“It’s important to have confidence in what you know and what you can do. You can’t make decisions effectively without confidence. It’s equally important to be realistic about what you don’t know and what you can’t do: without realism, confidence becomes hubris.”
– excerpted from Tough Choices by Carly Fiorina

I think she hits on an important input to effective decision-making: knowing yourself. In order to be effective, you should know your limitations and be able to admit to yourself when you are in over your head. Great leaders surround themselves with people who are strong in the areas that they are weak. The decision is still theirs but they improve their decision-making by knowing when they’ve crossed the line into territory where their knowledge and experience is questionable.

Have you accepted the reality of what your strengths and weaknesses are? Second, have you surrounded yourself with trusted advisors who are strong in your areas of weakness?

• Power Outage: Two winters ago, the Seattle area was hit with a storm that took out power in the whole region for 1-2 weeks. Generators were sold out immediately and nowhere to be found until power was restored 1-2 weeks later.
• Heat Wave: Last week, the Seattle area had record heat. Every big box retailer in the area had sold out of portable ACs on the first day of the heat wave. The guy at Lowes said they had 60 people lined up at their door at 6am for a shipment they received of 35 generators.

In both cases, by the time the catalyst occurred, it was too late to capitalize on the opportunity. Only 13% of homes in the NW have AC. My guess is they could have sold a several thousand portable ACs if they had them in stock. Not bad in these tough economic times.

First, what triggers can you proactively put in place in your company to capitalize on short-term opportunities like these? Second, what policies do you have in place that would allow regional management to make decisions quickly to act on these opportunities?

How does a CEO improve and influence the full range of decision-making at all levels of their organization? The wrong answer is for the executive to insert themselves in more levels of decision-making. Instead, CEOs should focus on defining the framework for decision-making. The framework should clearly define the criteria (objective and/or subjective) that will be used as the basis of a specific type of decision.

For example, in the May 2009 edition of the Harvard Business Review, A.G. Lafley, CEO of Procter & Gamble, describes the following decision framework used to determine which business(es) they should be in: 1) Structural attractiveness of the business: low capital, high margins, and relatively high growth, 2) P&G’s leadership position relative to its competitors: global sales and market share, and 3) Strategic fit of various industries with P&G’s core competencies and strengths: consumer understanding, brand building, innovation, go-to-market capability,and global scale. Instead of evaluating each decision on a case by case basis, the decision framework helped P&G improve their decision-making for all future business portfolio decisions.

This can be applied to decision-making as well. Instead of getting caught in a reactive decision-making mode, executives should delegate all the small and medium impact decisions to their middle managers. By reducing or eliminating the continuous incoming flow of small and medium impact decisions, an executive frees up the time and mental bandwidth to focus on the high impact decisions. This increase in focus on high impact decisions should produce a greater output for the organization, assuming the right decisions are made (but that’s another post).

Take an inventory of the decisions you make over a period of time to see if you are spending too much of your time on small and medium impact decisions. Then ask yourself which of those decisions you will delegate to your middle managers? By delegating these small and medium impact decisions, you will free up your time to focus on the high impact decisions and at the same time give your managers a chance to hone their decision-making ability.

Unfortunately, as often is the case, a leader’s greatest strength can become a weakness within their organization. Because she made all decisions for her organization, she didn’t allow room for her directs to grow their decision-making skills and experience. What she ended up with is a team full of influencers. That’s not a bad skill to have but the problem with this is that influencing another’s decision doesn’t include any accountability in the outcome. Improving decision-making skills requires experience making decisions along with accountability for the outcome

How well are you developing your future leaders in terms of decision-making? Are there decisions that you are making that could be made at a lower level in your organization? If you let your team make decisions, you will learn who your high-potential leaders are and gain new opportunities to coach those who have room to grow in their decision-making. This will create to a culture of decision-makers and lead to success well beyond your leadership of the organization.