In our current economic environment, many companies have outgrown their management bandwidth; meaning there is more to do than management has time to do it. This includes timely decision making. In a recent article in McKinsey Quarterly, published by McKinsey & Company, they reference a survey of more than 1,200 managers mostly in larger companies. We see some of the same trends in the middle-market companies that we serve involving inadequate decision processes.
The article outlines four types of decisions:
- Big-bet Decisions: infrequent decisions on strategic issues involving high risk and shape the future of the firm.
- Cross-cutting Decisions: frequent decisions that cut across multiple departments that involve risk such as pricing.
- Delegated Decisions: which are low risk, frequent and easily handled by individuals or working teams.
- Ad-hoc Decisions: these are low risk, infrequent and not likely to need management attention.
Managers complain about too many meetings, too long to build consensus and late decisions, or in some cases, no decisions. This begs the question who is in charge and who is responsible for what. To that end, we suggest an authority/ decision matrix that spells out who has the authority for which type of decision.
We devise these matrix models for clients to clearly define the who, what, and when for decision making. The matrix has position titles or names on the vertical axis and decision types on the horizontal axis. Within the cells there are authority limits for each position/decision type. This clearly spells out the escalation path and when escalation is not needed. There are also footnotes on which decision teams are needed for what type of decision; although this is usually limited to major strategy decisions or cross-cutting decisions. How the actual process unfolds will vary in each company based on their culture and management structure.
While the matrix will not settle all arguments or turf wars, it greatly limits them when followed with some discipline. The matrix is designed to avoid the upward push of decisions to distract senior management for decisions they have delegated or to show where they should delegate the decision authority. Multiple decisions on the same issue tends to kill innovation and accountability.
Jeff Bezos in his April 2017 letter to Amazon shareholders mentions the concept of “disagree and commit;” which means once a decision is made, join the team and get the job done. While a party may not like the decision outcome, they need to be a team player and move forward. The authority/decision matrix is a tool to set the rules of play.
We suggest that your company think about this authority/decision matrix to smooth decisions and speed up your operations. If you would like to know more about this tool and how to develop it, feel free to reach out to us via our website or better yet, just call.
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