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Home People & Capability Four questions for leaders looking to better delegate decision-making
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TAGS risk management, decision support, decision-making, delegation
When should a leader leave a decision up to others, and when do they need to make the call themselves? Here’s how to make the smartest decision of all.
Knowing when to delegate can be difficult for leaders when it comes to making decisions, but getting the balance right can free up their own time and make their business more effective.
As Professor Victoria Medvec, from the Kellogg School of Management at Northwestern University, observes, “sometimes the smartest decision is to delegate that decision to someone else”.
According to Medvec, leaders must first consider “the riskiness” of the decision they face. Then it’s a matter of answering four questions by determining: who is involved in making the decision; how much time should be spent on it; how much certainty is required; and the tolerance for error.
“These questions can help leaders make better use of their time – and empower their organisations in the process,” she writes.
Low-risk decisions should not be made leadership teams, however it does not always pan out this way.
Medvec says low-risk decisions are too often “escalated up to the leadership team”. This is perhaps due to leaders taking on all responsibilities or employees being unwilling to take responsibility. The result? Time is wasted.
“Decisions that are escalated also tend to be more error-prone, as the people making the decision are further away from the data required to make the call,” says Medvec.
“Moreover, when the most senior leaders make every decision, they fail to empower people at the lower rungs of the organisation and fail to develop their team’s decision-making skills.”
By delegating decisions downwards, “leaders can build the decision-making muscles of their employees, while making people feel more valued and trusted in their roles”.
Spending excessive time on low-risk decisions can result in a loss of core organisational business focus.
“In my experience, many organisations spend a disproportionate amount of time making low-risk decisions,” Medvec writes.
“I call this ‘inverting the risk continuum’.”
Instead, more time needs to be allocated to larger, potentially risky decisions than to decisions that will have a limited impact.
Caution can be a good quality to have, however, Medvec says some organisations can fall into a trap of over-analysing low-risk decisions.
Medvec advises that “to avoid paralysis by analysis, the level of risk should drive how much certainty is required”.
“It is critical to consider the level of certainty required because there is a cost to the analysis,” she writes.
“There is the cost of completing the analysis and the cost of postponing the decision. Postponing a decision is a decision in itself.
“Most people tend to overestimate the risk of making a bad decision and underestimate the risk of inaction.”
Risk-taking can deliver rewards, but given the potential for things to go wrong, how much value do you place on it, and to what extent do you encourage it?
Medvec notes “innovation is only possible when you are willing to take risks”, and recommends leaders “focus on ‘de-risking’ decisions by actively working to push decisions down the risk continuum”.
“What you do want is a company that encourages innovation and empowers its people to make decisions appropriate to their position,” she writes.
Martin Kovacs is a journalist with experience covering the IT, consumer electronics, retail, finance and energy sectors.
This article was first published at our sister publication, Smart Company.
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
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In order for decisions to be made lower in the organisational hierachy the organisation MUST develop a culture of TRUST. The more the tactical members of the organisation feel confident that they can make decisions and that should learning mistakes be made that the world won’t end the more likely of success. The vast majority of people want and need certainty that they are ok. If management do not allow development without fear of failure then chances of being able to push the decision making down to the appropriate level of the specific decision are less likely.
As the article mentions, “innovation is only possible when we are willing to take risks”, people are only generally prepared to step out when they have the backing and support of their hierarchy. Too many times we speak about innovation and yet when someone steps out to try something new and it doesn’t turn out, the consequences to the individual is disproportionate to the mistake made where the up the chain leader takes back the rope, as if the intention was always to punish any imperfection.
The leaders that really stand out, have creative and innovative teams who are willing to explore doing things differently. They are able to do this because the leader accepts the responsibility for outcomes, regardless, meaning the people feel trusted and protected. It costs less to trust, contrary to the behaviour of some leaders, who are more inclined to micro-manage and when mistakes are made, blame the team members. Only taking responsibility when things go well, rather than for everything.
A team that feels trusted and protected tends to be happier, leading to greater productivity, willingness to go the extra mile, when necessary. A happier, more productive team is far more cost effective, have less health issues, in general and therefore business continuity is confident.