Bureaucracy is Killing the CEO’s Decision-Making Power – How Large Can Still Be Lean
Ash Noah, VP of CGMA External Relations, AICPA
Rapid strategic decision making is becoming increasingly critical for businesses to stay competitive and successful. It is also becoming harder and harder for today’s CEOs to do, as they have to contend with a host of challenges like market volatility, traditional business models becoming outdated, the need for more strategic skillsets among their senior leaders, and information overload brought about by Big Data. A major barrier to decision making that’s often overlooked, however, is bureaucracy.
A recent survey of C-level executives conducted by the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA) found that large companies’ decision-making structures are undermining their competitiveness, and many companies are struggling to overcome bureaucracy and achieve agile decision making. According to the survey results, which can be found in the CGMA report “Joining the Dots: Decision Making for a New Era,” almost a third of respondents said that organizational silos and bureaucracy are creating coordination problems, making this the single biggest barrier they’re facing. Not only that, but over 70% of companies have had at least one strategic initiative fail in the last three years because of delays in decision making, and over 40% said they have lost a competitive advantage because they have been slower to make decisions than more agile competitors.
While the term “bureaucracy” may conjure up tired Dilbert-esque connotations, it is a very real challenge for today’s CEOs to overcome. The bureaucracy that can stand in the way of executive decision making is not the so-called turf wars and power trips of office politics, but rather the siloed operations and thinking that prevents executives from viewing strategies and decisions from the perspective of the entire enterprise – and beyond, from the entire industry.
Limitations of Siloed Thinking
Today’s enterprises are extremely complex organisms, each with its own legacy and way of doing things. Unfortunately this often means they are run by traditional, overly bureaucratic processes, which can be inefficient and hinder effective communication and fast, decisive action. This lack of agility comes at a price. Organizations that can’t make decisions quickly could miss market opportunities, suffer from inflated costs, or find that they’re managing a staff that is demoralized and unproductive.
While many executives recognize the problem with silos, large organizations often struggle to win the battle against bureaucracy. It takes a long-term effort, focusing not only on the manifestations but also the causes of bureaucracy. CEOs thus need to evaluate their companies for bureaucratic issues, and then take concerted action to address their root causes.
Breaking Down Bureaucratic Barriers
If your organization isn’t as quick or effective as it could be with strategic execution and decision making, the underlying causes of that are likely related to bureaucratic processes and perceptions getting in the way. Technology can and should play a key role in breaking down barriers and creating more connections across an organization; leveraging technology to the maximum, including deploying collaborative tools, can help significantly improve collaboration. However, removing bureaucratic roadblocks requires more than adopting new technologies – it also requires adjusting the organization’s culture and operations to become more integrated.
Here are four principles to implement to help break down barriers and enable more agile decision making:
- Trust: Build greater trust amongst leadership and between leaders and employees to improve the sharing of information and to ensure fresh perspectives are heard in supporting decision making.
- Collaboration: Drive greater collaboration to make sure that the people with the right knowledge and experience from different business units and functions are involved in making decisions.
- External Engagement: Emphasize engagement with external stakeholders to develop a broader perspective on stakeholder value, helping to ensure the organization’s strategy is sustainable for the long term.
- Transparency: Create greater transparency into how and why decisions are being made. By helping to develop a deep understanding of the organization’s business model and aligning all employees with the wider strategy, they can work towards a common goal, and facilitate enhanced relationships across the organization
It’s also important to cultivate a strategic mindset and business competencies – including strong technical, business, leadership and people skills – across the organization, and in particular with senior leaders, so they can enact change and lead by example. The finance function, which should already have this range of competencies, can also be a good partner to the CEO in breaking down barriers; finance is in a unique position to look across the organization and provide input that is in the best interests of the company as a whole rather than each function looking at its own deliverables and operating independently.
Where to Look
Implementing a culture of collaboration is important groundwork, but specific steps also need to be taken to counteract bureaucratic barriers to decision making. Stripping bureaucracy out of the process, as well as investing in new tools to help integrate internal and external information, are critical areas to evaluate and improve off the bat in order to remove decision-making hurdles. Ask yourself, how effective is my company at:
- Delivering relevant timely information: Are we sharing relevant and timely data with appropriate insights, and are we investing in data integration tools to integrate internal and external information?
- Preventing bureaucracy-hindering decisions: Are we creating greater transparency into how and why decisions are being made?
Most C-suite executives recognize the importance of these areas, but according to the survey, they’re not as effective at executing on them as they could be. Addressing these areas and making them a priority could make a big impact on the organization.
Several other key areas are often viewed as less important or overlooked altogether, when in fact they are critical for better decision making. These include:
- Gaining a greater mastery of big data to steal competitive advantage
- Learning from past outcomes and applying that knowledge to new decisions
- Driving greater collaboration and ensuring diverse perspectives are heard to make sure that the people with the right knowledge and experience from different business units and functions are involved in making decisions
- Placing greater emphasis on engagement with external stakeholders to develop a broader perspective on stakeholder value
Organizations need to re-evaluate the importance of these factors and work to more effectively integrate them into their decision-making processes.
It’s important to remember that even after conducting an audit of your company and making progress on the above factors, solving bureaucratic problems might require a balancing act. For example, many organizations believe that smaller groups of stakeholders are important to accelerating the decision-making process. However, that jars with the principle that good decision making also requires the input of wide-ranging employee and external-stakeholder groups. In practice, this will require transparent and simple sign-off procedures so that final decisions are not delayed in order to gather a variety of input.
Agile response and decision making is increasingly important in today’s fast-moving markets. The common siloed, bureaucratic approach has a negative impact on the ability of companies to make strategic decisions quickly. Horizontal collaboration and decision making across multiple departments and stakeholders combats this handicap. The most successful organizations and executives are the ones who are "joining the dots" and finding success by breaking down barriers, and with this more integrated approach, the largest of companies can still be the leanest.
About the Author
Ashok Noah is Vice President, CGMA External Relations at the American Institute of CPAs (AICPA). In this role, he serves as a liaison to CFOs and CEOs to understand how finance teams are evolving and guides AICPA initiatives to help management accountants create more value for their organizations. Noah is responsible for building and strengthening relationships with global employers and elevating awareness of the Chartered Global Management Accountant (CGMA) designation. He works closely with the Chartered Institute of Management Accountants (CIMA) in the U.K. in that effort.