March 8, 2020

Decision Rights & Corporate Governance

Josh Gentine

The concepts of decision rights and governance often trigger an eye-roll for many people. In fact, odds are, several of you may attempt to stop reading this right now (don't lie). I'm asking you to just wait. Governance and decision rights serve as unbelievable catalysts for addressing operational challenges, dysfunctional cultures, and poor organizational health and can be a transformational exercise when done correctly. Let me explain...

Corporate governance comprises all the processes of governing an organization. According to a recent article from Harvard Business Review, "corporate governance has become a topic of broad public interest as the power of institutional investors has increased and the impact of corporations on society has grown." However, ideas about how corporations should be governed varies greatly.

Decision rights defines who is making which decisions and how. It is all about intentionality. From my work with companies across varying industries, I often see a lack of intentionality. A business will have an organizational chart as well as processes and/or procedures to dictate who does what, but what is often missing is the critical work of being intentional about how decisions are made. This does not have to be daunting work; start slow with identifying the biggest decisions an organization has to make (prioritization) and then break down who will make that decision using what information.

According to a recent article by Deloitte, my consulting alma mater, titled "Getting Decision Rights Right: How Effective Organizational Decision-Making Can Help Boost Performance," there are five attributes that support efficient decision making:

  • Simplify and clarify decision rights across the organization
  • Establish strong, transparent accountability for decisions made
  • Align individuals in decision-making groups to a common mission
  • Encourage distributed authority
  • Prioritize the customer voice in decisions

While there is a lot more to be said about the intricacies of decision rights and governance (a passionate topic for me), the exciting product of this work is that these two concepts drive to the heart of an organization's culture. Let me give you an example. A key tenant of decision rights is trying to distribute decisions to the lowest levels of an organization (e.g. how can we get Decision A as deep down the organizational chart as possible recognizing that when we do, that decision will be as close to the customer as possible) - can you do that if you don't trust the teams at the lowest levels possible? And if you don't trust the teams at the lowest levels, why? What is it about your organization that leads you to believe that those employees are not capable of making Decision A? Do you have a flawed recruiting program? A flawed training program? Perhaps a pervasive trust issue predicated on egos and control?

By way of another example. Decision rights should be strong, transparent, and hold people accountable. If Decision B falls to the EVP of Production, is the EVP of Production ready and willing to be held accountable to the transparency that accompanies establishing proper protocols? Will executive leadership be comfortable with the EVP of Production making a mistake? Those are questions of trust, vulnerability, and operating cultures, not process nor decisions.

When I work with clients looking to change their culture, I often draw clarity from an exploration of how decisions are made and how leadership views decision rights. Simultaneously, if I'm working with leadership on talent expectations or workflow complexity, I can't help but dovetail into deep cultural conversations as these conversations will inform the work we do around decisions.

When you sit back and examine your organization, do me a favor and look at your decisions and how those decisions are being made, or not. What are the theories you hold around decisions? What mindsets pervade your thinking about how those decisions should be made? What are the broader cultural implications of those theories and mindsets? This exercise can take minutes, but what you'll find is that it cuts through to the heart of many of your operational challenges and what you'll discover is that these two catalysts can be the foundation for an organizational transformation.

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