DECISION MAKING
The Leadership Team Maturity Model
“Strategy is a pattern in a stream of decisions.”
The decisions of a leadership team will make or break a company. History is littered with millions of companies that failed on the back of a bunch of bad decisions by their leadership teams. Market leaders emerge from the pack through a series of great decisions by their leadership teams. Weak decision-making comes in many forms. There is the autocratic CEO weighing in and needing to approve almost every decision, ignoring the collective consensus of the leadership team. There is the leadership team without a strong true north (mission, vision, values) from which to orient decisions. There is the spastic leadership team grabbing for straws making big, disjointed decisions weekly and monthly, whipsawing the organization into a constant frenzy of start and stop initiatives. Essentially, weak decision-making leadership teams don’t have a firm grasp on what it will take to make their business model a leader; they don’t have a robust methodology for decision-making, and they don’t navigate the relative value equation of decisions well. Ultimately, they make a series of bad decisions, hurting the business and organization.
Everyone is making decisions every day in a company. The vast majority are more minor decisions that can be made by individuals or the teams they affect. Jeff Bezos calls these two-door decisions. You make the decision, and if it doesn’t work, you can go back through the door and take another door. Yet, some decisions are one-way doors. They are the big decisions that are hard to walk back. Their effects cascade and magnify into the future and are hard, costly, and sometimes impossible to walk back. These types of decisions need the leadership team's heavy scrutiny of substantial analysis and debate.
A leadership team with strong decision-making will pave a path of decisions to the promised land of becoming a market leader. They focus decisions on the big blocks that will move the business forward, aligning them with their true north. Their good decisions answer the what, why, who, where, when, and how of the decision. They make good decisions through collaborative discussion, debate, and strong methodologies. They deeply appreciate and understand the organizational capacity to execute decisions efficiently and effectively. They clearly communicate decisions and repercussions down through the affected teams in the organization. They also ensure the rest of the organization reflects their decision-making methodology and norms. Strong leadership teams ultimately understand decisions are forks in the road and forge the right journey for the business.
1. RATIONAL & FACT-BASED
We know poor decision-making when we see it. The decisions are made with emotion, biases, intuition, and attrition and lack facts, analysis, and objective debate. Low-performing teams often lack the rationality necessary for sound decision-making. Team members don’t check their biases at the door. There is a lack of good options, robust analysis, sound logic, and constructive debate. They take the fast and easy route to decisions instead of slowing down to determine the truth and implications of decisions. In turn, functional teams often take the same poor approach to decision-making, having learned bad behaviors from their poor decision-making leaders. These teams are destined to make a series of bad decisions that will hurt the company for years.
High-performing teams are rational in their decision-making. They work hard to problem-solve at least a few quality options for big decisions. They take the time and energy to systematically analyze, build a fact base, understand implications, and debate choices until a clear winner exists. And, if they can’t get to a clear winner, whatever decision is made, the whole team commits to that decision. They understand the different types of biases that can lead to poor decision-making and work hard to minimize biases and call each other out when they emerge. They have a rational process to make big decisions. They try to minimize emotional arguments, wars of attrition, politics, bullying, and a host of other decision-making dysfunctions. And the leaders model and ensure their teams have the same level of rationality in their decision-making. Being consistently rational and minimizing biases and emotions is hard, really hard, but a challenge high-performing teams consistently tackle.
2. VALUE-MAXIMIZING
Creating a leading business model comes down to a stream of good decisions by the leadership team. Let that sink in, and I'll repeat it for effect: creating a leading business model comes down to a stream of good decisions (and, of course, executing those decisions). The strength of your and your team's problem solving gets you to a set of hopefully good options, and then it is time to decide which option will drive the most value. And, frankly, value creation is what decisions should come down to. Yet, there are many proxies for value, such as customer value, growth profit, synergies, ROI, ROIC, differentiation, core competencies, and organizational capabilities, to name a few.
