Lean Thinking

02 October 2018

Distributed Decision Making

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Imagine you are in a car travelling down the motorway. You are trying to keep to the speed limit (110km/h here in Australia). How good are you at doing that? Do you, like me (and most of the population) just follow the car in front with an occasional glance at the speedometer? A few hasty speed corrections when that occasional glance tells you that the car in front was doing 130 not 100? Now imagine that there is a police car right behind you. Does your strategy change? Mine certainly does. Your eyes barely leave the speedometer. You maintain absolute, tight control over the car's speed.

There are downsides to this approach though. While your eyes are firmly fixed on the speedo (that's Australian for speedometer BTW) they aren't firmly fixed on the road. While you are deeply focused on the operational details of driving the car (controlling its speed) you have lost sight of something very important - the road ahead. You may be sitting right on the speed limit but you have just driven past your exit. Or worse, you may have missed a sign telling you that the speed limit had changed and now the flashing lights are in your rear view mirror and you are being pulled over for speeding. Precisely the thing you were trying to avoid.

This perfectly illustrates two big problems with the way decisions are made in most organisations. Senior leaders, the driver of the car, either make decisions in an information vacuum and end up having to make sudden course corrections, just like the driver following the car in front and having to brake quickly when they discover that the car in front was actually speeding. Or if the senior leader deeply immerses themselves in the operational information - the speed of the car - they can't focus on the strategic direction or overall market conditions and can get caught out that way.

In most organisations, senior leaders are asked to make many decisions. The problem is that the information needed to make those decisions in context is held at lower levels of the organisation. So either the senior leader makes the decision based on limited information (follow the car in front) or they need to get deeply involved in the operational details of the organisation and end up losing sight of strategy. In most of the organisations I have worked in, senior leaders tend to take option 2 because they have a virtual police car in their rear vision mirror - their boss, the board, shareholders, all monitoring their performance.

So senior leaders, the strategic leaders of the organisation, tend to spend most of their time focused on operational details. Steering committees. Finance committees. Program reviews. Briefings and so on. What they don't get much time to do is the strategic direction setting that they are really there to do.

So how do we change this? If you think back to our car analogy, there is an obvious solution - set the cruise control. Let the car control its own speed. I can set that and focus on the route, the scenery, the kids fighting in the back seat, the road conditions, and not have to worry about the operational details of controlling the car's speed. Self-driving cars (which I am really looking forward to) will take that to the next level with the car taking care of all the operational details and leaving me totally free to focus on where we are going.

Even better, the cruise control does a far better job of controlling the speed than I ever could, because it is wired directly into the car's systems. It knows at millisecond resolution what the engine speed is, what the road speed is, how much power is being drawn, whether the car is accelerating or decelerating and so on. It has access to all the information. I just get a crude, one dimensional representation of that in the speedo. It's the same in organisations. Leaders tend to get a crude, one dimensional representation of the true information in the form of status reports, PowerPoint decks and spreadsheets. What we want is decisions made where the real information is.

This is what senior leaders need to do in their organisations. In most organisations a leader's job is to make decisions. In an agile organisation, a leader's job is to create an environment in which decisions can be made. They need to build organisational cruise control systems. Systems in which decisions can be made by the operational teams based on parameters set by the leaders.

That's the way cruise control works - I (as the leader) set the parameters under which the car can make decisions. I set the target speed. In the same way, the leaders in an organisation can set parameters for the decisions of an organisational cruise control - budget limits, expected outcomes, and so on. The organisation can then go on and make decisions within these parameters.

Of course, all this relies on one crucial thing - trust. I trust the cruise control in my car. I know that it is competent to control the speed of the car. I know the limits of its competence. An old car I had, I knew that if it hit a hill (up or down) I would need to intervene as the cruise control didn't cope well. My new car has awesome cruise control. It even adjusts automatically for the speed of the car in front. I know that it is very competent. I also know that it has all the information it needs, the organisational clarity, to control the speed properly. I set the desired speed and away it goes.

It's the same with an organisation. For a leader to trust the decisions being made and not have to manually intervene all the time, they need to be sure that the people making the decision are both competent (have the right skills) and have the right organisational clarity (the right information) to make the correct decisions. Without both competence and clarity there can be no trust, and without trust, decisions can't be truly delegated.

In a low trust environment, we can try to delegate decisions but that lack of trust will mean that control mechanisms - reviews, steering committees, etc - will be set up to keep ultimate decision making authority with the leader. And again, they will end up spending all their time engaging with these control mechanisms rather than focusing on the road ahead.

The job of a leader, then, is to build trust. In a high trust environment, decisions can be delegated without the need for control mechanisms, and the leaders can stay focused on the road ahead. To do that, there are two things they need to ensure - that the people tasked with making a decision have the right skills, the competence to make the right decision, and that the people also have the right information, the right organisational context to make the right decision.

With competence and clarity we build trust. With trust we can delegate decisions to where the information is. When we delegate decisions to where the information is, we get better, faster decisions and, even better, we get to focus on the road ahead, instead of staring at the speedo all day.

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