No society can function as a society unless the decisive social power is legitimate.
Legitimate power stems from the same basic belief of society regarding man’s nature and fulfillment on which the individual’s social status and function rest. Indeed legitimate power can be defined as rulership that finds its justification in the basic ethos of society. In every society there are many powers that have nothing to do with such a principle, and institutions that in no way are either designed or devoted to its fulfillment. In other words, there are always a great many “unfree” institutions in a free society, a great many inequalities in an equal society, and a great many sinners among the saints. But as long as the decisive social power that we call rulership is based upon the claim of freedom, equality, or saintliness, and is exercised through institutions that are designed toward the fulfillment of these ideal purposes, society can function as a free, equal, or saintly society. For its institutional structure is one of legitimate power.
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.
Feedback from the results of a decision compared against the expectations when it was being made makes even moderately endowed executives into competent decision makers.
In no area is it more important than in decision making to build continuous learning into the executive’s work. And the way to do this is to feed back from results of the decision to the expectations when it was being made. Whenever executives make an important decision, they put down in writing what results are expected and when. And then the executive, nine months or a year later, begins to feed back from the actual results to the expected ones and keeps on doing this as long as the decision is in force. So in an acquisition, for example, an executive compares the actual results to the expected ones for the two to five years it takes fully to integrate an acquisition.
It’s amazing how much we learn by doing this and how fast. And physicians have been taught since Hippocrates in Greece 2,400 years ago to write down what course they expect a patient’s condition to take as a result of the treatment the physician prescribes, that is, as a result of the physician’s decision. And that, as every experienced physician will tell you, is what makes even moderately endowed doctors into competent practitioners within a few years.
“Poor Ike… Now… he’ll give an order to not a damn thing is going to happen.”
Feedback has to be built into the decision to provide a continuous testing, against actual events, of the expectations that underlie the decision. Decisions are made by people. People are fallible; at their best, their works do not last long. Even the best decision has a high probability of being wrong. Even the most effective one eventually becomes obsolete.
When General Dwight D. Eisenhower was elected president, his predecessor, Harry S. Truman, said: “Poor Ike; when he was a general, he gave an order and it was carried out. Now he is going to sit in that big office and he’ll give an order and not a damn thing is going to happen.” The reason why “not a damn thing is going to happen” is, however, not that generals have more authority than presidents. It is that military organizations learned long ago that futility is the lot of most orders and organized the feedback to check on the execution of the order. They learned long ago that to go oneself and look is the only reliable feedback. Reports—all a president is normally able to mobilize—are not much help.
If you wait until you have made the decision and then start to “sell” it, it’s unlikely to ever become effective.
Unless the organization has “bought” the decision, it will remain ineffectual; it will remain a good intention. And for a decision to be effective, being bought has to be built into it from the start of the decision-making process. This is one lesson to learn from Japanese management, As soon as it starts the decision process, and long before the final decision is made, Japanese management tells the decision
Everyone who is likely to be affected by a decision—say, to go into a joint venture with a Western company or to acquire a minority stake in a potential U.S. distributor—is asked to write down how such a decision would affect his work, job, and unit. He is expressly forbidden to have an opinion and to recommend or to object to the possible move, But he is expected to think it through. And top management, in turn, then knows where each of these people stands. Then top management makes the decision from the top down. There isn’t much “participatory management” in Japanese organizations. But everyone who will be affected by the decision knows what it is all about—whether he likes it or not—and is prepared for it. There is no need to sell it—it’s been sold.
Until the definition of a problem explains and encompasses all observable facts, the definition is incomplete or wrong.
How do effective decision makers determine what the right problem is? Effective decision makers ask:
What is this all about?
What is pertinent here?
What is key to this situation?
Questions such as these are not new, yet they are of critical importance in defining the problem. The problem must be considered from all angles to ensure that the right problem is being tackled. The one way to make sure that the problem is correctly defined is to check it against the observable facts. Until problem definition explains and encompasses all observable facts, the definition is either still incomplete or, more likely, the wrong definition. But once the problem has been correctly defined, the decision itself is usually pretty easy.
The right answer to the wrong problems is very difficult to fix.
Defining the problem may be the most important element in making effective decisions—and the one executives pay the least attention to. A wrong answer to the right problem can, as a rule, be repaired and salvaged. But the right answer to the wrong problem, that’s very difficult to fix, if only because it’s so difficult to diagnose.
The management of one of America’s largest manufacturing companies prided itself on its safety record. The company had the lowest number of accidents per one thousand employees of any company in its industry and one of the very lowest of any manufacturing place in the world. Yet its labor union constantly berated it for its horrendous accident rate, and so did OSHA. The company thought this a public-relations problem and spent large sums of money advertising its near-perfect safety record. And yet the union attacks continued. By aggregating all accidents and showing them as accidents per thousand workers, the company did not see the places where there was a very high accident rate. Once the company segregated its accidents and reported them in a number of categories it found, almost immediately, that there was a very small number of places, about 3 percent of all units, that had above-average accident rates. And an even smaller number of places had very high accident rates. But they were the places the union got its complaints from, the places whose accidents got into the papers and into OSHA reports.
By far the most common mistake is to treat a generic situation as if it were a series of unique events.
Executives face four basic types of problems:
Generic events that are common within the organization and throughout the industry
Generic events that are unique for the organization but common throughout the industry
Truly unique events
Events that appear to be unique but are really the first appearance of a new generic problem
All but the truly unique event requires a generic solution. Generic problems can be answered with standard rules and practices. Once the right principle has been developed, all manifestations of the same generic event can be handled by applying the standard principle. All the executive must do is adapt the principle to the concrete circumstances of the specific problem. Unique events, however, require a unique solution and must be treated individually. Truly unique events are quite rare; someone else has solved virtually every problem an organization faces already. Applying a standard rule or principle can solve most types of problems.
