Organisational success depends on leaders making smart decisions. And sometimes, that’s to delegate that decision to someone else.
If you’ve worked with senior leaders who insist on being involved in (ahem, ‘making’) every decision in the organisation, you’ll know how frustrating, disempowering and unproductive it is. I’ve seen it at close hand, and it’s incredibly destructive. Perhaps like me, you’ve spent too long over some decisions that aren’t ultimately worth that amount of energy. As I’ve discovered, there are a few tips that can help.
1. The four things to consider first in organisational decision-making
Decisions fit somewhere along a risk continuum, with some decisions having huge impacts and others, not so much – hiring a single employee will (generally!) have less consequences than outsourcing a functional area across ten business sites.
Leaders (and all of us in fact) should approach decisions by first considering the riskiness of a decision, and allowing that assessment to determine:
- who is involved in making the decision?
- how much time should be spent?
- how much certainty is required?
- what’s the relevant tolerance for error?
These questions can help leaders make better use of their time—and empower their organisation in the process.
2. Who gets involved in a decision?
A well-run organisation has the right people focused on the right risks. Ideally, the CEO and Board should only make decisions at the high end of a risk continuum, leaving mid- and low-risk decisions to those at the right level.
But too often, low-risk decisions are escalated up to the leadership team – either because the seniors insist on it, or the lower-level staff are not willing to put themselves on the line (both factors speak of course to culture).
Escalation makes decisions take much longer, going up and down hierarchies, and involving senior people who are busy and take time to get to the material let alone respond. Decisions that are escalated may well be more error-prone, as the people making the decision are further away from the relevant data.
All staff, including the CEO, have limited cognitive resources — and for a CEO these resources should be reserved for addressing the big, fundamental issues facing the business at any time. Big mistakes often occur when those at the top are using their mental energy on decisions that are not that critical, and/or for which they don’t have the relevant data.
Of course, when the most senior leaders make every decision, they fail to empower their people, and fail to develop decision-making skills in their teams. By pushing appropriate decisions down instead of having them escalated, leaders can build strong decision-making skills right through the business, while making people feel more valued and trusted.
3. How much time to devote to the decision?
Many organisations spend much time making low-risk decisions, perhaps because they overestimate the risk of making a bad decision, and/or underestimate the risk of inaction. Example – a hiring mistake on a single mid-level manager in a global organisation is unlikely to take down the business (problematic as it might be), but a single large acquisition that goes badly can and has done so.
So, more time should be allocated to significant, high-risk decisions than to those at the other end of the spectrum.
4. How much certainty is needed to make the call?
Some leaders by nature are more cautious than others – and this is fine as long as they don’t overanalyse mid-risk and low-risk decisions. Consider – when is 70% certainty enough? When is 50% sufficient? When is the risk so low that we should we just make the call based on gut response?
Postponing a decision is, in itself, a decision. Instead of being universally cautious, leaders should focus on “de-risking” decisions by actively working to push decisions down the risk continuum.
There are many ways of doing this. For example, if a company wants to de-risk the launch of a new product, it can launch it in a small or test market, where bugs will have less impact and mistakes can be remedied.
5. What is the organisation’s tolerance for error?
Most of our organisations today claim to value innovation. But innovation is only possible when you’re willing to take risks. And in order to take risks, you have to be willing to get things wrong. There is a qualification here though. “Fail often, fail fast” – a good working mantra for innovation – is less applicable to the higher end of the risk continuum. You don’t want to fail often or fast in a core business function! So, estimating the impact of error is useful upfront – it’s a key element of a good risk assessment in fact.
Overall, when leaders, especially those prone to being involved in every decision, learn to assess the inherent risk of decisions and focus on what really matters at their level, they’re far more likely to succeed in their own real role. And they’ll be working with happier, more productive teams, in higher-performing businesses. And that … well, that actually is worth a certain level of risk.
Source: https://insight.kellogg.northwestern.edu/article/how-should-leaders-make-efficient-decisions (but really you’ve got the best of it right here 😊)