When Should Leaders Own a Decision and When Should They Delegate?
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Leadership Oct 2, 2017

When Should Leaders Own a Decision and When Should They Delegate?

Here are four questions to consider to become a more efficient decision-maker.

Business leaders assess risk in decision making.

Michael Meier

Leaders earn their keep by making smart decisions. But sometimes the smartest decision is to delegate that decision to someone else.

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Every deci­sion fits some­where along a risk con­tin­u­um. An ugly shade of green in the hall­way is not nec­es­sar­i­ly going to dam­age the brand, but an ill-timed acqui­si­tion might — just as hir­ing a sin­gle under­whelm­ing employ­ee will have few­er con­se­quences than the deci­sion to out­source a func­tion­al area for twelve glob­al offices. 

I encour­age lead­ers to approach deci­sions by first con­sid­er­ing the risk­i­ness of a deci­sion and allow­ing that assess­ment to deter­mine (1) who is involved in mak­ing the deci­sion, (2) how much time should be spent, (3) how much cer­tain­ty is required, and (4) what your tol­er­ance is for error. These ques­tions can help lead­ers make bet­ter use of their time — and empow­er their orga­ni­za­tions in the process. 

Who Gets Involved in Mak­ing the Decision? 

A well-run com­pa­ny has the right peo­ple focused on the right risks. Ide­al­ly, the CEO and board of direc­tors should only make deci­sions at the extreme­ly high end of a risk con­tin­u­um, leav­ing mid- and low-risk deci­sions to those fur­ther down the cor­po­rate ladder. 

Unfor­tu­nate­ly, this does not always hap­pen. Too often, low-risk deci­sions get esca­lat­ed up to the lead­er­ship team. This can hap­pen for a cou­ple of rea­sons. Some­times CEOs act like vac­u­um clean­ers, hoover­ing” even the small­est deci­sions upwards. Oth­er times, though, the prob­lem is that the peo­ple below the CEO are unwill­ing to be account­able for mid-risk deci­sions and push them up to the top. 

I once advised a CEO who was being asked to decide when his com­pa­ny should launch a prod­uct in New York. He was not even in New York and the risk­i­ness of the deci­sion was rel­a­tive­ly low — it was not his deci­sion to make. He con­clud­ed that this deci­sion was on his desk because his team was unwill­ing to make the call and did not want to take accountability. 

When I talked to his peo­ple, I heard a dif­fer­ent sto­ry. They said that if you made a deci­sion that was not what he would have decid­ed, he would just re-decide any­way, so it was more effi­cient to let him decide in the first place. Regard­less of whether the deci­sion is sucked up to the top by the senior leader or pushed up from below, this esca­la­tion results in a num­ber of pre­dictable problems. 

First, this type of esca­la­tion makes deci­sions take much longer. Time is wast­ed because deci­sions have to climb their way up through the org chart, and then back down. Time is also wast­ed because the senior exec­u­tives being pulled into the deci­sion often have very busy sched­ules, so it takes time to get the deci­sion in front of them and pro­vide ade­quate brief­ing on the topic. 

Deci­sions that are esca­lat­ed also tend to be more error-prone, as the peo­ple mak­ing the deci­sion are fur­ther away from the data required to make the call. 

More­over, when the most senior lead­ers make every deci­sion, they fail to empow­er peo­ple at the low­er rungs of the orga­ni­za­tion and fail to devel­op their team’s deci­sion-mak­ing skills. By push­ing deci­sions down instead esca­lat­ing them, lead­ers can build the deci­sion-mak­ing mus­cles of their employ­ees while mak­ing peo­ple feel more val­ued and trust­ed in their roles. 

The real­i­ty is that every indi­vid­ual, includ­ing the CEO, has lim­it­ed cog­ni­tive resources — resources that should be reserved for address­ing the most fun­da­men­tal issues fac­ing the com­pa­ny at any giv­en time. The biggest mis­takes often occur when those at the top are using their men­tal ener­gy on deci­sions that are not that critical. 

How Much Time Should Be Devot­ed to the Decision? 

In my expe­ri­ence, many orga­ni­za­tions spend a dis­pro­por­tion­ate amount of time mak­ing low-risk deci­sions. I call this invert­ing the risk continuum.” 

Invert­ing the risk con­tin­u­um can lead a com­pa­ny to lose focus of core busi­ness ques­tions. I recent­ly spoke to a group of lead­ers whose com­pa­ny had made a sig­nif­i­cant acqui­si­tion, one that dou­bled the company’s size. When I asked them to write down the most impor­tant deci­sion they were mak­ing at that moment, 180 out of 200 said they were mak­ing a staffing decision. 

