The Misunderstood Role of Leadership in Decision-making

Small to medium-sized businesses (SMBs) often have hierarchical structures which emphasize decision-making as a product of a small group consisting of the owners of the business who make the decisions without documentation. Much of what I do as a consultant is facilitating group decision-making and implementing dynamic planning (planning on a format that communicates planning decisions to all stakeholders as decisions are made). What often obstructs my efforts is a misunderstanding about what constitutes leadership and how leaders make decisions.

To make my point, I must first describe the ideal for an SMB. The owners of this exemplary SMB articulate their values with respect to the business to one another in meaningful conversation. From these discussions, they set business goals. One of the core values they agree upon is that the business culture will emphasize group decision-making. That means that a decision will be made by a person of authority only after careful consideration of the time that should be taken for the decision, consultation with those knowledgeable about the elements of the decision, and with those who will carry out the actions required by the decisions, and reflection upon the goals of the business the decision is to help to achieve. That does not mean that any decision-making authority is delegated by the person with the authority to make the decision. When decisions are made, they are documented on a format that communicates the decision to all stakeholders. That is to say that the documentation of the decision will cause communication of the decision. This is dynamic planning, which can be done simply by documenting decisions on a shared spreadsheet file or by using any one of a variety of software applications. The documenting of decisions is the writing of a plan. Every time a new decision is made, the plan is revised, and, with dynamic planning, communicated.

Where does leadership come in? I often hear from owners of SMBs that leaders need to make good decisions for business success. This conflates the concept of decision-making and the concept of leadership. A successful leader causes a group to accomplish something desirable. This act of accomplishment includes a goal, a perceived benefit, and actions that lead to realizing the benefit. This accomplishment is the role of the leader and does not necessarily involve decision-making or the resultant plan. The documentation of decisions, the plan for the business, is what the leader follows to cause the actions to realize the benefit.

In seeking to accomplish the benefit, the leader (and often others) may come to realize that the benefit cannot be reached unless the actions change. Given the difficulty of predicting the future, this will almost always be the case. In many cases, the leader, who often is an owner, realizing the need for revision makes a decision and changes the plan without documenting the decision. In this case, the leader is violating the understanding that group decision-making will be used to make decisions. Most of the time this revision is not documented thus diminishing the current and future role of the plan. Where there is a realization that the plan needs to be revised, the decision constituting the revision should be made by the policy-making group and the plan revised. Where time is a factor that prevents the consultation of a group, there may be an exception to the understanding that business decisions will be group decision-making decisions. It is rare that this is truly the case. Even where the leader has the decision-making authority, the role of the leader is to follow the plan. If the results of the actions taken show that the plan should be changed, the plan should be revised through the group decision-making process except in those rare instances where time is such a compelling factor that the process must be truncated.

Leadership makes a difference especially when planning is a source of communication. Past success in a leadership role, whether from talent or luck, should not excuse a leader’s failure to use group decision-making and maintain a dynamic plan. The leader has the total perspective of the business plan and can suggest choices that those with a narrower perspective might not consider. Implementation of these suggestions through group decision-making and revising the plan thereby communicating the changes to all stakeholders will enable consistently better decisions resulting in better planning and better business performance. While the leader may participate in decision-making that creates and revises the plan, it is the leader’s primary role to follow the plan, use group decision-making, and accomplish the plan’s goals.