When Should Leaders Own a Decision and When Should ...

A well-run company has the right people focused on the right risks. Ideally, the CEO and board of directors should only make decisions at ... Skiptocontent close SORTBY:MOSTRELEVANTMOSTRECENT Subscribe WhenShouldLeadersOwnaDecisionandWhenShouldTheyDelegate? twitter facebook linkedin email print ByVictoriaMedvecTranslationsEnglishPortuguêsEspañol中文 MichaelMeier ByVictoriaMedvecTranslationsEnglishPortuguêsEspañol中文 twitter facebook linkedin email printLeadersearntheirkeepbymakingsmartdecisions.Butsometimesthesmartestdecisionistodelegatethatdecisiontosomeoneelse.AddInsighttoyourinbox.Everydecisionfitssomewherealongariskcontinuum.Anuglyshadeofgreeninthehallwayisnotnecessarilygoingtodamagethebrand,butanill-timedacquisitionmight—justashiringasingleunderwhelmingemployeewillhavefewerconsequencesthanthedecisiontooutsourceafunctionalareafortwelveglobaloffices.Iencourageleaderstoapproachdecisionsbyfirstconsideringtheriskinessofadecisionandallowingthatassessmenttodetermine(1)whoisinvolvedinmakingthedecision,(2)howmuchtimeshouldbespent,(3)howmuchcertaintyisrequired,and(4)whatyourtoleranceisforerror.Thesequestionscanhelpleadersmakebetteruseoftheirtime—andempowertheirorganizationsintheprocess.WhoGetsInvolvedinMakingtheDecision?Awell-runcompanyhastherightpeoplefocusedontherightrisks.Ideally,theCEOandboardofdirectorsshouldonlymakedecisionsattheextremelyhighendofariskcontinuum,leavingmid-andlow-riskdecisionstothosefurtherdownthecorporateladder.Unfortunately,thisdoesnotalwayshappen.Toooften,low-riskdecisionsgetescalateduptotheleadershipteam.Thiscanhappenforacoupleofreasons.SometimesCEOsactlikevacuumcleaners,“hoovering”eventhesmallestdecisionsupwards.Othertimes,though,theproblemisthatthepeoplebelowtheCEOareunwillingtobeaccountableformid-riskdecisionsandpushthemuptothetop.IonceadvisedaCEOwhowasbeingaskedtodecidewhenhiscompanyshouldlaunchaproductinNewYork.HewasnoteveninNewYorkandtheriskinessofthedecisionwasrelativelylow—itwasnothisdecisiontomake.Heconcludedthatthisdecisionwasonhisdeskbecausehisteamwasunwillingtomakethecallanddidnotwanttotakeaccountability.WhenItalkedtohispeople,Iheardadifferentstory.Theysaidthatifyoumadeadecisionthatwasnotwhathewouldhavedecided,hewouldjustre-decideanyway,soitwasmoreefficienttolethimdecideinthefirstplace.Regardlessofwhetherthedecisionissuckeduptothetopbytheseniorleaderorpushedupfrombelow,thisescalationresultsinanumberofpredictableproblems.First,thistypeofescalationmakesdecisionstakemuchlonger.Timeiswastedbecausedecisionshavetoclimbtheirwayupthroughtheorgchart,andthenbackdown.Timeisalsowastedbecausetheseniorexecutivesbeingpulledintothedecisionoftenhaveverybusyschedules,soittakestimetogetthedecisioninfrontofthemandprovideadequatebriefingonthetopic.Decisionsthatareescalatedalsotendtobemoreerror-prone,asthepeoplemakingthedecisionarefurtherawayfromthedatarequiredtomakethecall.Moreover,whenthemostseniorleadersmakeeverydecision,theyfailtoempowerpeopleatthelowerrungsoftheorganizationandfailtodeveloptheirteam’sdecision-makingskills.Bypushingdecisionsdowninsteadescalatingthem,leaderscanbuildthedecision-makingmusclesoftheiremployeeswhilemakingpeoplefeelmorevaluedandtrustedintheirroles.Therealityisthateveryindividual,includingtheCEO,haslimitedcognitiveresources—resourcesthatshouldbereservedforaddressingthemostfundamentalissuesfacingthecompanyatanygiventime.Thebiggestmistakesoftenoccurwhenthoseatthetopareusingtheirmentalenergyondecisionsthatarenotthatcritical.HowMuchTimeShouldBeDevotedtotheDecision?Inmyexperience,manyorganizationsspendadisproportionateamountoftimemakinglow-riskdecisions.Icallthis“invertingtheriskcontinuum.”Invertingtheriskcontinuumcanleadacompanytolosefocusofcorebusinessquestions.Irecentlyspoketoagroupofleaderswhosecompanyhadmadeasignificantacquisition,onethatdoubledthecompany’ssize.WhenIaskedthemtowritedownthemostimportantdecisiontheyweremakingatthatmoment,180outof200saidtheyweremakingastaffingdecision.