Most peo­ple tend to over­es­ti­mate the risk of mak­ing a bad deci­sion and under­es­ti­mate the risk of inaction.”

To me, this was sur­pris­ing. Staffing deci­sions — unless they involve posi­tions at the high­est lev­els of man­age­ment — typ­i­cal­ly fall some­where in the mid­dle of the risk con­tin­u­um. But this com­pa­ny was spend­ing more time on staffing issues than they had spent mak­ing the much riski­er deci­sion of whether to go through with the acquisition. 

To be clear, I am not say­ing that hir­ing is not impor­tant but rather point­ing out that a hir­ing mis­take of a sin­gle low- to mid-lev­el exec­u­tive is unlike­ly to take down a com­pa­ny or rock its share price. On the oth­er hand, a sin­gle large acqui­si­tion that goes bad­ly could destroy the busi­ness. So, more time should be allo­cat­ed to these deci­sions than to less risky ones. 

How Much Cer­tain­ty Do We Need in Order to Make the Call? 

Some lead­ers by nature tend to be more cau­tious than oth­ers — and there is noth­ing inher­ent­ly wrong with cau­tion. But it is easy to over­an­a­lyze mid-risk and low-risk deci­sions. To avoid paral­y­sis by analy­sis, the lev­el of risk should dri­ve how much cer­tain­ty is required: When is 70 per­cent enough? When is 50 per­cent suf­fi­cient? When should we just make the call based on our gut because the risk is so low that it would be bet­ter to revise the deci­sion if need­ed lat­er than to ana­lyze it upfront? You want to save your ana­lyt­ic rig­or for the impor­tant stuff. 

It is crit­i­cal to con­sid­er the lev­el of cer­tain­ty required because there is a cost to the analy­sis. There is the cost of com­plet­ing the analy­sis and the cost of post­pon­ing the deci­sion. Post­pon­ing a deci­sion is a deci­sion in itself. Most peo­ple tend to over­es­ti­mate the risk of mak­ing a bad deci­sion and under­es­ti­mate the risk of inac­tion, and this can have real con­se­quences in a com­pet­i­tive busi­ness envi­ron­ment. Post­pon­ing a cer­tain deci­sion might be the right call for a com­pa­ny, but it is nev­er com­plete­ly risk-free; there is always a risk to not act­ing, and some­times the con­se­quences are as dra­mat­ic as mak­ing the wrong deci­sion. For exam­ple, a com­pa­ny may spend months ana­lyz­ing whether a new prod­uct should be launched and in the time they spend decid­ing, their com­peti­tor launch­es a very sim­i­lar product. 

What Is the Company’s Tol­er­ance for Error? 

Most com­pa­nies today claim to val­ue inno­va­tion. We can find it in their mis­sion state­ments or post­ed in large let­ters in their cor­po­rate lob­bies. But inno­va­tion is only pos­si­ble when you are will­ing to take risks. And in order to take risks, you have to be will­ing to get things wrong. 

Lead­ers have a choice when it comes to tol­er­at­ing error. Some choose to pun­ish errors and reward over­analy­sis. Oth­ers actu­al­ly cel­e­brate mis­takes. At 3M, it was hard to get pro­mot­ed with­out hav­ing made a high­ly vis­i­ble mis­take that was wide­ly dis­cussed. That is not because 3M loved mis­takes, but because they val­ued risk-tak­ing, which they knew was the spark for innovation. 

Instead of being uni­ver­sal­ly cau­tious, lead­ers should focus on de-risk­ing” deci­sions by active­ly work­ing to push deci­sions down the risk con­tin­u­um. There are many ways of doing this. If a com­pa­ny wants to de-risk the launch­ing of a new prod­uct, for instance, it can launch it in a small­er mar­ket, where its bugs will be less vis­i­ble. Many star­tups live by the mantra fail often, fail fast,” which makes per­fect sense when deal­ing with low- and mid-risk deci­sions. But it may be less applic­a­ble to the high­er end of the risk con­tin­u­um. You do not want to fail often or fast at the core of your business. 

What you do want is a com­pa­ny that encour­ages inno­va­tion and empow­ers its peo­ple to make deci­sions appro­pri­ate to their posi­tion. No amount of analy­sis will ever com­plete­ly elim­i­nate risk. But when lead­ers learn to assess that risk and focus on what real­ly mat­ters, they are far more like­ly to succeed. 

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