Most everyday decisions in large organizations should be made “at the edge,” at the level of the individual contributor or team, rather than at the level of the executive. The increased speed of decision making more than justifies the additional small-scale risk, assuming boundaries are made clear.
Yes, that’s a major departure from conventional corporate structures, but hear me out.
In very large organizations, even the smartest leadership group becomes a bottleneck; important decisions must wait days or weeks for leadership to be able to act on them. The system is not at all efficient at scale; the larger the organization, the slower the increasing number of decisions must become. In contrast, when we empower individual contributors to make the decisions that directly pertain to their jobs, those decisions happen exponentially faster, and are higher quality too.
Asking contributors and teams to make these everyday decisions also allows the organization to capture more of their effort towards useful outcomes. Bureaucracy is like sand; walking across a beach takes far more effort than walking across an open field. Just like the friction of the sand wastes energy in the real world, when an enterprise asks top contributors to conform to large-scale bureaucratic rules, we also waste their energy on tasks that don’t ultimately give us what we want. By empowering contributors to make day-to-day decisions within a clear mission-based framework, however, we capture that extra momentum, transforming it into meaningful results instead.
Ideally, decisions will be made by small teams, which will provide peer review and double-check these everyday decisions. Smaller teams are able to communicate efficiently, gaining the benefits of working with other people without the downsides inherent to larger groups. They are able to move on their mission efficiently and effectively, radically accelerating progress when compared to traditional enterprise structures that require top-down approval. Since the people making the decisions already have the front-line information they need to make the most impact, they make faster and better everyday decisions the majority of the time. The access to the front-line information is a significant competitive advantage, especially when combined with good goals, and well-scoped missions.
The teams know where they are going, and are in the best position to make fast decisions to get there.
The traditional structure in most enterprise organizations actively sabotages high-quality innovation.
The Round Trip for Decision Making
The traditional structure in most enterprise organizations actively sabotages high-quality innovation. Because the executive decision-makers are inherently risk averse, the organization spends a lot of time attempting to collect accurate information and providing it to them. Inevitably, much of that information is abstracted from day-to-day realities.
The round trip for taking decisions upstream, along with the information required to enable them, burns time and creates inaccurate pictures of reality. By their very nature, the inaccuracies create risks, and the long lead time tends to compound those risks. Organizations with top-down models move slowly and tend to make suboptimal decisions. In the desire to remove the risk of failure (impossible in practice), decisions become oversized, risking slow, large-scale failure that can’t easily be averted.
Instead, large organizations should move the decision-making power, as much as possible, into the hands of the people with the highest density of high-quality data. Immediately the entire system speeds up. Risks and failures are made bite-sized. Management becomes a support function, there to provide mission, and to define success. Results become obvious, and course corrections can happen quickly.
The inversion of the hierarchical pyramid unlocks tremendous value, even for leadership. Management should never have been responsible for seeing everything. They should see the big picture and chart the course, but everyday decisions in navigating the waters and clearing obstacles should always be made by the people with their hands on the sails. The decisions that come to management need to be ones that truly can’t be made at the organization’s edge. Both leadership and the people on the front lines can concentrate on what they do best, to the benefit of the organization as a whole.
Critical Decisions Should Be Made by Leaders
Some decisions are business critical or irreversible. Others simply can’t be separated into small enough risk sets. Those larger, critical decisions need to be made carefully and with great calculation by senior management. But these decisions are rare.
In contrast, any decision that can be undone — and this is the majority of all decisions — should instead be made quickly by frontline teams. Place as many small-scale bets as you can. Then give solutions room to prove themselves.
No product survives first contact with a customer. Waiting for perfection, as many inevitably do in the corporate world, is waiting for death. Better to ship something basic, something you’re nearly embarrassed to claim, and see how it needs to evolve. You can’t get to perfect fast enough otherwise, because you can’t see what perfect is on your own. The market will tell you how to evolve if you listen.
Every organization that has gone bankrupt in the last hundred years failed because decisions and reality grew more and more distant from one another.
Returning to What Works
Autonomy on the edge may feel counterintuitive to the enterprise, but it’s not. It’s a return to the natural structure of human collaboration. Every organization that has gone bankrupt in the last hundred years failed because decisions and reality grew more and more distant from one another. However, bankruptcy isn’t inevitable; even large organizations can keep and have kept autonomy at the edges. Berkshire Hathaway is a great example. The company is a giant multi-hundred-billion-dollar empire, but it has a tiny central staff. It keeps as much of the decision-making on the edge as possible, and it has found wild success doing so.
I personally have seen transformations in Fortune 500 companies with incredible results as they moved back to autonomy in teams. In one project my company worked on with a telecom company, they were able to move from delivering production software in thirty-six months to delivering it in twelve months, which is a velocity increase of 3x. Quality also dramatically improved, as the divisions running the new system saw an immediate improvement in customer NPS scores. The people building things understood the customer’s needs, and products got better.
We instituted a similar autonomous teams program at Caterpillar, more narrowly scoped in their supply chain logistics organization. In the first twelve months of rolling out the new model, we saw more than $1 billion in slack removed from their outbound supply chain. That was a permanent improvement. When the people at the edges of the organization—customer service, the dealer network, logistics, supply chain teams—were empowered to orchestrate and deliver product directly to the customers, they did.
If your organization has moved away from distributed decision-making, it’s time to go back to a framework that allows for it again. Make the large-scale, business-critical decisions carefully at the executive level, but leave the day-to-day decisions in the hands of the contributors and teams affected by them.
You’ll capture far more business value, faster, if you do.
Brady Brim-DeForest is CEO of Formula.Monks and author of Smaller is Better: Using Small Autonomous Teams to Drive the Future of Enterprise.
