Confucius said: “To know that we know what we know, and that we do not know, what we do not know; that is true knowledge.”
The Audit Position – Identify Your Competency’s Edge
An audit position is essentially looking at your skill set to get a clear snapshot of where you are today. The goal is to identify your strengths and weaknesses, with your limitations being the “edge of your competence.” It is then important to assess these limitations and see if your team is capable of filling in the important gaps.
Doing this audit for a specific project is important to identify the critical components that you or a member of your team must be competent in to make the project a success. If you have identified six critical success factors in a project and you are only really competent at four, then you have to fill the competency gaps to reduce the overall risk. If you don’t have the resources, connections, or manpower to fill the gaps, then you may want to reconsider getting into the deal.
Identify What You Actually Know
Be brutally honest here. From a project perspective, you don’t have to know everything about the project to make it successful, but you do have to know the edge of your competence so that you can identify the proper resources or people to fill the gaps. You become your own worst enemy by overstating your talents to yourself, because when those talents are called upon, they have to be there or you have a big problem. Some good questions to ask:
- What are the critical tasks to make this project a success?
- What is my level of competency for each task?
- Am I competent enough to mitigate the overall risk without third party consultants?
- Do I have the resources or connections to increase my competency for each critical task?
If by asking the right questions you have figured out that you have 80% of the skills you need and the other 20% can be accessed easily through your team, then you are moving in the right direction.
Identify What You Don’t Know
Maybe more important than what you do know is to identify what you don’t know. This is the second important piece in the planning phase that will help you make solid informed decisions when looking at a new venture. Sometimes the ego gets in the way — it’s human nature to not want to admit that we are not good at something. In the investing world it is okay for you to not know everything, but it is not okay to think you know everything. Thinking you know everything is a severe competitive disadvantage. Knowing what you don’t know and filling the gaps with qualified professionals is what gives you a competitive advantage.
It may be helpful to ask questions such as:
- What do I not know that could make this project fail?
- Do I have the resources or connections to fill this gap in competency?
- What are my major limitations as they pertain to this project?
- Can my current team eliminate these limitations?
- If not, can I find a team member or consultant to eliminate these limitations?
At this point, you will have a clearer picture of what you need to plan for when deciding to commit to a new project. This brings us to our next subject: filling in the competency gaps.
Fill the Gaps or Abandon Project
You don’t have to abandon all projects if you don’t have every skill needed to make it successful. However, you do want to know where the gaps are in your competency and make sure your current team can fill them. If they can’t, do you have the resources or connections to fill the spots where you may be deficient?
Doing an audit position to identify what you do and do not know will ensure that you and your team don’t go into the project blindfolded. This will significantly increase the chances for success in any given project.
This is the 5th of 12 articles on the cornerstones of investing. Next month will Paul Martinez will be writing Cornerstone #6.