Deciding How to Decide
Five paths to bad leadership choices and how to avoid them
October 13 2009 by Ruth Wageman And Debra A. Nunes
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 thinking 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 over delegate 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 achievement driven. They love efficiency, can process a lot of detail at high speed and tend to micromanage if they don’t control those impulses. Moreover, as organizations become leaner, the executives who survive are those who real ly delivered the numbers—meaning more and more achievement motive gets clustered at the top.
The problem is that so much work at ground level—as opposed to 30,000 feet—eats up too much CEO time that could be better spent. Result: a lack of clarity about strategy. A leader might spot an inefficient process and get so caught up in operational details that she takes her eye off the bigger strategic picture.
For example, a CEO wanted to rapidly expand his regional company nationwide. Over a period of years, he drove this effort personally and was heavily involved in identifying smaller companies to acquire and led the acquisition process. This overinvolvement left him with little time to scan the market and to consider alternative strategic futures. As a result, he failed to interpret the signs of economic downturn, and his company was poorly positioned to handle the combined threat of a changing marketplace and an economic slowdown.
Leaders driven by such an attraction to detail love the numbers—especially the financial data. But they run out of room to pay attention to the hard conceptual process of thinking through strategy and providing clarity to the rest of their organizations about the future. After all, there are only 24 hours in a day. CEOs bogged down in detail cannot take time to work through complex strategies and alternative moves with their senior leaders.
Chief executives must be clear with senior leaders about which decisions they have reserved for themselves.
3. The CEO calls on senior leaders “door to door” instead of consulting the team as a team. The CEO of a global mining company told us of his experience being a member of his predecessor’s team. “When something big had to be decided, he’d walk through the executive suite, going from door to door, asking each individual his views. You either wanted to be first, so you could shape the options—or last, so you could have a real impact on the final choice. And you certainly hoped that you were in the office that day if you wanted to be consulted at all.”
This practice undermined the workings of the team and deprived the organization of the creative problem-solving capabilities that a robust debate among senior leaders brings to the table. Consulting the team is not consulting the individuals one by one.
Why go door to door, rather than calling the team together for their collective advice? For one thing, it can feel expensive to get a group of highly paid executives in the same room, especially when they are geographically dispersed. And it also feels more immediate to pop into individuals’ offices, run an idea by them and get their thoughts. CEOs do recognize that their executives are smart people with astute insights and valuable experience. But they also know they are strongly opinionated people. It seems so much easier to deal with them one-on-one than to manage a group through tough issues.
But there is real value in bringing them together. When the entire group debates, they build on one another’s ideas, test each other’s perspectives, and identify the weaknesses and strengths—and contingencies—in any plan. This vigorous discussion can bring conceptual breakthroughs, the value of which often justifies the extra effort of managing group dynamics. Moreover, when top teams don’t talk something through in real time, they may lose alignment and momentum, and the CEO may lose the power of shared ownership for making real change happen. Some team members will inevitably feel undermined. And not everyone will be aboard when it comes time to make it happen.
4. The CEO makes up his or her mind, and then pretends to consult the team. Speaking to a class of students at a top tier business school about his favorite decision-making practice, a well-known CEO told this story: The business needed to be reconfigured. The move arose from significant changes to company strategy and the operating model. Most politically sensitive: The changes would mean a loss of power for some people on the leadership team. Convinced of the rightness of his views, knowing he needed his team to make the change happen, but determined to avoid the political wrangling, he set out to get them to adopt his choice but to make them “feel like it was their idea.” He proudly described to the rapt students how he led them down the path to his preferred choice and chuckled about fooling them.
Having watched another CEO attempt the same maneuver—same kind of politically charged issue, same moves—we’re not so sanguine about just how fooled they were by the CEO. Sitting around the conference table, we could tell that they could tell that the CEO’s mind was made up, even as he pretended to lead discussions about finding a solution. The CEO was saying the right words, but his body language gave him away again and again: happy when they moved in the right direction, frustrated when they did not. Astute executives are fully versed in the language of nonverbal cues. Finally, someone said, “Just tell us what you want.”
A manipulative leader seldom fools experienced executives. They might not be confrontational, but they still know when they’re being manipulated— and they remember. In business, as in personal life, a lack of honesty will degrade trust, sometimes irreparably. Just try getting an honest team discussion in the future.
