Start-ups assume the best in their people. Founders and leaders freely give away power
and control. They have faith in their teams’ judgment and provide means to
empower individuals. As a result, their
work teams are highly engaged risk-takers, iterating quickly and adapting to changing
markets.
Large firms see the worst in people. The structures, policies and compliance procedures
demonstrate their lack of trust.
Vertical hierarchies, approval processes and sign-offs sap their speed and
creative spirit.
Organizational trust
is fundamental to collaboration and continuous innovation.
To foster trust, next generation organizations such as a Collaborarchy™ operate with
Distributed Authority.
Authority is a right.
In a business context, authority centers on the right to make decisions about product
strategy or marketing tactics, verdicts on hiring and firing staff, spending
company resources or resolving customer problems.
In traditional hierarchical organizations, titles define
authority. Those at the top have the
power. Making decisions in this vertical structure requires an information
exchange between those with situational knowledge and those with authority. This constant up and down the ladder creates
bottlenecks and organizational friction.
In advanced organizations, decision-making
rights are granted to those closest to the problem. Management trusts the wisdom of team members, believing the staff will act in the best
interest of the company and it’s
customers. By distributing authority, leaders put power in the hands of
those best positioned to find the right solution. This permission speeds decisions so companies
can be nimble and outflank competitors.
Clarity of
decision-making authority is essential, especially at high growth
businesses. In a Decision-making
framework I use with clients, Leaders classify decision situations as Strategic
or Tactical. Categories of decisions can
include hiring/compensation, budgets, key company initiatives, product
development, etc. From there, teams or individuals are granted authority over decisions in these realms.
Posting this matrix publicly ensures domains of
responsibility are clear. With mutual
understanding of boundaries and expectations, confusion and frustration among
staff teams is minimized.
How we make
decisions is as important as who
pulls trigger. The decision-making
process has several distinct stages from problem identification and information
gathering through evaluation of options. Oftentimes, these activities are conducted
simultaneously or worse, in the wrong order. Many of us choose an option first and then
gather the information needed to justify our decision.
Effective teams conduct
a methodical decision-making process to ensure wise choices. Getting the process right upfront saves time and rework down the line. During the information gathering stage, they reach out to all constituents (including customers) for input. When riffing through possible solutions, they actively seek divergent ideas and consult the skeptics as well as quiet members of their
team. Selection criteria are clear, defined
in advance of the evaluation process and aligned with both customer interests
and company Core Values.
In organizations built for speed, the default action is to
move an idea forward. Short of a viable
objection or potential harm to the business, initiatives are pushed ahead. Release reviews and project postmortems enable
the team to candidly assess the outcome, learn from mistakes and try
again. This rapid iteration process
works best if autonomous teams gain cross-functional input and have the
authority to make decisions.
Enlightened leaders are re-examining traditional decision-making criteria. Most companies base decisions on KPIs. Ideas
and initiatives are assessed for their impact on revenues, units sold, production costs or profits. These results are
lagging indicators, outcomes only measuring performance. They can answer the question “How much?” but
they can’t answer the question “Why?” Operating
via KPIs puts teams in firefighting mode, always reacting to results from the past.
More progressive firms are getting ahead of the curve by focusing on Business Drivers - leading
indicators producing future outcomes. Business
Drivers can include customer satisfaction, repeat purchase rates, Net Promoter
scores as well as staff retention and employee engagement ratings. Operating by Business Drivers enables
companies to anticipate customer needs and market trends while ensuring their teams are working at peak productivity. Firms focused on Drivers
rather than KPIs are more attuned to the end-to-end customer experience
enabling them to be out front, leading change and defining the future.
In our next post, we will examine the power of transparency.
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