How Having Clear Decision Rights is Critical to Effective Strategy Execution

​In a Harvard Business Review article, entitled "The Secrets to Successful Strategy Execution", "information flow" and “clarifying decision rights” are identified as the most important factors in determining whether a business is effective in executing its strategy.  In our last blog article, we provided some tools, insights, and ideas that can help improve information flow and ultimately drive business enterprise value as it executes its strategy.   In this week’s blog, we address how “clarifying decision rights” inter-relates with “effective information flow” and a business’s strategy implementation effectiveness.  The most valuable businesses are those that have a clear strategy that is implemented effectively and where everyone has a good idea of the actions and the decisions for which he or she is responsible.

People make day-to-day decisions based on their level of authority and on the information they have available to them.  In every business, there are hundreds of decisions made each day or even every hour that may or may not align clearly with the intended strategic direction of the company.  The blurring of decision rights as a company grows is a common problem and can create paralysis where no one decides or when everyone seems to have a say.  Even worse than paralysis is when conflicting decisions are made inadvertently.

Having well-defined decision rights as part of a detailed job description along with specific goals and objectives for each employee is a critical starting point.  This will help identify areas in which there are gaps and/or overlaps in responsibilities and where clarification on decision-making rights may need to be reviewed. This alone, however, will do little to ensure clarity on decision rights across the company.  Neither will be making changes to a company’s hierarchy or organizational structure.

The way to make progress in clarifying decision-making rights is to proactively, systematically, and deliberately figure out how the decision-making process can be improved in the business.
One technique outlined in an article published by Deloitte is to simplify, define, and communicate what, how and who makes decisions by using a Responsible, Accountable, Consulted, and Informed (RCAI) framework.  This can be applied to new hires, customer pricing terms, new marketing initiatives, product launches.  Of course, the bigger the decision, the more clarity required.  It is best to start with the decisions in which there is the greatest ambiguity, and which can have the biggest impact on the company’s strategic goals.

First, decide who is Responsible for carrying out the actions tied to the decision.  Next, determine who is Accountable.  This should also the person (or group) that makes the final decision, and all involved should know who this is.   Some people should be Consulted for their input, along with a consultative process to ensure the best decision is made.  Finally, there are those in the organization that should be Informed once a decision is made. This could include people in other parts of the business, including those in lateral, senior, and junior roles.

A similar framework is outlined in a Harvard Business Review article, called RAPID – Recommend, Agree, Perform, Input, and Decide (although not necessarily in that order).

The key is to make sure everyone knows what decisions will be made by who and how they will arrive at those decisions.  Without a defined framework, many that are asked for input may become disenfranchised when decisions contrary to their input are made.  Often people are confused about the difference between responsibility and accountability.

As the company grows and the team gets larger, with more cross-over in responsibilities across functions, the information flow tends to weaken and the clarity on decision rights gets foggier.  Ultimately, the best decisions are made by competent people with the right information at the right time, but only when they have a clear understanding of the business strategy and with a well-defined decision-making framework.
​
Always keep in mind that the most strategic companies are often the most valuable companies.

---