Friday, October 30, 2009

Decision-Making Myths

Bob Frisch has a good article over at Business Week on three key myths about decision-making. His three myths are:

Myth 1: A Single Team Makes All of the Big Decisions
Myth 2: The Executive Team Is a Body of Equals
Myth 3: Team Members Should Always Adopt a CEO Perspective

My research confirms Frisch's conclusions regarding Myth #1. Many people speak of the "top management team" as the key strategic decision-making body of the organization. However, my research - along with work by Professors Ann Mooney and Allen Amason - confirms that strategic choices are made a bit differently. Typically, a subset of the top team is involved in all key strategic choices, and then they pull in different people based on the nature of the decision. In short, what we have is a stable core of decision-makers and a dynamic periphery. Mooney and Amason describe that core as the "inner circle". The question is: How does a CEO manage the relationship between the inner circle and the broader management team, and how does that affect the performance of the organization? I believe that the CEO can do significant damage if he or she does not manage that relationship effectively.

1 comment:

Brian said...

Your research also indirectly proves point #2. As the old saying goes, "some partners are more equal than others".

The third point is also critically important. Simple logic tells us that team members all approaching a problem from a different perspective is critical to identifying trade-offs and opportunities. In a larger sense, this is why any free market works, with everyone pursuing their highest interest equalibrium is created. This perspective, however, relies on an efficient market assumption where all perspectives are given appropriate weight. Often not the case in any beaurocracy (be it in the public or private sector).