Strategic, board-level decisions often fail because they are ground down in the corporate machine. While senior executives must be smarter at overcoming this by engaging middle managers and explaining why certain decisions have been taken, there is also a bigger, systemic question that needs to be addressed around organisational design and culture so that the best ideas are driving a business forward.
Martin Hess, VP of Enterprise Services at IT concern Hewlett Packard, says: “We have taken out tiers of management to flatten the organisation’s structure, because one of the biggest frustrations is that decisions taken at the top basically don’t hit the bottom. Too many tiers of management dilute the message that comes from the top, so you’ve got to find ways in which you can communicate decisions that avoid that dilution.”
It does appear that a point has been reached whereby traditional structures, be they hierarchical or matrix, are proving increasingly inadequate for global businesses. If that is the case, anything that can simplify and bring transparency to the decision-making process should be welcomed.
Julian Birkinshaw, Criticaleye Thought Leader and Professor of Strategy and Entrepreneurship at London Business School, comments: “All organisations use, to some extent, business models and management models that they don't question and have inherited. These are based on order and control, but this ends up constricting an organisation’s ability to function...
“There are alternative models emerging which are bottom-up, relying more on the ability of people to make decisions for themselves and working out a mode of operating that is successful.”
Much has been written about how data and analytics can inform choices. While there has undoubtedly been a step-change in this field, it shouldn’t be seen as some kind of panacea for making tough calls. Martin says: “You’ve got to avoid the process whereby you filter only the information that supports that decision.
“It’s not a weakness to change. You make decisions based on the data... then you’ve got to create a model that is permeable, allowing other data sources to come in that might influence that decision going forward.”
The focus must be on flushing out any false assumptions you may have. Simon Dawson, Associate at leadership and organisational change consultancy Transcend, says: “Be aware and open about your biases, both personal and organisational, that might come into play in decision making, whether it's in interpreting data or having a gut feel about what to do.
“That might include being tainted by negative previous experience; the different perceptions of risk; whether levels of optimism are realistic or how people perceive themselves and each other.”
Caroline Brown, CFO of consulting and software service concern KBC Advanced Technologies, emphasises the need to balance data with personal judgement. “I’m afraid I tend to go with the gut feel and really interrogate the data that doesn’t agree with that,” she says.
“I’m very sceptical about data most of the time. I wouldn’t go as far as to say [I pick the data that I agree with]... but data that is in contradiction of the gut feel gets interrogated thus, because it starts with the wrong assumptions and probably the wrong inputs as well.”
The volume of information now available means that executives can become lost in an endless maze of data analytics as they attempt to make the ‘right’ decision. “Companies which look at data and are obsessed by it can find themselves in a state of ‘analysis paralysis’,” warns Julian. “They get stuck in inaction, whereas the next era is one of action and conviction.”
For Geraint Anderson, CEO of electrical systems manufacturer TT electronics, it’s a matter of course to be working to clear data points but, he says, “it's ultimately about whether I feel it’s the right thing to do... then making sure that I can back that up with data where possible”.
The right results
The crux for effective decision-making in any organisation comes down to leadership. “When decisions fail to take hold within an organisation it’s mostly down to culture and lack of communication around the context for the decision,” says Caroline.
Geraint says: “I keep HR directly informed and share and develop decisions and the direction with the rest of my team, bringing them together on a regular basis to assess whether we are still on the right track. It’s vital that you’re coherent and bring decisions together as a team and are not just being dictatorial.”
The common mistake is to announce a change, not communicate it clearly and then fail to revisit it on a regular basis. Clodagh Murphy, MD of Eclipse Internet, a division of KCOM that provides communications services to small and medium-sized businesses, comments: “Decisions often get taken in boardrooms and are cascaded out as ‘just do it’, without taking the time to explain the context of why the decisions have been taken...
“We’ve had bottlenecks where, to some extent, the capability of some of the middle managers just isn’t there to articulate the messages effectively... [and] we’re doing quite a bit around people development to try and overcome some of that.”
If decisions do appear to keep getting ‘stuck’ in a business, ultimately a CEO will need to see this as indicative of a more ingrained weakness around the leadership team, the culture and organisational model. At present, many companies are at a stage of reassessment, wondering how to reduce complexity so that everything is moving faster, but in a way that is based on clearly established values.
According to Julian, “we have now reached a point where an emphasis on collective knowledge has led to sterile decision making, devoid of emotion… Organisations now need to marry knowledge and emotion”.
It may prove to be an unbeatable combination.
I hope to see you soon.