‘The Decision Driven Organisation’ by Marcia Blenko, Michael Mankins and Paul Rogers, Harvard Business Review, June 2010

We brought this article forward from the last blog because we were then reviewing other articles from Harvard Business Review. As the authors are from Bain and Company, a leading strategy consultancy, we thought that their views should be worth sharing, particularly if the Harvard Business Review has agreed to publish.

The message of the article is powerful; when companies are looking to improve performance, particularly after the appointment of a new CEO, the temptation is to see reorganisation as the answer, without fully considering the decision making processes within the company. Such reorganisations are therefore often based on a superficial assessment of processes and people and can become turf battles rather than the basis for improvement.

Bain’s research shows that the main factor in driving performance is effectiveness in decision making and that changes to structure have little or nothing to do with it. I would like to have known more about the methodology of the research because it seemed to be based on executives’ subjective perceptions about the effectiveness of decisions and structure, which could well be influenced by the questions asked and the scoring system used.

Much more convincing are the examples of top company applications of the principles, though recent problems at Ford and BP causes one to have a few doubts about their inclusion. Ford’s CEO made as a first stage in his 2006 reorganisation the examination of the decisions that were critical to turning around the slide in market share. British Gas assessed the decisions in their various segments that created the most value and created structures that allowed such decisions to be taken effectively. Bain argue that, in addition to assessing value, it is also important to distinguish between different timescales, separating the one-off major investment decisions from the day to day judgments that need quick and flexible responses.

The BP case study was different and shows the other side of Tony Hayward, their recently resigned CEO. When he took over the job he found highly complex structures that had built up over the years as a result of numerous acquisitions and reorganisations. He led a simplification process based on removing layers of middle management and ‘returning decision rights’ to the appropriate people. This also had the benefit of reducing overheads by a third. Bain do not mention their involvement directly (because it is an Harvard Business Review article after all) but one assumes that their consultants supported this initiative, and no doubt contributed to the overheads that year!

Bain include in the article a short questionnaire that allows readers to assess their own decision processes with 10 questions ranked on a scale of 1 to 4, for example, ‘our leaders at all levels consistently demonstrate effective decision behaviours’. I was left wondering how many people would indicate ‘Strongly Agree’ or even ‘Agree’ to that proposition, unless they were wearing rose coloured spectacles about their fellow managers. It seems to me that such questions are meaningless without some kind of benchmark and its inclusion did not increase my faith in their research.

Nevertheless the article is worth reading by anyone who is interested in strategy and its link to performance. The message that ill-considered restructuring is not likely to improve performance is a powerful one that newly appointed senior managers would do well to follow.

Click here to read the article in full;
http://hbr.org/2010/06/the-decision-driven-organization/ar/1