The high-risk stakes of decision-making concentrated at the top.
The most effective corporate leaders are rightly praised for their track record of rewarding and profitable decisions. Years of experience builds confidence in their ability to gauge the market and make the best calls.
These leaders are often described as incredibly lucky: risk-takers who just happen to be in the right place at the right time.
But are they really ‘lucky’?
In decision-making terms, ‘luck’ can be a dangerous commodity.
We’ve all heard about start-ups that failed after a couple of years of rapid growth or companies that collapsed following a sudden change in consumer demand. All too often, the post-mortems of these corporate failures reveal problems with structure and culture; decision-making has been concentrated at the top with little to no delegated responsibility.
Research has shown corporations experience more extreme results when CEOs have too significant an influence on decisions. That’s because when only one person is calling the shots, personal bias weighs heavily on the process. Some great decisions might result in the short term, but there’s an increased risk of truly terrible ones as well.
Eventually, the luck runs out.
More effective leaders are usually aware of their limitations, tending to seek out and rely upon the wise counsel of their senior managers.
The commodity they possess more than luck is trust.
They have trust and confidence in their directors and managers to make sound decisions and give good advice in the firm’s best interests. What’s more, this trust doesn’t come about overnight; it results from carefully developed internal processes.
However, without these processes in place, organisations can fall into another trap, assuming they can push decisions down the line without proper guidance. Delegation matters, but it is not an easy fix to a decision bottleneck. Like the CEO, any team member can make a poor, personally-biased decision.
Getting the balance right means building internal capabilities that allow for consistent, transparent, and collaborative decision-making throughout the organisation.
Empowered teams are more likely to work in the same direction, ensuring better business outcomes over the long term.
Further, teams proactively trained in decision capability become more conscious of trade-offs. In particular, they understand the financial and non-financial impacts of their choices.
That’s why building decision capability is essential for organisations looking to create additional value. Teams invested in the process can confidently and ethically undertake consistent, streamlined decisions.
And back at the top of the firm, rather than relying on luck, the trusting CEO can step away from the minutia and concentrate on the calls that matter.
Looking to understand how your organisation can make more robust decisions? Talk with us about how you can stop rolling the dice and start building your internal capability.