5. The CEO is reluctant to share decision-making power with the team when it matters. Often CEOs do not ask much of their teams—and when told so they express surprise or annoyance. CEOs assume they are asking a lot of their senior team. They ask a lot of the individuals, to be sure, but not of their teams. Having members merely share information and provide reports about their own areas—the most typical use of a leadership team— is seriously underutilizing team capabilities. Top leaders could be asked instead to use their formidable complement of experience and their breadth of knowledge of the company to advise each other and to make critical enterprise- affecting decisions together.
Why are CEOs reluctant to place that challenge before their teams? We believe that one fundamental reason is that most CEOs have never seen a great leadership team in action. In our research, we found that great teams represented less than a quarter of top teams out there—most of them were mediocre or struggling. It seems a terrible risk to ask a potentially divisive group to handle something for which the CEO feels deeply responsible, such as the strategy.
For example, one CEO we observed intended to take the company in a direction different than his predecessor. Most of the present team had been hired by his predecessor. Fearing they had not bought into the new direction, he never discussed the strategy for getting there with the team as a whole. Instead, he spoke with each leader individually about how she or he planned to manage that part of the business in order to deliver on the numbers. As a result, this team could not gain any traction on executing the new strategy—ironically, not because they were resisting the change, but because they had no opportunity to rise to the challenge of managing the interdependencies across units.
CEOs make these suboptimal choices because most senior leaders have no frame of reference for what can happen when members of a senior team are asked to think as enterprise leaders and to decide something vital to the company’s future. They have not experienced how a team can manage the myriad interdependencies across the entity or create breakthrough thinking—when the entire team is in the same room.
As a consequence, CEOs disaggregate critical business problems in ways that miss real opportunities for breakthrough thinking. Certainly costs can be managed by reducing them in each individual part of the business and holding each team member accountable for his own area. But growth opportunities and novel synergies only come across the parts, and they are only discovered when a well-designed leadership team is asked to find them together.
How to achieve balance:Deciding how to decide
In our research, we learned from numerous CEOs who were skillful and thoughtful in getting key decisions made. First, they ask themselves: What kind of care does this particular decision really need? Above all, they make explicit choices about how to handle a decision—when and how to delegate, invite consultation from their teams, or make the choice themselves. Here are the main lessons we learned from them about how to avoid the five tripwires and achieve the right balance for decision-making excellence at the top.
Articulate what stays in your portfolio
Chief executives must be clear with senior leaders about which decisions they have reserved for themselves. Unlike any other leader in the organization, a CEO holds responsibility in the eyes of numerous stakeholders for acting on behalf of the whole entity, for embodying the organization and its core values and for steering the course of the enterprise. For example, most chief executives choose to make decisions that affect the company brand themselves. And they are wise to be explicit about it.
For example, we admired CEO Arturo Barahona for insisting on the preservation of the Aeromexico logo, despite the potential symbolic power of altering it, when the company underwent significant strategic changes. He considered the sizeable costs involved in such a change. But he also understood how deep the emotional heritage associated in the minds of customers and employees with the design, color and cultural legacy of their logo ran. He therefore protected it from marketing’s urging to modernize the traditional Aztec symbol.
Task a working group well
Of course, a CEO should ask senior leaders for their thinking about enterprise-affecting issues. As organizational scholar Victor Vroom established, complex problems with unclear solutions that require the group to implement them are ideal situations for a leadership team to share in decision making. But that means more than simply asking a team to propose strategic changes for a thumbs up or thumbs down from the CEO. Tasking a working group effectively means asking the team to devise well-examined proposals and to bring to the CEO’s attention all the critical or controversial aspects of an option under consideration. Especially where the CEO’s own strengths, weaknesses and core responsibilities are involved, he or she must be engaged in the formulation of the thinking, not just signing on the dotted line.
Here is a counterexample to Barahona’s clarity at Aeromexico. At one global conglomerate we studied, the chief executive asked a marketing group to think about how to create a single-company, updated image across all divisions of the firm. This business-to-business company had struggled to create a brand image for years, only recently seeing some success for the brand of a few key products. But the overall company brand had little or no recognition with its customers.
