Executive Summary
If your organization or team is struggling with bad decision processes, don’t just treat symptoms. Determine which aspect of your governance system is truly at the heart of the problem and start moving toward the path to improvement. Breaking down the types of decisions being made across your organization is a good way to begin. Once you’ve identified which groups have the authority and resources to make which decisions, the next step is to link them to ensure effective coordination. Finally, be sure to build in metrics to monitor their effectiveness. Whether you’re an enterprise executive, or supervisor of a small team, you have the power to improve decision-making processes that live within the areas you control.
Despite the extensive body of research on decision making, it remains a source of great frustration for many leaders and companies. This may be because decision science often zeroes in on the decision-maker deeply examining their biases, anxieties, and instincts. But within organizations, decision making is often a distributed capability. Thousands of choices are made at the exact same time across vast networks of departments and geographies. Setting priorities, allocating resources, hiring and firing, resolving crises — decisions that range from high-risk strategic calls to low-risk tactical dilemmas.
Though governance systems have rarely been written about in this context, they often drive the larger decision making processes within a company. The problem is that the majority of organizations don’t design these systems with intentionality, so they tend to proliferate like weeds in an untended garden. To the point, one McKinsey survey of more than 2,200 executives shows that 72% of leaders think bad strategic decisions are either as frequent as good ones or the prevailing norm in their organizations.
There are consequences to this:
- Unfocused meetings. Whereas effective meetings facilitate honest conversations that lead to smart choices, unfocused meetings often turn into long, irrelevant status updates with dishonest exchanges that paralyze effective decision making and risk making an already messy governance system worse.
- Confusion over decision rights. If your governance system is failing, people may grow confused about who is in charge of what — leading to a futile tug-of-war between departments or team members.
- Competing priorities. People who complain about overlapping or ever-changing priorities are often operating within an organization that is misaligned about what to focus on.
- Rogue task forces and councils. If governing bodies are not managed correctly, they stick around long after their reasoning has ceased and generate activity and reports nobody cares about.
These symptoms are easy enough to spot — but treating them as individual issues, as opposed to the results of a poor governance system, fails to resolve the real problem at hand. The good news is that, whether your company has 100 employees or 100,000, there are a few steps you can take to design a better system, one that synchronizes decision making across your company. Here’s how to start.
Identify what decisions need to be made.
Breaking down the types of decisions your organization makes on a regular basis is a good way to begin. When I work with clients, I start by sorting decision making into three categories:
- Corporate decisions include setting vision and direction for the company, appointing top leaders, defining company values and culture, and managing external reputation.
- Strategic decisions include decisions about investments the company will make, which customers it will serve, capital expenditures, and setting corporate policies that all employees must comply with.
- Operational decisions include budgeting, developing and launching products, and managing talent.
You may choose different categories depending on the size and maturity of your company. The key is having some way to sort the types of decisions being made to ensure the right people are making them.
Determine who should make which decisions.
Decision rights must be distributed thoughtfully to ensure everyone is clear on the boundaries of their departments and roles. There are a couple of major factors to consider when deciding where to allocate decision rights. Initially, you will need to determine what level different types decisions should take place at. At the enterprise level, place decisions that will effect the company at large and need to be made centrally. At the department or business unit level, place decisions that must be discretely made for functions or geographies. At the local or individual level, place decisions that must be made with the uniqueness of employees and teams in mind.
Next, you will need to identify decisions that may require cross-functional collaborations. At the intersection of marketing, sales, R&D, and manufacturing, for example, there might be a need to coordinate innovation or product launch decisions. If the organization is in high-growth mode, there may be a need for a cross-functional council tasked with onboarding and retaining top talent. Your goal should be to make decision making across teams and departments as seamless and efficient as possible.
Connect governance groups.
Once you’ve identified which groups have the authority and resources to make which decisions, the next step is to link them to ensure effective coordination. None of these groups are making decisions in a vacuum, and many rely on each other to execute their choices.
There are typically two types of linkages that need to be created. First, meeting cadences must be established to create a predictable rhythm for the business. Teams governing near-term priorities will need to meet more frequently for shorter durations of time, while those focused on longer-term priorities should meet less often for longer durations of time. Some companies organize this process by scheduling standing meetings and publishing them on an annual governance calendar that the entire company has access to. This ensures that everyone understands which decisions are being made when, and by whom.
Second, information linkages must be identified between governing groups. Each group has a predictable set of information flowing into their meeting, and a defined set of decisions and conclusions coming out. Those inputs and outputs contain information that is critical to other decision-making groups. Defining how information moves between these groups, by whom, and in what time frame will help ensure that your organization stays aligned. Information linkages include things like group members acting as liaisons to other groups, succinct post-meeting updates, and online portals where real-time decisions and meeting minutes are posted. Linking governing groups through shared calendars, and technology that fosters transparency also keeps the entire organization updated on where decisions are made, and the rationale behind them.
Build in quality control.
The best governance designs monitor and track their effectiveness. Whether this is done through gathering employee feedback or an annual evaluation of the systems in place, the quality of your decision-making processes must be regularly assessed so that you can identify what is and is not working. One company I worked with monitored their decision-making process by scheduling a 10-minute check in at the end of every standing meeting to evaluate whether or not they had accomplished what they intended. During this time, they reviewed the decisions that were made and solicited feedback from employees to gauge if people understood how and why the choices affecting them most were made. In addition, they wanted to know whether or not employees felt they were able to contribute adequately to those choices. In this way, the company was able to continuously reiterate and improve their processes.
Whether you’re an enterprise executive, or supervisor of a small team, you have the power to improve decision-making processes that live within the areas you control. This is not to say that designing and implementing a good governance system is easy. Doing so will take time, discipline, and commitment. But allowing poor governance to stifle performance is far more costly. If your organization or team is struggling with bad decision processes, don’t just treat symptoms. Determine which aspect of governance is truly at the heart of the problem and start moving toward the path to improvement.
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How Systems Support (or Undermine) Good Decision-Making - Harvard Business Review
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