Managing Organizational Wobble and Pricing Signal Delays 

By nature, organizations are often shifting gears or changing course, especially in times of volatility. While organizational wobble is difficult to avoid, there are ways to effectively manage it and improve reaction times. In this article by Chris Kennedy-Sloane, Business Consultant at Vendavo, discover how to mitigate the risks of organizational change, and cut down pricing signal delays. 

Directional change is hard, but in this macroeconomic environment, the frequency with which businesses must pivot or change course creates real risks for a coherent strategy. We’ve all been there, moving in one direction one week, and completely changing course the next, to the detriment of team morale, work hours, and precious resources.  

This organizational wobble, the tendency to flip between different paths, can be truly difficult to work out of the system, particularly if you’re often responding to pricing inputs like commodity prices, exchange rates, or volatile shipping types. The truth is, forecasting is hard. More importantly, the delay between choosing to change your price and actually changing your price can often be many months -in some industries up to 6 months or even a year. 

This signal delay between deciding to change price and actually changing your price is further compounded by the fact that businesses tend to look at past performance in order to determine future actions. It’s the best data we have, right? 

Past performance is not indicative of future results 

We’ve all seen that warning on the stock and commodity trading marketplaces, but time and time again, businesses make the mistake  of using prior performance to drive forward-looking decision-making. They forecast for a future present using data from a past now. This signal delay further compounds the risk of organizational wobble where strategies that seemed eminently sensible a few months ago, now appear to not make sense at all.

Accelerating the time between making decisions and taking action is one of the best ways to offset organizational wobble, but it’s not easy. One helpful way to combat this challenge is to create a system where the final authority and decision-maker is very clear.  Often, the team most suited to make these decisions is the pricing team.  

Delegating authority can cut signal delay and improve reaction times 

Delegating authority allows those with their fingers on the pulse of the business to not only plan for the expected result, but also create scenarios in advance with thresholds that will cause them to be triggered. If inflation rises above X, we do Y, if the metals market drops below A, we do B. You can’t cover every scenario but you can at least have the best case scenario and worst case scenario covered for your major business drivers. 

Every time one of these scenarios is 100% accurate and is used by the business to redirect their strategy in shorter timescales than would otherwise be possible, the pricing team gains more credibility with the business as a trusted advisor. It may be that delegated authority is limited at first, but as you gain structural credibility with business leaders, you can allow them to feed into the scenario and outcome planning process. With them on board, the range of acceptable scenarios, where unilateral action is allowed, can grow further.

Keep in mind, this does mean that you will likely need to spend more time earlier in your pricing processes. You’ll certainly need to invest in internal negotiation and buy-in to enable this strategy. However, a small amount of time and effort now can result in your team being able to focus on implementing the strategy when the time comes, rather than negotiating it anew. Gaining this extra time can mean that evenings or weekends can be saved from last minute changes, offsetting the risks that organizational wobble has on your team – like pushing you into overtime.