In the end, leaders should make decisions based on value, and this is where things get a little tricky since big strategic ideas are high-level ideas, often with too many unknowns complicating the calculation of a discrete value. I've worked on too many projects where the CEO wants a nonsensical confidence level of specificity. It's what we would call at McKinsey "fun with numbers." Instead of every decision coming down to a rock-solid ROI, high-performing leadership teams implicitly or explicitly use some form of a "decision funnel" to evaluate options through a series of strategic decision filters, including the "true north filters," the value equation filter, and the relative to what filter, to get to a balanced portfolio of initiatives.
We won't go deep into the various filters but will touch on them. First, a company's true north, comprised of its mission, vision, and values, is not at all useful if it isn't fully utilized in all decisions from the top of the company to the frontline. The mission and vision of a company are the best heuristics for making good decisions. And it's not complicated; it just comes down to having everyone answer the question when making a decision, "Does this align with our mission, vision, and values?" It isn't a good decision for the company if it doesn't. Seriously, if it's not happening now, if this one question was asked and answered "yes" with the hundreds to thousands of decisions made every day by your employees, your company will start shifting the course of the stream of decisions in the right direction to market leadership.
There are many ways to tackle value when determining the value of the options. You should always start with getting the value drivers and sources right. Often, people don't grasp the whole picture regarding revenue, cost, and experience implications. The next step is to assign value to options. This could be an ROI if you have the data, a relative magnitude, an experiment to test hypotheses, internal data, or something else. The key is to search for the facts and sound logic that back up your value analysis.
The last step is to ask and answer, "Value relative to other options or the status quo? Many, if not most, decisions are made not with hard numbers but by comparing the relative value of options. The easiest way to elevate this part of your game is to utilize the prioritization matrix and plot your options. It makes debates much easier, and often, during the debates, teams problem-solve ways to improve impact or effort to make a good decision great.
High-performing teams and organizations are methodical in understanding the value of options and filtering them through some sort of decision funnel to make the right decision. And methodical doesn’t mean even a decision takes a long time; it just means they answer the right series of questions to reach the correct conclusion.
3. COMMITTED
Many culturally toxic leadership teams are not collectively committed to decisions. In these teams, leaders are often passive-aggressive in decisions, saying one thing but doing another thing later. They usually try to sabotage decisions by not applying enough resources to realize the expected outcome of a decision. They keep arguing their case against a decision after the decision is made. They often focus on personal gain in terms of power and perception rather than making the business holistically better.
With most big decisions, there are supporters and detractors. Yet, in high-performing leadership teams, even the detractors commit to a decision once a decision is made. They might disagree, but they support the decision, applying the right resources and efforts to try and realize the outcome of the decision. They don’t keep harping on the decision; they commit and move forward. This commitment to decisions drives alignment within the organization, which leads to a high level of execution and follow-through, ensuring leadership teams continually march towards creating a market leader.
4. TRANSPARENT
Low-performing leadership teams often lack transparency with decisions. Sometimes, the decisions never really leave the room in which they were made. Often, the leaders communicate the decision to those affected, but the communication lacks specifics, the “why,” and the implications. These leadership teams often struggle with execution. It’s one thing to make a decision and a totally different thing to see that decision through.
Conversely, high-performing leadership teams put those things in place and adequately communicate them to see a decision through. They understand every big decision is a change to the organization, often all the way down to the frontline team members. So, they spend the time and energy to rally everyone affected around the decision. They are transparent about the decisions made, why they are essential, the implications to team members, customers, and the business, and the “ask” of those involved. They are patient in answering the questions that inevitably come up. They ensure the appropriate resources and effort are mobilized to translate decisions into impact.
BECOME A HIGH-PERFORMING TEAM WITH PERSONAL COACHING
I hope you are enjoying the leadership maturity model. Seeing the rapid improvements leadership teams have realized using the model has been rewarding. As an executive, consultant, and coach, I've worked with many leadership teams over my 25+ year career. If you want to take your leadership team to the next level, I encourage you to learn more about my background and reach out or set up some time if you think there is a fit. We'll work together to develop your team into a high-performing leadership team and your business into a market leader.