To Decide is Human: The Importance of Effective Decision Making in Organizations
Everyone makes a bad decision from time to time - that’s only human. While some bad decisions are obviously more impactful than others, we’re learning more and more about the influence of emotion and bias in decision making. We’re not necessarily creatures of pure logic when it comes to deciding things. But we humans do need to make decisions to make progress in the world.
The holistic approach to decision-making
Is it important how decisions get made in organizations? A few historical data points suggest an answer.
- In 1876, Alexander Graham Bell offered to sell his telephone patent to Western Union president William Orton for $100,000. The telegraph tycoon declined the offer. Bell’s company quickly became the heart of the telecom industry, its patents worth millions.
- In 1962, a talent executive at Decca Records told Beatles manager Brian Epstein that, “We don’t like your boys’ sound. Groups are out; four-piece groups with guitars particularly are finished.”
- In 2000, Netflix founders approached Blockbuster with an offer to sell for $50 million. Blockbuster executives laughed them out of the room. Blockbuster went from over 9,000 stores to one and Netflix is now valued at over $150 billion.
- In 1986, Morton Thiokol engineers warned NASA not to launch the Space Shuttle Challenger based on their analysis of O-ring vulnerability. Under pressure from NASA, and despite the warnings of its engineers, Thiokol faxed its recommendation to approve the launch.
The point of decision making in organizations is to pursue success, however leaders define that term. If leaders think holistically, they’ll make decisions that support a competitive business model, a nourishing culture, effective capabilities, and caring individuals. So how do they pursue decision making success, exactly?
The value of collective intelligence
First, it’s about recognizing the value of collective intelligence. It’s been instructive to observe the ways in which people make decisions in a radically self-managed company like Morning Star, where I was part of the core startup team and served for over a decade. Morning Star’s basic principle largely aligns with Frederic Laloux’s Advice Process from Reinventing Organizations which states that: “any person can make any decision after seeking advice from 1) everyone who will be meaningfully affected, and 2) people with expertise in the matter.”
In a practical sense, however, Morning Star colleagues don’t make “any” decision, but do make decisions that fall within the scope of their agreed responsibilities. When the path forward isn’t clear, or a required decision has no precedent, the advice process is always a reliable principle. For example, what if the Decca talent executive had taken some trusted advisors out for a working lunch before deciding against the Beatles? What if William Orton had sent a few telegrams across the country to seek advice on Bell’s offer? What if Morton Thiokol had listened to its engineers and spared the lives of seven astronauts?
Second, it’s about harvesting efficiencies whenever possible. Beyond the advice process, there are other neural decision-making pathways available. It’s possible to negotiate the scope of decision authority with one’s colleagues in advance for recurring, continuous or forseeable decisions. This authority is often called a decision right (or decision rights, plural), and describes earned, meritocratic authority to make specific decisions.
Concentrated and distributed decision making
Three benefits flow from a negotiation process for ownership of these types of decisions. First, if colleagues demonstrate their ability to make certain decisions to others (that’s the earning part), it translates into successful negotiation of decision ownership. Second, ownership of decisions is a huge engagement catalyst, because people are very careful with things they own, including decisions. Third, organizational efficiency expands because the most efficient computer for decision making is a single human brain. For obvious reasons, it wouldn’t make sense to invoke the advice process for every decision in a large commercial enterprise.
It’s okay to concentrate decision making power where and when it makes sense, if it’s authorized by the people affected and the subject matter experts consulted. That means that collective intelligence can inform decisions about how to distribute decision making—concentrated and distributed decisions can play well together.
Decision Making: A business improvement opportunity
I’ve been playing a Decision Rights Game with teams for a few months, and it’s been fascinating to see the different lenses through which individuals view decision making. I witnessed a team of five close colleagues individually prefer five different methods of making the same decision. It was a surprising result and sparked rich dialogue. Making decisions about how to make decisions is a big part of the game of business. In a purely self-managed enterprise, every single person is a manager with some aspect of decision making authority and responsibility (some incorrectly assume that self-management means there are no managers). Making superior, value-creating decisions on a regular basis is an essential spice for any self-management recipe.
Getting clear about decision making authority is a serious business improvement opportunity, because many organizations are, unfortunately, sloppy about the way they define and distribute that authority. The benefits of clarity, transparency and accountability and the limitless possibilities of self-management are within the grasp of leaders willing to wrestle with the challenge of distributed decision making. How should decisions be made? Apparently, that wasn’t a burning question for the Y2K Blockbuster leadership team.
Making decisions about how to make decisions
Many leadership teams are concerned about governance in an environment of distributed decision making or self-management. They needn’t be. Control decisions, the gigantic decisions that can make or break a company (build a new factory, enter a new market, etc.) are generally owned by a board of directors unless delegated to a CEO. Unless and until statutory and regulatory schema change, boards and top leaders will still own control decisions. Everything else is a management decision, and organizations are free to structure their management decision making in whatever way makes sense for their existence in the world.
In other words, being sloppy about decision making isn’t a recipe for success. Modern organizations try to compassionately control people while withholding decision ownership and accountability.
My best friend, philosopher Peter Koestenbaum, recently turned 95 just after releasing a new book (“Confronting Our Freedom: Leading a Culture of Chosen Accountability and Belonging”, with Peter Block). I once asked him whether it’s everyone’s job to humanize business, and his response was that undertaking the job of humanizing business is a decision, not a discovery. People need to exercise their free will and decide to take on the ultimate work of humanizing business and creating better workplaces.
Leaders can distribute decision rights and help people feel happier and more engaged. If individuals want a better future of work, however, they must decide for themselves to create that future. That is the urgent meta-decision that calls for a response from every worker and every workplace.