The group came back to him with a well-fleshed-out proposal to create a new corporate logo, replacing all brand logos. He called the discussion immediately to a halt. Not only would rebranding involve a massive expenditure—labels, letterhead, ad campaigns—but, he argued, the company had worked too hard to have a brand presence where it was known. It would be wasteful to undermine that now.
Recognizing his error, he assigned the group to develop a campaign that would convey a positive image of the corporation and what it provided to the world, keeping the brand and corporate logos intact, but creating connections among them. And he asked the group to generate multiple ideas and engage with him in talking through the best of the options. This time, the team and the campaign’s efforts were a success.
Stay out of the weeds
CEOs need to take action to avoid scrutinizing day-to-day operations. They sometimes must put a stop to getting bogged down in details by refusing to receive disaggregated data. For example, the CEO of a major national restaurant chain insisted that any data brought into a senior team meeting be aggregated to a level where themes and patterns could be seen, not minutiae. The CEO didn’t need to know how well the pepperoni pizza was selling in Peoria. CEOs should know what’s going on. But to do that, astute CEOs look at the analysis, not at the raw data. They make the deep dive into detail only in areas where further analysis is genuinely necessary to understand the complexity of an enterprise problem. CEOs should be 30,000 feet up, not down in the weeds (or, in this case, the mozzarella).
Create a well-designed leadership team
A CEO must create the right conditions for an effective leadership team before sharing responsibility with them for a critical decision. Most important are the essentials of a great leadership team:
- a clear team purpose, including the short list of vital decisions the team will own;
- carefully chosen members (not just “all my direct reports”) who are capable of taking a broad, enterprise wide perspective and have demonstrated the ability to work collaboratively; and
- clear rules of engagement—the must do’s and must not do’s of how they will work together.
At the global mining company cited earlier, the CEO solved the problems he inherited by appointing three teams: one for core decision making that handled issues affecting the entire organization; one for coordinating operations and organization wide initiatives; and one for sharing information across the business to create alignment. Each team had a clear purpose and a clear structure, and each had the information it needed to get its job done. With that structure in place he was able both to challenge his leadership teams with critical decisions and to get excellent consultation for decisions he made on his own.
Ask explicitly for consultation
Any time a decision is before them, senior leaders tend to make the default assumption that they are being asked to decide. As a consequence, CEOs must be clear with their leadership teams exactly what they are asking of them. If consultation is what you want—wise advice so that you can make a better decision—then tell them that’s what you want. By doing so, a CEO invites a real challenge to his or her thinking, rather than setting up the conditions for what Yale professor Irving Janis famously termed “groupthink”—lockstep agreement with the leader’s views. The kinds of decisions for which effective CEOs seek consultation from their teams are those very close to the heart of the business, such as testing the readiness of the firm to take on an acquisition or rethinking the firm’s place in the value chain.
For example, the CEO of a large conglomerate called her leadership team together and asked them to give their views about how the company might handle its struggling apparel business. She asked them to consider carefully whether the business should be sold, taking into account that apparel was historically the company’s core business, closely tied to the origins and identity of the family-owned firm. And, she asked, if the apparel business was kept, how might its adequate performance be ensured so that there was no drain on the company as a whole? As she posed these questions to her team, she was clear that she intended to make the decision herself, and that the team’s role in the decision was to help inform and sharpen her thinking.
We have found that when a CEO communicates clearly to the team that they are being asked for their collective advice—not to make the decision together—mature executives are happy to offer their views and will feel adequately involved in a decision. Top leaders recognize that the CEO is entitled to make decisions unilaterally. They feel valued and respected when the CEO is clear about his or her authority but asks for their counsel.
Gone are the days of the heroic CEO who single-handedly makes all the key decisions that will shape the future of the company for the better. CEOs are increasingly relying on teams of proven and effective leaders to consult, coordinate and make decisions in a volatile marketplace. But to do so deftly and well requires making thoughtful decisions about how and when to engage them in decision-making.
Ruth Wageman is director of research for Hay Group and visiting scholar in psychology at Harvard University. She coauthored Senior Leadership Teams: What it Takes to Make Them Great, with Debra Nunes, James Burruss and Richard Hackman. Debra Nunes leads Hay Group’s global practice on executive team effectiveness.