Executives should be high enough to have the authority needed to make the decisions and low enough to have the detailed knowledge.
There are four basic characteristics that determine the nature of any business decision.
- First, there is the degree futurity in the decision. For how long into the future does it commit the company?
- The second criterion is the impact a decision has on other functions, on other areas, or on the business as a whole.
- The character of a decision is also determined by the number of qualitative factors that enter into it: basic principles of conduct, ethical values, social and political beliefs, and so on.
- Finally, decisions can be classified according to whether they are periodically recurrent or rare, if not unique, decisions.
A decision should always be made at the lowest possible level and as close to the scene of action as possible. However, a decision should always be made at a level ensuring that all activities and objectives affected are fully considered. The first rule tells us how far down a decision should be made. The second how far down it can be made, as well as which managers must share in the decision and which must be informed of it. The two together tell us where certain activities should be placed.
ACTION POINT: Push decision making down to as close to the action as possible. But remember: The longer a decision commits the organization, the wider its impact upon other functions, the greater the number of qualitative factors involved and finally, the rarer the decision, the higher in the organization the decision should be made.
Management: Tasks, Responsibilities, Practices
* Source: The Daily Drucker by Peter F. Drucker