• How should a member of an enterprising family be evaluated for fitness to run the family enterprise?
• How should a micro-finance account officer evaluate the micro loan application?
• How should a franchisor evaluate the application of the wannabe franchisee?
• How should a property owner evaluate prospective tenants?
Preference is what the persons wants to do. Preference is the source of his/her passion. A choice has been made and this is not influenced by what the person can or cannot do. It is influenced by his/her vision.
Competence is what a person can do. It is influenced by the training and experience of a person. It is often called capabilities.
Given an entrepreneurial situation, it is preference-driven passion that will make a person perform higher than what is expected. Passion will make an incompetent individual seek competence. A passionate individual will seek education, training or help from other people to fill the competency gap.
A competent individual who does not prefer the task at hand will perform the task on a minimum compliance basis. Competence sometimes leads to over-confidence bordering on arrogance. When a competent person does not deliver a task in a superior manner, it is because the task was not preferred by the person.
It is better to decide based on preference rather than on competence.
A family member who is not passionate about the family business should not be obligated to join the family business. To expect a family member to perform a task he/she hates in a excellent manner is asking for a miracle (even if the person is competent).
The enterprising family matches the family member’s preference with the activities and tasks of the family enterprise. If a match is not found, the enterprising family should fund the passion of the member. But the passion of each family member must first pass the vision and values test for family investment. Preference is more important than competence.
The micro-finance account officer should evaluate the borrower on the basis of the enterprise being preferred. If the micro-enterprise is passionate about cooking, the food stall micro-enterprise would be a perfect preference. If the borrower hates cooking, being passionate about the enterprise that has to do with cooking food will never happen. As such, the micro-enterprise is doomed at inception and the loan will never be repaid.
Thus, the micro-finance officer must evaluate the preference, passion, and inclinations of the borrower. He/she must evaluate if there is a passion fit between the person and the enterprise. Preference is more important than competence.
When choosing a franchisee, make sure he/she shares your values and vision for the area where the franchise would be granted. The vision and values indicate the preference of the wannabe franchisee. There have been horror stores where franchisors find out that their franchisees violate the franchise agreement. The fundamental reason for this is the misalignment of the values and vision for the franchise area. The wannabe franchisee may be competent but this competence may even be the basis of breaking the franchise agreement. Preference is more important than competence.
When choosing a tenant for your real estate investment, make sure he/she shares your vision for the property and your personal values. When the tenant does not share the values of the owner, the property may be used in ways that would not sit nicely with the owner. It is best to interview the tenant to discover if there are shared values and vision. Values and vision of the tenant will be externalized by their preferences and will be reflected in how the property will be used. The tenant may be competent on how to take care of the property but how it will be taken care of will be based on their preferences. Preference is more important than competence.
How is preference discovered?
It is not difficult to discover preference. When the opportunity exists, it is best to observe the actual behavior of the person. What a person gives priority to is an indication of preference. What a person trades off is not a preference. When a person makes black or white decisions, the choice reflects preference. The key word is "observe", not "ask". Observe the person when the person being observed does not know. The object is to discover what is natural.
Enterprising families should observe what the family members like to do or play with. There was a COO of a child-of-the-owner who liked to play with the cash registers more than with her toys. Every time she and her playmates pretended to have a store set-up, she wanted to be the cashier rather than the buyer. A preference is being displayed right there.
When observation is not possible, an interview with the applicant is the next best option. This should consist of a case discussion on something the interviewer has already decided upon. A set of facts and options based on a real situation that the interviewer has gone through can be presented. It is best to have a black or white situation where the choices are extremes or where there are hardly a compromise option. The reason for the interviewer’s choice must be known and clear.
The relevant questions are: What option will be taken and why? This will indicate the preference of the interviewee. Furthermore, the reason behind the preference will also be discovered. Give several cases for discussion and see if there is consistency in preference and values. As mentioned above, difficult choices made in a consistent manner will reflect the preference and the values of a person.
There is no doubt that it is far easier to discover competence. But preference is more critical than competence.
(Alejandrino J. Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: ace@aim.edu.ph. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).