How do CEOs, owners, and other top leaders make decisions? The answer can have a significant impact on both the quality of the decision and the performance of the team and organization.
Here are four types of decision-making:
“I’m going to make the decision. End of story.” The owner or CEO is the ultimate authority, and he or she will handle the decision. This style harkens back to the old command-and-control days, or, perhaps, a little “Father Knows Best” attitude.
In 2009, McKinsey surveyed global executives and asked about capital and human resource decisions. They discovered that “Decisions initiated and approved by the same person generate the worst results.” Apparently, father (or mother) doesn’t know best!
This sentiment is echoed by Tom Davenport, author of Judgment Calls: Twelve Stories of Big Decisions and the Teams That Got Them Right. He writes that decisions are “too often made by solitary CEOs who think they have a “golden gut.’” Not only does this impact the quality of decisions, it is often difficult for independent thinkers to operate in this environment. Authoritative leaders can end up alienating the very people who could help them make better decisions – the creative, independent thinkers.
There are times when authoritative leadership and decisions are absolutely necessary. A crisis, when you have to move fast, for instance, requires swift, decisive action. You don’t put a committee together when someone yells, “FIRE!” in a theater. If a leader relies on an authoritative approach to all decisions, though, it can demoralize and disengage staff.
This is authoritative in disguise. The leader focuses on trying to persuade his or her direct reports to support a decision or course of action. Keep in mind that he’s not actually asking for input or feedback. When could this be an effective decision-making model? Say a leader had to make a quick decision to stave off a crisis or to prevent one. Now he has to solicit support, clarify actions, or create buy-in from subordinates.
When relied on as the sole approach to decisions, though, it can disengage employees, stunt productivity and creativity, and reduce buy-in for initiatives.
“Let’s talk about it. Let’s agree on a decision, and until we do, we don’t move forward.” This approach can work well with committees. The goal is to create buy-in from all the members; the final decision may not have been their preferred course of action at first, but they can get behind it. They consent.
I have a Vistage member who believes in consensus decision-making; it’s the culture he wants to foster in his organization. But he finds it difficult to grow. Here’s why: consensus slows everything down. Trying to get everyone on the same page and agree on one course of action or idea can be difficult, if not impossible in some cases. In addition, sometimes the “committee” isn’t “right” and bold decisions by a confident leader would be best.
The Harvard Business School points out another challenge, which they call the “Rule of 7.” For every person you add to a group beyond seven individuals, decision-making effectiveness decreases by 10 percent. You will not typically find a lot of consensus decision-making in fast-growing, or continuous-growing companies.
“I’m the leader, but I want to hear what you have to say. We’ll discuss, we’ll agree/disagree, and at the end of the day, I’ll make an informed decision.” What’s the difference between collaboration and consensus? Consensus is about agreeing; collaboration is about alignment. People don’t have to agree, but when a decision is made, they must align.
This method tends to yield the strongest results from a strategic standpoint. Collaboration invites others to offer opinions based on their own thoughts, experience, and expertise. This gets the team moving in the same direction, and the leader will make the final decision. When leaders collaborate with their teams, employees are more engaged, productive, and satisfied.
Which Decision-Making Model is Right for You?
It depends on:
- Your Industry. The way leaders make decisions has changed because the way they do business has changed. Back when the economy was based on manufacturing, everything had to be done in a prescribed manner. You put the car together exactly the same way, every time. Authoritative leadership worked very well then, and it still works well in certain industries and segments, like the military and production. In others, though, there is a greater need for, and expectation of, being involved in decisions.
- Your people. Today, employees, particularly Gen Xers and Millennials, are less receptive to “Do it because I told you to” management. While authoritative and persuasive models have a place in certain situations, in most others, a collaborative approach ensures people align, if not agree, and that they are moving forward in the same direction.
- Your situation. As mentioned, you don’t want to convene a committee when the building’s on fire. There are no “good” and “bad” approaches to decision-making; rather, it’s important that the right approach be applied to the right situation.
There is no one-size-fits-all decision-making model. One of the most important decisions a leader makes is how to decide and what kind of input he or she seeks from subordinates.