I admire Thomas Sowell for many things: his scholarship, his clarity of thought and skill with language, and his life story. (How many high school dropouts have PhDs in economics and teach at Stanford?)

Though an economist, Sowell has much to tell executives who are responsible for service operations in complex organizations. An example of his wisdom is his concept of "one-stage thinking." He explains one-stage thinking by telling a story of how, as an undergraduate, he proudly answered a question in class by explaining what he would do to solve an economic policy issue. His teacher patiently listened to his answer and asked a simple question: "And then what will happen?" Sowell went on to answer the second question. The professor again asked: "And then what will happen?" As Sowell dug a deeper hole with his answers, he "began to realize that these reactions would lead to consequences much less desirable" than his first answer suggested.

It must have been painful to listen to the eager student and patient professor. Although awkward, teaching and learning were occurring. And Sowell says "I was beginning to see that the economic reverberations of the policy I was advocating were … worse than the initial situation."

In the opening chapter of Applied Economics: Thinking Beyond Stage One, Sowell goes on to explain that most bad economic policies involve similar one-stage thinking—the type of thinking that never considers the question: "And then what happens?"

Nolan consultants frequently confront service problems that are caused or compounded by one-stage thinking. (For some reason, service operations seem to be especially vulnerable to this problem.) Frequently, our solutions and recommendations involve correcting the one-stage thinking.

Here are four practical things service executives can do to minimize the impact of one-stage thinking on their operations:

1. Probe and question your staff's proposals and plans along the lines of Sowell's professor. "And then what happens?" or "Will your proposal result in any side effects?" As you probe for secondary impacts, expect inexperienced staffers to think first of other good impacts of the proposed action rather than seeing possible unintended impacts. Management education doesn't happen only in MBA programs: the boss's boss can be an excellent, if intimidating, instructor. Play this role wisely and gently, perhaps privately.
2. Build the topic of second-stage impacts into your decision process. When you assign an issue or project, specify you want them to anticipate the negative secondary impacts and develop a plan to avoid or minimize them. If you do this consistently and use the "And then what happens" probe, your staff will quickly sharpen their thinking on second-stage impacts.
3. Use multiple metrics when you assign issues to staff. If we ask the staff to reduce the backlog by year-end, for example, they are likely to come back with a plan that eliminates the backlog but creates a nasty budget variance or disrupts other year-end service requirements. Encouraging your staff to see a challenge with several metrics—especially if the metrics seem to be at cross-purposes—can get them to begin to use second-stage thinking.
4. Review completed projects to encourage second-stage thinking. Use probing questions: As we did this work, what did we learn? Were there surprises? Were there any unintended consequences for clients? How could we have better anticipated or even avoided the surprises?

By the way, you might want to read Applied Economics. Dr. Sowell has two excellent chapters in the book on public policy issues that are plagued by one-stage thinking: "Medical Care" and "Insurance." I promise that if you consider his arguments on these topics, you will begin to see that many critics and executives in our industries can't get beyond one-stage thinking. Reading Sowell is a great way to move beyond your one-stage thinking.

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