Decisions are the coin of the realm in business. Every success, every mishap, every opportunity seized or missed is the result of a decision that someone made or failed to make. At many companies, decisions routinely get stuck inside the organization like loose change. But it’s more than loose change that’s at stake, of course; it’s the performance of the entire organization. Never mind what industry you’re in, how big and well known your company may be, or how clever your strategy is. If you can’t make the right decisions quickly and effectively, and execute those decisions consistently, your business will lose ground.
Indeed, making good decisions and making them happen quickly are the hallmarks of high-performing organizations. When we surveyed executives at 350 global companies about their organizational effectiveness, only 15% said that they have an organization that helps the business outperform competitors. What sets those top performers apart is the quality, speed, and execution of their decision making. The most effective organizations score well on the major strategic decisions—which markets to enter or exit, which businesses to buy or sell, where to allocate capital and talent. But they truly shine when it comes to the critical operating decisions requiring consistency and speed—how to drive product innovation, the best way to position brands, how to manage channel partners.
Even in companies respected for their decisiveness, however, there can be ambiguity over who is accountable for which decisions. As a result, the entire decision-making process can stall, usually at one of four bottlenecks: global versus local, center versus business unit, function versus function, and inside versus outside partners.
The first of these bottlenecks, global versus local decision making, can occur in nearly every major business process and function. Decisions about brand building and product development frequently get snared here, when companies wrestle over how much authority local businesses should have to tailor products for their markets. Marketing is another classic global versus local issue—should local markets have the power to determine pricing and advertising?
The second bottleneck, center versus business unit decision making, tends to afflict parent companies and their subsidiaries. Business units are on the front line, close to the customer; the center sees the big picture, sets broad goals, and keeps the organization focused on winning. Where should the decision-making power lie? Should a major capital investment, for example, depend on the approval of the business unit that will own it, or should headquarters make the final call?
Function versus function decision making is perhaps the most common bottleneck. Every manufacturer, for instance, faces a balancing act between product development and marketing during the design of a new product. Who should decide what? Cross-functional decisions too often result in ineffective compromise solutions, which frequently need to be revisited because the right people were not involved at the outset.
The fourth decision-making bottleneck, inside versus outside partners, has become familiar with the rise of outsourcing, joint ventures, strategic alliances, and franchising. In such arrangements, companies need to be absolutely clear about which decisions can be owned by the external partner (usually those about the execution of strategy) and which must continue to be made internally (decisions about the strategy itself). In the case of outsourcing, for instance, brand-name apparel and foot-wear marketers once assumed that overseas suppliers could be responsible for decisions about plant employees’ wages and working conditions. Big mistake.
Clearing the Bottlenecks
The most important step in unclogging decision-making bottlenecks is assigning clear roles and responsibilities. Good decision makers recognize which decisions really matter to performance. They think through who should recommend a particular path, who needs to agree, who should have input, who has ultimate responsibility for making the decision, and who is accountable for follow-through. They make the process routine. The result: better coordination and quicker response times.
Companies have devised a number of methods to clarify decision roles and assign responsibilities. We have used an approach called RAPID, which has evolved over the years, to help hundreds of companies develop clear decision-making guidelines. It is, for sure, not a panacea (an indecisive decision maker, for example, can ruin any good system), but it’s an important start. The letters in RAPID stand for the primary roles in any decision-making process, although these roles are not performed exactly in this order: recommend, agree, perform, input, and decide—the “D.” (See the sidebar “A Decision-Making Primer.”)
A Decision-Making Primer
Good decision making depends on assigning clear and specific roles. This sounds simple enough, but many companies struggle to make decisions because lots of people feel accountable—or no one does. RAPID and other tools used to analyze decision making give senior management teams a method for assigning roles and involving the relevant people. The key is to be clear who has input, who gets to decide, and who gets it done.
The five letters in RAPID correspond to the 5 critical decision-making roles: recommend, agree, perform, input, and decide. As you’ll see, the roles are not carried out lockstep in this order—we took some liberties for the sake of creating a useful acronym.
People in this role are responsible for making a proposal, gathering input, and providing the right data and analysis to make a sensible decision in a timely fashion. In the course of developing a proposal, recommenders consult with the people who provide input, not just hearing and incorporating their views but also building buy in along the way. Recommenders must have analytical skills, common sense, and organizational smarts.
Individuals in this role have veto power—yes or no—over the recommendation. Exercising the veto triggers a debate between themselves and the recommenders, which should lead to a modified proposal. If that takes too long, or if the two parties simply can’t agree, they can escalate the issue to the person who has the D.
These people are consulted on the decision. Because the people who provide input are typically involved in implementation, recommenders have a strong interest in taking their advice seriously. No input is binding, but this shouldn’t undermine its importance. If the right people are not involved and motivated, the decision is far more likely to falter during execution.
The person with the D is the formal decision maker. He or she is ultimately accountable for the decision, for better or worse, and has the authority to resolve any impasse in the decision-making process and to commit the organization to action.
Once a decision is made, a person or group of people will be responsible for executing it. In some instances, the people responsible for implementing a decision are the same people who recommended it.