Organizational Decision Making: Is It a Competitive Advantage?
Paying attention to how your organization handles decision rights is the first step to realize your organization's goals
Think of a company you admire. How do you imagine business decisions are made there? You probably aren't picturing layers of bureaucracy, "paralysis by analysis" or decisions handed down by "Corporate" from a continent away. However, for too many organizations, outdated or all-out broken decision-making processes hamper productivity and performance in many ways. The delay in the important product launch… the lost opportunity to gain market share… the talented employee who feels marginalized and leaves. The effects of too-slow or poor decision making can ripple throughout the organization.
But just as other elements of an organization's operating structure can be defined and refined, decision making can be as well. We call this decision rights. Decision rights are closely related to governance, which is a framework for managing business issues that require formal decision making. Decision rights go beyond the standard approach to governance, cataloging critical decisions that must be made, identifying who is closest to the relevant information that will help them make these decisions and documenting who will ultimately be accountable for the decisions that are made.
Effective, clearly defined decision rights can drive efficiency and accountability while empowering individuals to make the right decisions at the right time.
But is now the right time for your organization to redefine decision making? Before you decide, let's take a closer look at what decision rights can contribute to an organization and some of the common triggers that signal a need to rethink them.
Decision making as a competitive advantage or not
Decision rights are a framework to manage any business issue requiring decision making. The framework includes three key components:
- Decision inventory – A comprehensive list of the key decisions that must be made by an organization, leaders, team, business unit or function
- Decision rights model – The hierarchy of decision makers or decision-making groups who own the defined decisions. The model is designed by defining guiding principles, assigning decision-making accountability, and designing committees and advisory groups
- Decision making processes – The defined roles and procedures that support delivery of decision making (e.g., meeting procedures and protocol, issue and action tracking tools, escalation processes)
Together, these three aspects of decision rights form a reference point for leaders and employees to formalize a consistent and efficient approach to decision making.
Why is it so important to formalize the decision-making process? Decision rights contribute to organizational effectiveness in a number of ways and can drive quantitative and qualitative value.