In today’s fast-paced world, we are constantly required to make an increasing number of decisions and nowhere is this more evident than in business. The rate of innovation and the disruption that many traditional businesses are facing has only increased the speed at which they need to respond to change. Often a successful market response is inhibited by the speed at which decisions are made. And this is usually due to the hierarchical way that businesses are structured and the embedded bureaucracy in traditional decision-making processes. At the most extreme, delayed decision-making can result in the business completely missing out on an opportunity…
In my previous article ‘How to beat decision fatigue & dramatically increase workplace productivity‘ I discussed simple ways that organisations could empower, enable, and encourage their people to make better decisions. In this article I will share 6 tips on how to structure rights so that people within an organisation actually know who should make a decision.
1. Document decision rights
Once a business reaches a certain size, it is not practical or optimal for one person (typically the founder) to make all the decisions anymore. As additional people with specific skills are brought in to assist in developing and managing the business, they need to be empowered to make the decisions to do it. Initially, these devolving decision rights could be informally agreed or inferred. However, key decision rights need to be clearly communicated to drive accountability for decisions and reduce confusion.
“Key decision rights need to be clearly communicated to drive accountability for decisions and reduce confusion.”
2. Assign decision rights to individuals, not committees
There is a tendency within organisations that, as the importance of a decision increases, so does the number of people required to make or ratify the decision. Ironically, this often reduces the rigor and attention applied in making the decision, as it is easy to offload responsibility for a bad decision on the collective.
If an individual knows that they are ultimately and independently accountable for a decision, they are more likely to ensure quality consideration and consultation in the decision-making process. This does not mean that decisions are taken in isolation, but that an individual makes the decision after considering the relevant information and input required. The exception to this is when there are regulatory or legal specifications that require a decision to be made by a group of people. These however, should be very limited.
3. Assign decision rights at the appropriate level
Often decisions are allocated according to seniority instead of according to knowledge. But the most senior person in the room may not actually be the best person to make the decision… With a greater understanding of the ‘bigger picture’, what they can offer is their experience to guide the process. It’s a balancing act between delegating a decision to the person with the best detailed knowledge and maintaining a strategic view of the business impact.
4. Recognise the different roles in the decision-making process
In addition to the person who makes the decision, there are a number of people who formally and informally play a role in the decision-making process. These roles need to be clearly articulated and understood within the organisation, and in some cases, should be documented along with the decision rights. Following the traditional RACI-type model, here are some roles to consider…
Who within the organisation should be consulted when making the decision?
Who is responsible for ensuring that the decision is executed once it has been made? This is often overlooked when the necessary means to track the decision through to execution are missing. It may or may not be the person who makes the decision.
Who needs to be informed once the decision has been made?
Is there someone in the business who has the right to veto a decision? This should not be used to undermine or ratify a decision, but rather to ensure that legal, compliance or regulatory requirements are met.
5. Create principle-driven decision rights for quantitative & qualitative decisions
The purpose of decision rights is not to delegate each and every decision that needs to be made in a business. This would obviously be impractical and unreasonable! Decision rights should be based on principles that enable people to determine which decisions they have the authority and the obligation to make. Often businesses find it easy to clarify financial decision rights that are based on quantitative limits. However, qualitative decisions cannot be overlooked and are often more difficult to document and delegate.
6. Align decision rights to enabling policies & processes
It is essential that decision rights are aligned to policies and processes within the business and most importantly, are not contradicted in other business artifacts. Decision rights should be an integral and aligned part of any business operating model.
Decision rights can assist businesses to be more agile making decisions in response to internal and external change. However, accurately building these decision rights requires time and commitment. It requires time and commitment to the clear documentation of these rights and to the effective implementation of them. It is only by giving this initial time and commitment that businesses will see the benefits in pace of movement.