There are two main issues we run in to when trying to get a decision made. The first is most organizations are structured around vertical functions and many decisions cross departmental boundaries requiring multiple people to agree. This becomes especially difficult if win-lose or trade-offs are required. The second is not having a mission statement, embedded in the organization, that is outcome aligned providing direction and guidance for decision making. That is, when faced with a decision we can ask, what answer will best improve the outcome in delivering our mission.
As discussed in “Why are organizations structured in vertical silos?” the horizontal workflow is broken up into functional teams like sales, service, production, development, marketing, finance and human resources. With this structure, to make a decision we need every department to say “yes”. But for a decision to be stalled or blocked only one department has to say “no”. Every department has the right of veto. This is the Prisoner’s Dilemma on steroids and is one of the biggest inhibitors of growth for organizations.
The challenge here is that each department is making their decision from their own perspective. For example, a large sales opportunity will bring in more revenue than planned but requires production to marginally increase their costs. Production, worried about their expense budget set at the start of the year, won’t go ahead unless Finance and Human Resources give their approval. Finance doesn’t believe the sales team’s margin calculations, because sales are measured on revenue and keep lowering prices to win deals. Human resources won’t increase Production’s budgeted headcount because last quarter’s numbers were below target. The end result is to get the deal done there are more internals meetings than meetings with the customer! Assuming the deal gets done at all.
The second reason is that the mission statement is not an outcome based, that is embedded in each layer within the organization. As explained in “Why are mission statements critically important?”, the nested mission statements provide the guidance in making decisions throughout the organization.
Taking the example above the decision criteria in a vertically aligned organization is;
- Sales – How much revenue will the deal bring in; does it help us exceed our targets? Do we have a winning price or should we lower it?
- Production – How will this impact our expense budget? Our resources are all booked, if sales push hard how can we fit this work in?
- Finance – Have we done enough due diligence on the numbers? Why is the price so low? Sales needs to sell more “value”.
- Human Resources / Finance – We need to reduce overall expenses because we missed our numbers in the first half. Why do Production need more head count, let’s do a review? We need to ask them to kickoff a “productivity” project?
- Sales – Is this deal part of our mission? Does it deliver value to the customer which they acknowledge? As we jointly own the implementation with Production do we have the right resources available to execute? Do the numbers stack up; revenue, resourcing expense, capital?
- Production – Because we work side by side with sales we know we can implement the deal and will check we can juggle the additional resources required. While it means more expense we need to ensure we cover the delivery risks to not erode the margin forecast we submitted to Finance. The budget overrun in expenses is more than covered by the additional revenue which will deliver increased top and bottom line growth.
- Finance – Production have signed off on the sales team’s numbers and both own making the implementation a success, therefore we are confident the deal is accretive to our results.
- Human Resources – we missed last half’s numbers, is it because the market is moving, or are customers’ expectations changing? If so, do we have the right skills and processes in place to move with the outside environment? How can we leverage this deal to increase our experience, skills and attracting the best talent?
Most often the decision process is the first one where each department is deciding based on their perspective. The result is that there is an impasse at the lower layers of the organization and the different areas escalate up the management ranks. This creates more meetings until we hit the decision equilibrium point as discussed in “Why am I always in meetings?”.
Sometimes we ask, "Why can we get things done in a crisis? In a crisis a mission statement emerges, “do what we need to do to fix this”. People stop worrying about their department’s needs and are prepared to take risks because they need to, there's a crisis happening. They just get on with it to achieve the outcome. When it is over the CEO compliments everyone for jumping in and resolving the crisis while at the same time wondering why we can’t work that way all the time.