Decisions are the coin of the realm in business. Every success, every mishap, every opportunity seized or missed is the result of a decision that someone made or failed to make. At many companies, decisions routinely get stuck inside the organization like loose change. But it's more than loose change that's at stake, of course; it's the performance of the entire organization. Never mind what industry you're in, how big and well known your company may be, or how clever your strategy is. If you can not make the right decisions quickly and effectively, and execute those decisions consistently, your business will lose ground.
Indeed, making good decisions and making them happen quickly are the hallmarks of high-performing organizations. When we surveyed executives at 350 global companies about their organizational effectiveness, only 15% said that they have an organization that helps the business outperform competitors. What sets those top performers apart is the quality, speed, and execution of their decision making. The most effective organizations score well on the major strategic decisions – which markets to enter or exit, which businesses to buy or sell, where to allocate capital and talent. But they really shine when it comes to the critical operating decisions requiring consistency and speed – how to drive product innovation, the best way to position brands, how to manage channel partners.
Even in companies respected for their decisiveness, however, there can be ambiguity over who is accountable for which decisions. As a result, the entire decision-making process can stall, usually at one of four bottlenecks: global versus local, center versus business unit, function versus function, and inside versus outside partners.
The first of these bottlenecks, global versus local decision making, can occur in nearly every major business process and function. Decisions about brand building and product development frequently get snared here; when companies wrestle over how much authority local businesses should have to tailor products for their markets. Marketing is another classic global versus local issue – should local markets have the power to determine pricing and advertising?
The second bottleneck, center versus business unit decision making, tend to afflict parent companies and their subsidiaries. Business units are on the front line, close to the customer; the center sees the big picture, sets broad goals, and keeps the organization focused on winning. Where should the decision-making power lie? Should a major capital investment, for example, depend on the approval of the business unit that will own it, or should headquarters make the final call?
Function versus function decision making is perhaps the most common bottleneck. Every manufacturer, for instance, faces a balancing act between product development and marketing during the design of a new product. Who should decide what? Cross-functional decisions too often result in ineffective compromises solutions, which frequently need to be revisited because the right people were not involved at the outside.
"Who Has the D?", Paul Rogers and Marcia Blenko, Harvard Business Review, January 2006. Visit CJPS-Enterprises for more information.