“Mostpeopletendtooverestimatetheriskofmakingabaddecisionandunderestimatetheriskofinaction.”Related HowtoNurtureYourSuperstarEmployees AreYourEmployeesPuttingtheCompany’sInterestsFirst? ReadytoMakeaRiskyDecision?YourWordsSuggestOtherwise Editor’sPicks Editor’sPicksHowtoNurtureYourSuperstarEmployeesFocusonthesethreetraitstohelpyourtopperformersflourish—andstickaround. Editor’sPicksAreYourEmployeesPuttingtheCompany’sInterestsFirst?Anewtoolmeasuresafirm's"stewardshipclimate." Editor’sPicksReadytoMakeaRiskyDecision?YourWordsSuggestOtherwiseMiningdigitalcommunicationsforemotionscanleadtobetterdecisions.Tome,thiswassurprising.Staffingdecisions—unlesstheyinvolvepositionsatthehighestlevelsofmanagement—typicallyfallsomewhereinthemiddleoftheriskcontinuum.Butthiscompanywasspendingmoretimeonstaffingissuesthantheyhadspentmakingthemuchriskierdecisionofwhethertogothroughwiththeacquisition.Tobeclear,Iamnotsayingthathiringisnotimportantbutratherpointingoutthatahiringmistakeofasinglelow-tomid-levelexecutiveisunlikelytotakedownacompanyorrockitsshareprice.Ontheotherhand,asinglelargeacquisitionthatgoesbadlycoulddestroythebusiness.So,moretimeshouldbeallocatedtothesedecisionsthantolessriskyones.HowMuchCertaintyDoWeNeedinOrdertoMaketheCall?Someleadersbynaturetendtobemorecautiousthanothers—andthereisnothinginherentlywrongwithcaution.Butitiseasytooveranalyzemid-riskandlow-riskdecisions.Toavoidparalysisbyanalysis,thelevelofriskshoulddrivehowmuchcertaintyisrequired:Whenis70percentenough?Whenis50percentsufficient?Whenshouldwejustmakethecallbasedonourgutbecausetheriskissolowthatitwouldbebettertorevisethedecisionifneededlaterthantoanalyzeitupfront?Youwanttosaveyouranalyticrigorfortheimportantstuff. Itiscriticaltoconsiderthelevelofcertaintyrequiredbecausethereisacosttotheanalysis.Thereisthecostofcompletingtheanalysisandthecostofpostponingthedecision.Postponingadecisionisadecisioninitself.Mostpeopletendtooverestimatetheriskofmakingabaddecisionandunderestimatetheriskofinaction,andthiscanhaverealconsequencesinacompetitivebusinessenvironment.Postponingacertaindecisionmightbetherightcallforacompany,butitisnevercompletelyrisk-free;thereisalwaysarisktonotacting,andsometimestheconsequencesareasdramaticasmakingthewrongdecision.Forexample,acompanymayspendmonthsanalyzingwhetheranewproductshouldbelaunchedandinthetimetheyspenddeciding,theircompetitorlaunchesaverysimilarproduct.WhatIstheCompany’sToleranceforError?Mostcompaniestodayclaimtovalueinnovation.Wecanfinditintheirmissionstatementsorpostedinlargelettersintheircorporatelobbies.Butinnovationisonlypossiblewhenyouarewillingtotakerisks.Andinordertotakerisks,youhavetobewillingtogetthingswrong.Leadershaveachoicewhenitcomestotoleratingerror.Somechoosetopunisherrorsandrewardoveranalysis.Othersactuallycelebratemistakes.At3M,itwashardtogetpromotedwithouthavingmadeahighlyvisiblemistakethatwaswidelydiscussed.Thatisnotbecause3Mlovedmistakes,butbecausetheyvaluedrisk-taking,whichtheyknewwasthesparkforinnovation.Insteadofbeinguniversallycautious,leadersshouldfocuson“de-risking”decisionsbyactivelyworkingtopushdecisionsdowntheriskcontinuum.Therearemanywaysofdoingthis.Ifacompanywantstode-riskthelaunchingofanewproduct,forinstance,itcanlaunchitinasmallermarket,whereitsbugswillbelessvisible.Manystartupslivebythemantra“failoften,failfast,”whichmakesperfectsensewhendealingwithlow-andmid-riskdecisions.Butitmaybelessapplicabletothehigherendoftheriskcontinuum.Youdonotwanttofailoftenorfastatthecoreofyourbusiness.Whatyoudowantisacompanythatencouragesinnovationandempowersitspeopletomakedecisionsappropriatetotheirposition.Noamountofanalysiswillevercompletelyeliminaterisk.Butwhenleaderslearntoassessthatriskandfocusonwhatreallymatters,theyarefarmorelikelytosucceed.FeaturedFaculty VictoriaMedvecAdelineBarryDaveeProfessorofManagement&Organizations;ExecutiveDirectoroftheCenterforExecutiveWomenSuggestedForYouMostPopularMarketingWeReactDifferentlytoPapervs.DigitalRequestsOurwillingnesstoactvirtuouslychangesdependingonhowwe’reasked.DataAnalyticsHowGigWorkersPushBackAgainstTheir“DigitalBoss”Insteadofhavingmanagers,theseworkersarebeholdentocustomerreviews.Therelationshipisrocky.MostPopularPodcastsCareersPodcast:OurMostPopularAdviceonImprovingRelationshipswithColleaguesCoworkerscanmakeuscrazy.Here’showtohandletoughsituations.SocialImpactPodcast:HowYouandYourCompanyCanLendExpertisetoaNonprofitinNeedPlus:Fourquestionstoconsiderbeforebecomingasocial-impactentrepreneur.CareersPodcast:AttractRockstarEmployees—orDevelopYourOwnFindingandnurturinghighperformersisn’teasy,butitpaysoff.MarketingPodcast:HowMusicCanChangeOurMoodABroadwaysongwriterandamarketingprofessordiscusstheconnectionbetweenourfavoritetunesandhowtheymakeusfeel. MoreinLeadership WantYourEmployeestoInnovate?TrustThem. Podcast:CanaLittleEmbarrassmentMakeYourTeamMoreCreative? HowMuchEmpathyDoYouFeelWhenPowerfulPeopleSuffer? close-thinAddInsighttoyourinbox.We’llsendyouoneemailaweekwithcontentyouactuallywanttoread,curatedbytheInsightteam.