As ye decide, So shall ye innovate (Part 1)

As ye decide, So shall ye innovate (Part 1)

Published: 11 Apr 2013 at 00.00

Here’s a question for you: What organisation do you think is more likely to be a creative organisation: One where most decisions are made by a few individuals high at the top of the organisational hierarchy? Or one where decision-making is spread throughout the hierarchy, and decision authority is delegated and shared?

How an organisation structures its decision-making processes is a good predictor of the level of innovation you can expect from it. Let’s see how organisational decision-making affects organisational innovation.

Diagnosing organisational innovation readiness: For the past few years I have been working on a method to help ordinary organisations become creative ones. This method shows show businesses how to turn a “me too” copycat corporate culture into one with unlimited creative potential that can fluently produce new “wow” products and services.Under this method, we diagnose the current state of an organisation by examining 56 factors that relate to five important organisational dimensions: leadership, commitment, collaboration, culture, and structure. The way an organisation structures decision-making is one of the eight structural factors that we audit to better understand the innovation capacity of a company.

Structuring organisational decision-making: To determine how an organisation structures its decision-making, we locate it on a continuum defined by two extremes: at one end, decision-making gravitates toward, and is heavily concentrated at, the top; at the other, decision-making is devolved or consensual.

With centralised decision-making, the authority is concentrated in a few designated managers at the top of the hierarchy. This often slows down customer-related or operational decisions, as a case first has to move up the hierarchy until it reaches the person with the relevant decision power.

In the other extreme, decision-making is devolved to the lowest possible operational level within the organisation and _ particularly for important decisions _ often aims for consensus. Delegation can speed up the decision processes for customer-related or operational decisions, allowing for an issue to be quickly resolved when and where it occurs, although reaching consensus may require more time.

A consensus describes a condition in which everyone is willing to go along with the joint decision. While it may not be the first choice for all group members, it has enough support to have a good chance for success, and no one has a feeling of “giving in”. Consensual decision-making uses the collective knowledge and experiences of a group. As the Stanford professors Jeffrey Pfeifer and Robert Sutton said, “One of the most consistent findings in the literature on decision-making and performance is that the best groups perform better than the best individuals, because groups are able to take advantage of the collective wisdom and insight of multiple individuals, while individual judgement reflect the narrower insights and skills of just one person.”

How about your organisation? Are decisions mostly made on higher levels, or spread out over all levels? Where on the continuum between decision authority concentration and delegation is your company positioned? To what degree is consensual decision-making part of your organisational decision-making practice?

How you structure your organisational decision-making affects organisational creativity. Research results and case studies suggest that most creative organisations such as BMW, Pixar, Google and IBM follow devolved and/or consensual decision-making approaches.

Sam Palmisano, the CEO of IBM, also advocates decision-making structures in which power is dispersed throughout the company: “A top-down system can create a smothering bureaucracy that doesn’t allow for the speed, the flexibility, the innovation that clients expect today.”

Aside from fostering innovation, delegated and consensual decision-making also frees up senior management to focus on what they are paid to do _ monitoring the big picture and the emerging future _ so that they can develop, decide on, and implement strategies within the overall strategic roadmap of the organisation.

Moreover, delegated decision-making tends to speed up decision-making for operational and tactical decisions, as the decisions can be made right at the front line instead of having to slowly travel up and down the hierarchy layer by layer. Faster decisions mean faster responses to customer requests and operational issues, and allow a company to take advantage of short-term opportunities.

Before you can move toward more delegated and consensual decision-making with your organisation, you need to do your homework and align the factors that belong to the other organisational dimensions of leadership, commitment, collaboration, and culture.

– You must create a shared vision and mission, and shared values, and ensure that these are widely known and understood so that they can inform decision-making (leadership).

– You must invest substantial resources in human development to equip your workforce with the technical, conceptual and human skills needed for good decision-making (commitment).

– You must ensure that relevant information and knowledge is widely shared within the organisation and are easily accessible (collaboration).

– You must nurture an organisational culture that contains those factors that enable devolved decision-making, such as trust and tolerance of failure (culture).

How, exactly, can you move your organisation toward a more delegated and consensual decision-making approach that makes your company more innovative? In the next column we will discuss four specific recommendations for actions you can take to shift from decision concentration to decision delegation.


Dr Detlef Reis is the Founding Director and Chief Ideator of Thinkergy Limited (www.Thinkergy.com), the Ideation and Innovation Company in Asia. He is also a University Lecturer for Business Creativity and Innovation Leadership at the College of Management, Mahidol University (www.cmmu.mahidol.ac.th). He can be reached atdr.d@thinkergy.com

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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