Deciding how to decide: five paths to bad leadership choices--and how to avoid them.

Author:Wageman, Ruth
Position:STRATEGY - Company overview

Both the complexity of organizations today--whether small, large, global, regional, single business lines or conglomerates--and the corresponding demands on today's top leaders are daunting. Executive decision making demands high levels of conceptual skills, of strategic thinking, and of the ability and patience to work through the upsides and downsides of a staggering array of complex alternatives. That's all too much for one person to handle alone, no matter how talented or experienced.

So if one individual can't do it all single-handedly, how can CEOs ensure that insightful decisions get made? And how should leaders decide when they must be part of a decision process?

Some executive decisions truly benefit from the breakthrough dunking or wisdom that one gets from a great leadership team. But when and how a leader brings in the team is a choice in itself. CEOs must make good decisions about what to be involved in directly and what to delegate so that decisions don't languish at the top waiting for resolution.

While conducting research for Senior Leadership Teams: What It Takes to Make Them Great, we observed many senior leaders' decision-making practices, and identified critical lessons for CEOs and their senior teams about how to make decisions deftly and well.

In our work, we identified the following five "tripwires" that most often derail CEOs in finding the balance between getting involved in and effectively delegating decision making.

  1. The CEO is not involved where he or she should be. No one denies that leaders need to delegate authority to their direct reports and to other leaders in the organization. But some CEOs overdelegate--tasking subordinates with making decisions on their own when the CEO should have a hand in the process. For example, they ask their senior staff to generate proposals for how to change organizational structure, or to redesign the operating model. CEOs expect simply to kick the tires of these proposals and give a thumbs up or thumbs down. On the surface, it seems like an effective practice. The executives feel empowered to work on a vital issue and the CEO is free to focus on other strategic matters, as well as manage the demands of constituencies. That may be fine for a wide range of decisions. But there are issues that demand the CEO's active participation--most especially those that will involve the CEO having to directly manage the consequences. Inevitably, those decisions will come right back to the top.

    For example, the CEO of a supply company in the natural resources industry asked a small group from his top team to propose a change in the operating model, because the company's major products were experiencing seismic shifts in their relative importance. The market, which had once considered their products as best in class and worth a premium price, now viewed them as commodities. Worse, there was no new blockbuster product expected from the company's R&D anytime soon.

    The working group soon recognized a need for major shifts in the company's structure--with serious implications about who would hold power in the firm. Unable to resolve the issues at their level, they recommended new matrix structures to be "bolted on" to the existing model. A trial run made it clear that this was no solution. Ultimately, the CEO revisited the issue, talking through the problem with whole top team and developing a creative redesign together with his staff--but not before a significant chunk of executive time and organizational energy was wasted.

  2. The CEO gets involved where he or she shouldn't. It is both natural and beneficial for a CEO to be enthusiastic about what his or her company does. Most of us know business leaders who began their careers as dedicated scientists, researchers and doctors, and who are still in love with the technical matters of their profession. Or former business unit heads who remain emotionally attached to those businesses. Or former salespeople who just cannot help themselves from getting personally involved in deals, long after they were promoted to the C-suite.

    On the one hand, it makes sense. These individuals are motivated and engaged by those subjects. Not only do they love what they do, they love what they did that got them there. On the other hand, the technical stuff is no longer their job. Why do CEOs risk getting thrown off balance by love of details? According to research by psychologist David McClelland, many executives tend to be...

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