Knowing when to delegate can be difficult for leaders when it comes to making decisions, but getting the balance right can free up their own time and make their business more effective.
As Professor Victoria Medvec, from the Kellogg School of Management at Northwestern University, observes, “sometimes the smartest decision is to delegate that decision to someone else”.
So when should a leader leave a decision up to others, and when do they need to make the call themselves?
According to Medvec, leaders must first consider “the riskiness” of the decision they face. Then it’s a matter of answering four questions by determining: who is involved in making the decision; how much time should be spent on it; how much certainty is required; and the tolerance for error.
“These questions can help leaders make better use of their time – and empower their organisations in the process,” she writes.
Low-risk decisions should not be made leadership teams, however it does not always pan out this way.
Medvec says low-risk decisions are too often “escalated up to the leadership team”. This is perhaps due to leaders taking on all responsibilities or employees being unwilling to take responsibility. The result? Time is wasted.
“Decisions that are escalated also tend to be more error-prone, as the people making the decision are further away from the data required to make the call,” says Medvec.
“Moreover, when the most senior leaders make every decision, they fail to empower people at the lower rungs of the organisation and fail to develop their team’s decision-making skills.”
By delegating decisions downwards, “leaders can build the decision-making muscles of their employees, while making people feel more valued and trusted in their roles”.
Spending excessive time on low-risk decisions can result in a loss of core organisational business focus.
“In my experience, many organisations spend a disproportionate amount of time making low-risk decisions,” Medvec writes.
“I call this ‘inverting the risk continuum’.”
Instead, more time needs to be allocated to larger, potentially risky decisions than to decisions that will have a limited impact.
Caution can be a good quality to have, however, Medvec says some businesses can fall into a trap of over-analysing low-risk decisions.
Medvec advises that “to avoid paralysis by analysis, the level of risk should drive how much certainty is required”.
“It is critical to consider the level of certainty required because there is a cost to the analysis,” she writes.
“There is the cost of completing the analysis and the cost of postponing the decision. Postponing a decision is a decision in itself.
“Most people tend to overestimate the risk of making a bad decision and underestimate the risk of inaction, and this can have real consequences in a competitive business environment.”
Risk-taking can deliver rewards, but given the potential for things to go wrong, how much value do you place on it, and to what extent do you encourage it?
Medvec notes “innovation is only possible when you are willing to take risks”, and recommends leaders “focus on ‘de-risking’ decisions by actively working to push decisions down the risk continuum”.
“What you do want is a company that encourages innovation and empowers its people to make decisions appropriate to their position,” she writes.
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Martin Kovacs is a journalist with experience covering the IT, consumer electronics, retail, finance and energy sectors.
