A CEO Decision Making Framework

In our coaching and consulting practices we often find companies considering how to evolve their high-level decision-making practices in the midst of considerable growth. Growing from a small core team able to make most critical decisions themselves into a much larger leadership team with greater diversity and expertise requires an intentional shift in how you work together. This is especially true for founder led companies as they straddle the middle rounds of their growth and work to integrate a more experienced leadership team. During this transition, the temptation to continue with a tightly centralized CEO led decision-making model must be tempered with the need to elevate the CEO to be a more strategic leader and not an “in the weeds” individual contributor. Just as importantly, it’s essential the members of the leadership learn how to work with each other directly without requiring the involvement of the CEO in a hub and spoke decision making system. While far from exhaustive, we share these six principles as a starting place for this conversation.

1)    Decisions should be made as close to the information as possible. As the organization grows, it will become more and more difficult, if not impossible, to elevate every decision up to the CEO.  Even if attempted it’s not possible to elevate every decision with the same depth and clarity of the information possessed by those at the level closer to the issue. Thus, decisions should be made as close to the information as possible.

2)    The Company’s overarching goals and the underlying strategic objectives should be overcommunicated. To ensure that decisions made closer to the information are aligned with the company’s overall strategic goals and objectives, it’s critical that each employee understands how their department and their role contributes to the broader Company goals.  As companies grow, new employees are added constantly, priorities change, and the business evolves from quarter to quarter. If we want employees to make decisions that are consistent with broader Company goals, then the CEO and senior leadership must consistently and clearly communicate those goals and objectives. When in doubt, err on the side of overcommunicating rather than under communicating.   

3)    Some decisions should not be delegated. Four types of decisions should always cross the CEO’s desk:

a.     Cross Functional: Decisions that impact multiple function areas should ultimately be decided by the CEO (e.g. a new product line), as only he/she can commit various groups across the organization. 

b.     Structural: Decisions that fundamentally change the structure of the company (mergers, acquisitions etc.) must be made by the CEO.

c.     Key Cultural: Decisions that affect overall company culture or set policy must be elevated to the CEO (values, operating principles, leave policies, key hires, values, D&I).

d.     Market Realignment: Circumstances will arise that change prior executive agreement on a key company goal or objective (e.g. new government policy, new market entrant). The decision on how to re-set company direction and priorities in light of new market realities must be elevated to the CEO.

4)    A wrong decision is better than no decision. A CEO should bias towards making a decision (action bias) and making it with conviction AFTER inviting collaborative conflict at the executive team on the decision ensuring key players have a voice in the process. Perfect information is an illusion and timely action is often necessary. This means that simply not making a decision is not an option; not deciding means you have no chance of success and no ability to course correct and/or learn from an incorrect decision. This maxim, however, should not impede critical CEO decisions (acquiring a competitor, changing core mission) being made with excellent information.

5)    Once a CEO makes a decision, it must be over-communicated and supported. Once a decision is made, a CEO should ensure that key players are bought into the decision and work to ensure that they are executing on the decision. So too must other executives, as they align around the decision, and (over)communicate it to their respective teams.

6)    It’s better to be happy than right.  Like all good marriages, the relationship between you and the CEO is one of ebbs and flows.  While you may make progress on getting some banal things off the CEO’s plate, there might be others he/she is unwilling to let go of or may have a unique skill set that is otherwise unavailable elsewhere in the organization. The CEO’s circumstances and personal style will factor into what is elevated and how it is elevated.  If the CEO is an owner, founder or majority shareholder of the business this may be a much longer and more incremental process. 

• Co-authored by Seth Weissman and Laila Tarraf. Visit them online at www.sethweissman.com and www.dhirubhai.net/in/lailatarraf/