that is planned now is unlikley to be exactly the one that is needed even in a few months times. In mathematical terms, rather than moving state to state, we are moving along a continuum whose future is not exactly known. This requires increased awareness, undertsanding and agility to continually scan, assess and react.

I can think of a system upgrade I managed some years ago for a trading room. The system was contained on one machine, operated in one office location and accepted a handful of data feeds, mostly by end of day/overnight specifically configured files. These days the same undertaking will most likely need to tackle multiple locations both for processing and operation, will be taking many complex real-time feeds and be expected to interface with any number of other systems.

I would argue that I could undertake and successfully complete that project today, but it is not because I have done it before, but because I have the capabilities and change skills to adapt and address to the situation I find in front of me.

As a result what should be presented and assessed are capabilities and understanding rather that results per se. Of course results can be used as evidence of these personal qualities, but only as such.

In the past this was sometimes referred to as creative recruitment ie hiring someone who was not a perfect match but who you thought/believed had the capabilities and potential. This is all but absent these days as more defensive hiring is in evidence. In a precarious world the hirer only hires if s/he can tick the box "done before". This way were are perpetuating the past rather than embracing and adapting to the future......and people wonder why so many initiative founder.

Even in the hard nosed world of investment management there is plenty of evidence of this . In fact I overheard an earnest conversation the other day where a particular fund manager was cited as having been able to deliver supreme returns for four years and then it dropped off and he has never recovered. The comment was that he had lost his "mojo", but I suspect that the knack he had worked specifically at the time and in the market he was working in, but when that changed he failed to translate and repeat his performance.

There are many, many stories like this.

So I would say that past performance is no guarantee to future performance, instead used it as a guage of capability and base your judgements on that.